Tuesday, March 25, 2008

Budget Delay Cripples Economy


Experts have expressed their views on the possible effects the delay in the passage of the 2008 Appropriation Bill into law may have on the economy and its constituent sectors, agreeing that such effects are undesirable.

Despite expectations late last year that the budget would be passed early following the cordial relationship between the executive and legislative arms of government, the passage of the Appropriation Bill into law has experienced an impasse between the two arms of government in recent times.

Commenting on the issue, the spokesman of the Central Bank of Nigeria (CBN), Festus Odoko, in a telephone interview on Sunday, said that an early passage of the budget would normally make things work out smoothly.

He pointed out that in the event of a delay in passing the Appropriation Bill into law like it is now, a provision existed that permitted the President to spend up to a certain proportion of the previous year’s budgetary allocation.

He added that though the fact that the President could continue spending to a certain limit to meet essential expenditures might reduce the undesirable effects of the delay, some contractors might resort to borrowing heavily from banks to meet their obligations, thus causing the various banks to be increasingly exposed in terms of credit given.



The tax appropriation bill for this year has been yet again postponed. Economic experts agreed that postponing the tax appropriation bill is harmful for Nigeria's already fragile economy. The current law in place allows the president to spend up to a certain percentage of last year's budget, but that may not be enough to cover the necessary expenses. One of the projected outcomes of the postponement is that, as a result of the government not having money to pay contractors, the contractors will have to borrow exorbitant amounts of money from banks. The banks would then be subject to the terms of credit that they agreed upon with their borrowers.

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