The Minister of Budget and National Planning, Senator Udoma Udo Udoma, has expressed optimism that the Nigerian economy will continue to maintain its recovery in 2019, with real GDP growth expected to increase from 0.8 per cent in 2017 to 2.1 per cent in 2018 and 3.01 per cent in 2019, coupled with sustained implementation of the Economic Recovery Growth Plan (ERGP).
Udoma who was speaking at the Deloitte Dialogue on Nigeria’s Economic Outlook for 2019, in Lagos, said the proposed 2019 budget is intended to further reposition the economy on the path of faster, inclusive, diversified and sustainable growth, and to continue to lift significant numbers of citizens out of poverty.
The Minister explained that with the improved coordination of fiscal and monetary policies, exchange rate stability, improved oil export earnings and capital inflows, as well as the continuation of the current prudent management of foreign exchange reserves by the Central Bank of Nigeria (CBN), inflation is expected to trend downwards to single digit of 9.98 per cent in 2019 from 11.44 per cent as at December 2018.
“Government is committed to growing the economy, and accordingly the 2019 budget proposal has been designed to continue to provide the stimulus and support required to spur growth in the economy,” he stated.
While indicating that the 2019 budget is another step in the country’s journey to ensure diversified, inclusive, sustainable growth, creating jobs for the teeming population and prosperity of Nigerians, Udoma said government expects more diversified and inclusive growth in 2019 and over the medium term.
He said, “though the current real GDP growth performance is still a little sluggish, which is expected as we are just recovering from recession”…
It, however, indicates a positive momentum, especially with regard to the growth of the non-oil sector. Our aim is to take all measures necessary to ensure that we increase the growth rate while maintaining fiscal sustainability.”
Explaining the basis for the oil price projections in the budget, the Minister said oil prices depend on the interaction between supply and demand for oil in international markets. It is, however, the supply-side factors that have been mainly responsible for the price increase in 2018 and the recent decline, he added.
Although crude oil price soared in the second half of 2018, rising as high as $81.20/b on September 24, 2018 – a four-year high – it declined towards the end of 2018, falling below the 2019 budget benchmark of $60/b. While the government is concerned about this recent trend, most analysts believe the price will recover in the course of 2019, and so the Federal Government has not seen any need to adjust its benchmark price of $60. However, he assured the gathering that if, at any time prior to the passage into law of the 2019 budget by the National Assembly, there is strong reason to believe that this benchmark price of $60 is unlikely to be realised, then the Executive will, of course, engage with the National Assembly to agree a lower benchmark price.
On oil production levels, the Minister said that President Muhammadu Buhari has directed the NNPC to work hard to achieve the 2.3mbpd budget target. “The ERGP oil production target for 2019 is 2.4mbpd, NNPC production submission is 2.45mbpd. We have revised the ERGP target and NNPC forecast downwards to 2.3mbpd for the 2019 budget proposal,” he pointed out.
He explained that the 2019 proposed budget size is smaller than the 2018 budget because of the need to contain the size of the deficit so as to keep the nation’s borrowing within prudent limits. The Minister pointed out that the proposed deficit of N1.859 trillion in 2019 is about 1.33 per cent of GDP, which is within the 3 per cent threshold stipulated in the Fiscal Responsibility Act (FRA) 2007.
Udoma indicated that though government has been increasing allocation to infrastructure, government spending alone will be insufficient to address the infrastructure needs of the country. This, he explained, is why government is encouraging PPPs. Tax incentives are being provided to encourage private sector investment in infrastructure. Hence, the Executive Order 007 on Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme, which was signed by the President on January 25, 2019.
“The scheme seeks to leverage private sector capital for the development and refurbishment of road networks in industrial clusters and key economic areas in the country. It entitles private investors to full recovery of the cost incurred on the road project(s) in the form of a Road Infrastructure Tax Credit, which can be utilised against participants’ future CIT payable to the Federal Government,” he explained.