NIGERIA'S BUDGET 2017: THE MISSING LINKS
According to President Buhari Nigeria under his watch will target 2.5% economic growth in 2017 with the budget proposals presented last Wednesday to the National Assembly.
If this is achieved, it should technically get the country out of recession but don't expect it to impact visibly on the average standard of living.
This is because 2.5% is lower than the estimated population growth rate of the country of 2.8% by 2013.
Besides, even this population growth rate could be out of date and even be an understatement since then. After all, it is said that by 1960 the nation's population was 45.2m but by December 2015 was estimated at 182.2m by the World Bank. And National bureau of statistics latest household survey indicate still growing average household in some key states and no change in others.
In addition, the November inflation rate climbed to 18.48% from 18.33% in October and there is no guarantee of reverse in the near future. So 2.5% will just be like a drop in an ocean.
Even then, can the 2.5% target growth rate be achieved?
Unfortunately, the answer is no, given facts on the ground and missing links in budget 2017 as presented.
The first reality is that much as government claims to have reduced recurrent expenditure, it is obvious that not enough has been chopped off. From the budget, government machinery now exists to generate increased revenue to only to pay salaries and service debts. To fund capital expenditure, it has decided to borrow every kobo from local and external sources. Thus, more serious and focussed trimming of the recurrent expenditure still needs to be done, this development is not healthy.
This is partly because in 2017, in view of projected appetite for debts, government is bound to crowd out the private sector some more from private sector credit.
According to available statistics, by quarter three in 2015 government share of private sector credit was 4.75% but almost doubled to 8.44% by quarter three 2016. Meaning by 2017, we should be expecting double digit percentage share. In contrast, manufacturing share declined to 13.2% from 15% and only oil and gas share also increased significantly.
Besides nothing in the budget addressed the issue of cost push inflation resulting from higher prices in Naira for imported raw materials and the heavy burden of 14% minimum interest rate.
In fact, that the president could only tell anxiously waiting investors that a committee on business environment headed by the vice president, is working on new fiscal and related possible was not enough to engender immediate planning and execution based on the budget proposals and pronouncements.
Now the only people who may not have to tarry a while are crude oil exploration and production companies especially deepwater ones; farmers of wharever scale and smugglers.
The point really is this: Mr President and his team do not seem to realise yet that voting money for anything does not drive investment, it only aids projections, the real drivers are policy statements and decisions especially in the shape of budget pronouncements on fiscal and monetary policies.
All the fine words Mr president uttered about eating, driving and patronising Made in Nigeria were nice to hear but they would led to immediate actions if fiscal policies and incentives needed to drive this massive value change were announced.
If this is achieved, it should technically get the country out of recession but don't expect it to impact visibly on the average standard of living.
This is because 2.5% is lower than the estimated population growth rate of the country of 2.8% by 2013.
Besides, even this population growth rate could be out of date and even be an understatement since then. After all, it is said that by 1960 the nation's population was 45.2m but by December 2015 was estimated at 182.2m by the World Bank. And National bureau of statistics latest household survey indicate still growing average household in some key states and no change in others.
In addition, the November inflation rate climbed to 18.48% from 18.33% in October and there is no guarantee of reverse in the near future. So 2.5% will just be like a drop in an ocean.
Even then, can the 2.5% target growth rate be achieved?
Unfortunately, the answer is no, given facts on the ground and missing links in budget 2017 as presented.
The first reality is that much as government claims to have reduced recurrent expenditure, it is obvious that not enough has been chopped off. From the budget, government machinery now exists to generate increased revenue to only to pay salaries and service debts. To fund capital expenditure, it has decided to borrow every kobo from local and external sources. Thus, more serious and focussed trimming of the recurrent expenditure still needs to be done, this development is not healthy.
This is partly because in 2017, in view of projected appetite for debts, government is bound to crowd out the private sector some more from private sector credit.
According to available statistics, by quarter three in 2015 government share of private sector credit was 4.75% but almost doubled to 8.44% by quarter three 2016. Meaning by 2017, we should be expecting double digit percentage share. In contrast, manufacturing share declined to 13.2% from 15% and only oil and gas share also increased significantly.
Besides nothing in the budget addressed the issue of cost push inflation resulting from higher prices in Naira for imported raw materials and the heavy burden of 14% minimum interest rate.
In fact, that the president could only tell anxiously waiting investors that a committee on business environment headed by the vice president, is working on new fiscal and related possible was not enough to engender immediate planning and execution based on the budget proposals and pronouncements.
Now the only people who may not have to tarry a while are crude oil exploration and production companies especially deepwater ones; farmers of wharever scale and smugglers.
The point really is this: Mr President and his team do not seem to realise yet that voting money for anything does not drive investment, it only aids projections, the real drivers are policy statements and decisions especially in the shape of budget pronouncements on fiscal and monetary policies.
All the fine words Mr president uttered about eating, driving and patronising Made in Nigeria were nice to hear but they would led to immediate actions if fiscal policies and incentives needed to drive this massive value change were announced.
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