Analysts: Delay in Budget Assent May Worsen Macroeconomic Indicators

Ndubuisi Francis in Abuja

The current stalemate occasioned by President Muhammadu Buhari’s refusal to assent to the 2016 budget due some areas of disagreement with the National Assembly may continue to impact negatively on the nation’s macroeconomic indicators, some analyst have cautioned.

Analysts believe the delay in assenting to the fiscal document has implications on Gross Domestic Product (GDP), investor confidence, and national productivity, among others.

Commenting on the budget logjam in a telephone chat with THISDAY, an economic/financial analyst, Odilim Enwegbara, argued that beside the effect on productivity, the delay most importantly, drastically reduces the GDP growth forecast.
The World Bank had recently revised Nigeria’s growth forecast from 3.3 per cent to 2.3 per cent in 2016.

According to Enwegbara, “as a result of continued uncertainty, investors being averse, will certainly continue to sit on the fence with the resultant effect being low confidence in the economy.”

He noted that of particular concern is that investors who are yet to make up their minds whether to invest in Nigeria’s economy or not, end up in indefinite postponement.

“Since high inflation is a function of low productivity, and equally, since low productivity triggers layoffs and factory shutdowns, delays in the passage of a national budget always is bad for any nation’s economy. I will suggest, going forward, that budgetary deadlines be enacted so that no more prolonged delays. The good news, however, is that whenever it is eventually signed, it will run a full 12 months course,” Enwegbara said.

Also reacting to the budget impasse in a statement made available to THISDAY, the Lead Director, Centre for Social Justice, Eze Onyekpere, called for a quick resolution of the controversy.

In the statement captioned, “Resolve the Budget Logjam Now: An Appeal to the President and Legislature,” Onyekpere expressed regret over the delay in assenting to the 2016 federal budget.

“The undue delay in the approval and presidential assent to the 2016 federal budget is a cause for concern to all discerning Nigerians. The budget inter alia shows the economic policy direction of the state and indicates what activities, projects and programmes will be preferred by the fiscal, monetary and macroeconomic regime. Even though the budget was prepared without any foundation policy guide, the country is currently floating without a direction; a fiscal void and vacuum is the result of the undue delay in enacting the 2016 federal budget into law.

“Again, without the estimates becoming law, new key capital projects cannot commence and ongoing ones cannot continue to be funded. In most major construction sites across the federation, contractors have withdrawn their services and projects have been stagnated. This is happening in an economy with a huge infrastructure deficit, where projected capital expenditure is expected to strengthen the economy towards the path of growth, employment creation and value addition. The delay will lead to poor capital budget execution at the end of the 2016 year. Essentially, the granite foundation for the failure of the 2016 federal budget has been laid.

“The danger in the continued wait is that preparations for the 2017 federal budget cannot proceed in the absence of an approved and signed 2016 federal budget. By now, the Minister of Finance should have been concluding the preparation of the Medium Term Expenditure Framework (MTEF) for forwarding to the Executive Council of the Federation for its endorsement,” the CSJ boss said.

He noted that Nigerians, investors and the international community needed to get the economic bearing of Nigeria in 2016, which the budget should provide, adding that the recent call by the International Monetary Fund (IMF) for Nigeria to resolve her budget logjam and have an assented budget showed the opinion and concern of the international community about the budget crisis.

“The rising inflation, weak economic growth and increasing unemployment call for governmental action through the deployment of budgetary resources. This will only be possible when the budget becomes law.

“Centre for Social Justice (CSJ) therefore calls on the President and the National Assembly to show leadership and understanding and expeditiously resolve the budget logjam. The full details of the Presidents misgivings with the budget as approved by National Assembly should be in the public domain.

“The spirit of negotiation, give and take should dominate the proceedings leading to the resolution of the budget crisis. Nigeria cannot begin to take steps towards the path of economic progress without an approved budget. The reality of our times dictates urgent action,” the statement added.