BEYOND BUDGET 2016
At last, the controversial 2016 budget has been signed by President M Buhari, months behind schedule.
In his speech during at the occasion, the President assured Nigerians that it projects his government's determination to reflate the economy and stimulate demand.
To this end, Budget 2016's record breaking size and deficit was deliberate without any qualms over the foreign and local borrowings that will also most likely set new records especially if crude oil price refuses to recover significantly.
To this effect, declared the President about N350bn was to be injected into the economy immediately. Particularly, road construction is to gulp N200bn compared to only N18bn provided for this in 2015 budget.
The impression one gets is that in spite of the controversy and political horse trading and muscle flexing that hovered over the budgeting process all through, government has given enough thought to the budget and so, it will herald Buhari change agenda.
Unfortunately, this impression may not be correct. For one because the neophyte APC government has not convinced any Nigerian that being thorough is part of its assets.
For another, the huge budget deficit and still dwindling foreign exchange earnings do not leave much room for above average implementation.
Hence, two things are likely to be sure horse developments once implementation starts. These are great leap in prices across the board notably for consumer goods and industrial input.
In his speech during at the occasion, the President assured Nigerians that it projects his government's determination to reflate the economy and stimulate demand.
To this end, Budget 2016's record breaking size and deficit was deliberate without any qualms over the foreign and local borrowings that will also most likely set new records especially if crude oil price refuses to recover significantly.
To this effect, declared the President about N350bn was to be injected into the economy immediately. Particularly, road construction is to gulp N200bn compared to only N18bn provided for this in 2015 budget.
The impression one gets is that in spite of the controversy and political horse trading and muscle flexing that hovered over the budgeting process all through, government has given enough thought to the budget and so, it will herald Buhari change agenda.
Unfortunately, this impression may not be correct. For one because the neophyte APC government has not convinced any Nigerian that being thorough is part of its assets.
For another, the huge budget deficit and still dwindling foreign exchange earnings do not leave much room for above average implementation.
Hence, two things are likely to be sure horse developments once implementation starts. These are great leap in prices across the board notably for consumer goods and industrial input.
In the case of consumer goods, particularly agric products and others more inclined to be seasonal or with fairly long gestation period, it will be s long while before the related demand could have matching outputs that will engender stable prices or very limited increase.
In the case of some industrial inputs and price shifts likely, the recent case of fresh tomato scarcity may drive the point home more effectively.
Recently, Dangote group opened tomato processing factory in the North. One understands that it proceeded to mop up fresh seed tomatoes to have enough to keep its new machines humming away daily.
The result? In various market across the land fresh tomatoes suddenly became more valuable than gold. This will continue to be the case till next season if not beyond, because none provided for the increased demand likely from the new factory.
Now a similar case is likely to be repeated for very many products and needed goods as the determination to reflate demand appears without impactful plans to boost production in the short term.
So one can see hyperinflation hovering in the horizon.
This may not be bad if it can be made as temporary as possible and that is the crux of the matter. If goods for sale do not catch up with the related demand level soon, putting borrowed money in the pocket of Nigerians through non- direct production avenues like construction, could lead to more problems.
Meanwhile, that the budget finally went through the mill so late in the year, is even enough reason to look beyond 2016 now. The truth is that with or without signed budget 2016, it is scary.
In the case of some industrial inputs and price shifts likely, the recent case of fresh tomato scarcity may drive the point home more effectively.
Recently, Dangote group opened tomato processing factory in the North. One understands that it proceeded to mop up fresh seed tomatoes to have enough to keep its new machines humming away daily.
The result? In various market across the land fresh tomatoes suddenly became more valuable than gold. This will continue to be the case till next season if not beyond, because none provided for the increased demand likely from the new factory.
Now a similar case is likely to be repeated for very many products and needed goods as the determination to reflate demand appears without impactful plans to boost production in the short term.
So one can see hyperinflation hovering in the horizon.
This may not be bad if it can be made as temporary as possible and that is the crux of the matter. If goods for sale do not catch up with the related demand level soon, putting borrowed money in the pocket of Nigerians through non- direct production avenues like construction, could lead to more problems.
Meanwhile, that the budget finally went through the mill so late in the year, is even enough reason to look beyond 2016 now. The truth is that with or without signed budget 2016, it is scary.
Comments
Post a Comment