By Omodele Adigun, Bimbola Oyesola and Uche Usim, Abuja
Nigerian stakeholders have warned that the late passage of the 2017 budget by the National Assembly may alter Federal Government’s projections on how to stimulate recovery of the ailing economy. Reacting to last Thursday’s passage of the 2017 budget after five months into the new year, various stakeholder groups expressed concern that regardless of government’s pledge to allow the budget run its full course of 365 days, several key targets of the document could be missed out. The passage came after many observers had expected a shot in government’s activities following the expiration of the lifespan of the 2016 budget.
But as if it was waiting to avoid the controversies that trailed budget padding in 2016, the leadership of the National Assembly, immediately passed the document after President Muhammadu Buhari left for a second medical vacation to Britain.
But since the passage of the N7.44 trillion 2017 budget, economy and finance experts have been speaking on the need for the Federal Government to immediately hit the ground running with the full implementation of its capital expenditure component if only as a way to reflate the economy held down by recession as soon as the Acting President accents to it.
Some of the commentators insist that proper execution of its capital components will lead to job creation, provision of critical infrastructure to buoy industries and boost export of locally made goods to earn foreign exchange.
Commenting on the budget, Dr. Uche Uwaleke, Associate Professor of Finance, Nasarawa State University, Keffi said: “the 2017 budget is meant to be an integral part of the medium-term (2017 – 2020) Economic Recovery and Growth Plan (ERGP) which projects a GDP growth rate of 2.19 percent this year.”
He therefore noted that with barely seven months to the end of the year (although the budget is expected to run for 12 calendar months till May 2018), but that the government needs to hit the ground running with respect to implementation immediately the Acting President gives assent.
“Going by the country’s recent experience, we hardly have issues with implementation of recurrent estimates which in most cases hit 100 percent. The challenge has always been with the capital components of the budget in which wide adverse variances are recorded due in part to unanticipated shortfalls in revenue and the lengthy procurement process.
Now that improvements in revenue is being recorded on the back of rising oil revenue, coupled with accretion in foreign reserves and relative stability in exchange rate, effort should be made to cash-back critical capital projects earmarked for execution in the budget especially as it affects the Ministries of Power, Works and Housing, Transport and Agriculture. The faithful implementation of capital projects will boost economic activities thereby facilitating the economic recovery effort of the government in line with the Economic Recovery and Growth Plan (ERGP).” He said.
Also commenting on the budget, a former Managing Director of Unity Bank, Rislanudeen Muhammad said:
“It is good news that 2017 budget is finally passed by the National Assembly after such long, costly delay. With 30per cent of the budget set for capital expenditure, it is an opportunity for the government to quickly embark on massive employment generating, income enhancing projects that will help in reflating the economy and fast tracking our exit out of recession.
The IMF projection of Nigerian economy growing by 0.8percent in 2017 was largely conditioned on oil price remaining high as well as stability in Niger Delta to achieve production level of 2.5 million barrels a day ( as projected in the budget and supported by exceptional oil export quota reduction waiver by OPEC) implying the economy is yet to be diversified. We still rely on oil for export income and foreign exchange to address our high import propensity and government need to walk the talk on economic diversification as encapsulated in the EGRP.
Presently, any volatility in the forex market exposes Nigerians to negative impact of imported/ cost push inflation. In fact the recently launched economic recovery and growth plan (EGRP) projection of GDP growth rate of 2.19 percent in 2017 is clearly a tall order even though National Bureau of Statistics is yet to release the 2017 first quarter GDP data as a starting point.
“We need to reverse the years of vicious cycle of 100percent recurrent expenditure budget implementation as against less than 50percent 2016 capital expenditure (which in itself is a major improvement over the past). Recall that implementation of the capital aspect is hinged on N2.3 trillion fiscal borrowing or 2.18percent of GDP from both external( 46 per cent)and internal sources (54percent). There is already concern from IMF about our high debt to revenue ratio and optimal loan repayment capacity without impacting on our projected growth strategy. We need to enhance our tax to GDP ratio by enhancing the effectiveness of tax collection. As embedded in the EGRP, there is need for harmonisation of fiscal, monetary and trade policies to ensure they complement rather than contradict each other especially policies relating to high interest rate and multiple exchange rates”, he noted.
Meanwhile The Organised Private Sector (OPS) at the weekend warned that habitual late passage of budget for two consecutive years could contradict the economic recovery plan of the present administration, stressing that the Federal Government pledge that the budget whenever passed will run its full course of 365 days was no guarantee it would achieve its targets.
President of the Manufacturers Association of Nigeria (MAN) Frank Jacobs, said the National Assembly passing the budget in the month of May means it would affect implementation of the budget negatively.
“This is even the budget proposal that has been passed and until it’s been assented by the President, that we can talk of implementation, for now it’s just a bill”, he said.
He noted that the 2016 budget was passed on May 7, adding that for this year it may take until June before the budget will eventually get underway, and this would not be in the interest of a recessed economy.
“The budget I believe has a lot of infrastructure and construction to be implemented and by June rain would have started and everybody know that construction is best undertaken in dry season. There’s no doubt that much time has been wasted”, he said.
He noted that as the 2016 budget was able to run its full course of 365 days, government would also ensure that the 2017 budget, though passed late would run its full course.
He however reasoned that the OPS could only watch and follow whatever plan government has as the preparation and implementation of budget is solely in the hands of the government.
Similarly, the Director General of Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, also corroborates the MAN President as he stated that the new budget irrespective of the time it was passed would run its full course off 365 days.
He explained further, “the Federal Government took that decision last year that budget begins when the President assented to it, so that it will run its 12 months circle. It’s the same last year, just to take care of the delay.”
But the LCCI boss said the delay and late passage of budget was not really good nor ideal for the nation’s ailing economy.
According to him, “the best for any country is to have its budget in its best time line of January to December to accommodate all the details and for proper planning.”
For his part, Mr. Johnson Chukwu, The Managing Director, Cowry Assets Management Ltd stated, “When you delay a budget, you take away the effectiveness of its implementation. We have lost almost half of the year due to the delay in the passage of the budget. And due to the seasonality of the rain, some physical infrastructure like road may be difficult to be executed. This will reflect on the implementation of the budget.
Also reacting Mr. Sewa Wusu, Head, Research & Investment Advisory SCM Capital Limited said “You should remember that the 2016 budget is still running, because its implementation was extended till the end of May 2017. That has bridged the gap in the implementation of the 2017 budget.
My advise to the National Assembly is that they should pass budget at the appropriate time. The delay in the passage of the 2017 budget has really affected the economy. Now that the budget has been passed, the Federal Government should monitor its implementation so that its desired impacts could be felt on the economy.