BARRING ANY sudden change, President Muhammadu Buhari will tomorrow (Wednesday) lay the 2017 budget proposals to a joint session of the National Assembly. According to a letter addressed to the Senate President, Dr. Bukola Saraki, a total of N7.3 trn is being proposed as total expenditure for next year.
Details of the expenditures will be unveiled on that day and how government intends to finance the budget. But this much is already clear: The President will tomorrow unveil his administration’s much-awaited stimulus package. The patience of Nigerians are growing thin. Investors, both at home and outside are waiting to see if Buhari really has a plan or deluding himself with “change”. Few questions are necessary at this point : will the 2017 budget not be another huge joke, fine on paper but unrealistic in meeting expectations?
How will government secure the revenue to meet the estimates with shortfalls in revenue growing ? This is important in view of the Senate’s rejection of the $30bn loan proposal by President Buhari. Or is government going to the International Monetary Fund (IMF) and the World Bank?
For a while, the President has twice declined to honour the invitation of the National Assembly to proffer solutions to the myriad economic challenges facing the country. Tomorrow is crucial. You know why? Any rays of hope that Nigeria’s troubled economy will rebound anytime soon took a more depressing outlook few weeks ago . This was as a result of third consecutive negative growth in the nation’s Gross Domestic Product (GDP). What this means in real terms, is that the economy is at the risk of depression, a far worse scenario than the current recession.
Figures from the National Bureau of Statistics(NBS) may have validated these fears as the GDP has dipped further to -2.24 percent in the third quarter (Q3) from the second quarter (Q2) figure of -2.06 percent. This was lower by 0.18 percentage points from the negative growth rate recorded in the second quarter of this year. Imports also surged by 43 percent on naira devaluation.
This is worrisome. The GDP is one of the major indicators used to gauge the health or size of a country’s economy. In real terms, it represents the total dollar value of all goods and services produced over a specific period in that country.
The NBS report may have confirmed deep fears of many economic experts that this government is not doing enough to address the present economic challenges facing the economy. The NBS report is damning enough to be taken seriously. The report stated that the aggregate GDP in nominal terms stood at N26.5 trn. It also revealed
that the performance of virtually every sector of the economy recorded a sharp decline. Worse still, oil production which accounts for over 70 percent of government’s total revenue on the average stood at 1.63 million barrels per day. This is about 600,00 barrels less than the projected benchmark per day ,according to the 2016 budget. This represents a decline of -22.01 percent year -on-year (y-o-y) in the Q3 as against -17.48 percent in the Q2.
This also means that the oil sector contribution to the GDP dropped to 8.19 percent, from 8.26 percent recorded in the second quarter of this year. The manufacturing sector is one of the sectors hard hit by the ongoing recession, due largely to the continued drop in exchange rate, which has made inputs more expensive.
Altogether, the negative growth in three quarters in quick succession is a grim and damning verdict on the economy. The ominous signals contained in the NBS report should be a wake up call for an immediate retooling of the economy . The message is clear : Nigeria’s economy risks sliding into depression if urgent steps are not take now to get the country back to recovery.
As we have noted in recent editorials, the contractions in the economy which have persisted for sometime now should serve as a rude awakening for the managers of our economy to design realistic strategies that will inspire confidence and drive economic growth. The blame game which has consumed government’s efforts to rescue the economy should stop. . The truth is that our country is in perilous times and most Nigerians are groaning under these harsh economic situation.
The way forward is for government to roll out economic plans, with specific time lines that will address key structural challenges that hamper economic growth. These Include the current forex scarcity that has forced many industries to close shop. Current inflation rate of 18.3 percent is the highest in 30 years. Investors must see real opportunities in our country before they can bring in their money . They always, and rightly too, put their money where their hearts are. Federal government needs a more knowledgeable economic team to advise it on how to turn round the economy. It is clear that the present economic team is either overwhelmed or lacking the competency to drive economic growth. Nigeria cannot afford a repeat of the grim economic outlook of 2016 to continue in 2017.
What all this negative growth means is that government’s fiscal fiscal and monetary policies have failed. It is curious, if not sad for the CBN to admit at the end of the Monetary Policy Committee meeting, that its monetary policy tools had run out of options and that the economy could only get the needed push from effective implementation of fiscal policies.
Though the strength of the fiscal policy rests on the ability of the federal government to adjust its spending levels and tax rates to influence the economy, the CBN’s monetary policy instruments should have a calming effect on money supply and inflation as well as interest rates.
But I have my doubts that the CBN has done enough in this regard. Settling debts owed local contractors may help stimulate the economy as the MPC suggested. However, the benchmark interest rate of 14 percent will discourage borrowing and investment.
Government must come up with a robust and more keenly coordinated macroeconomic policy framework that will stimulate output growth and stimulate aggregate demand and rein in inflation.
As Nigerians eagerly await Buhari’s 4- year economic road map this month, government should get real serious next year on how to get our economy out of the wood.
2017 budget : Will it spur economic recovery?
