2017 Budget as Lever for Economic Recovery

Obinna Chima

After a six-month wait, Acting President Yemi Osinbajo, in the absence of President Muhammadu Buhari, finally got to append his signature to the 2017 Appropriation Bill on Monday.

This year’s budget, like others before it, took a long time coming. But what stood it out from others was that the 2017 budget was devoid of rancour between the executive and National Assembly over the alterations made to the original document by the latter.

Much of the negotiations and interactions to reinstate what had been altered in the budget were handled behind the scenes and in a discreet manner that saved the public the agony of another fight over the spending estimates.

The budget with an aggregate expenditure of N7.44 trillion has an ambitious revenue projection of N5.08 trillion. With total capital expenditure of N2.178 trillion and non-debt recurrent expenditure of N2.987 trillion, the federal government is proposing to fund the projected fiscal deficit of N2.36 trillion by borrowing.

The federal government also earmarked N1.841 trillion for debt service, which unfortunately is 24.74 per cent of the total budget and 36.3 per cent of revenue projections for the year.
By implication, for every N1 made by the federal government in 2017, about N.036 will be spent on servicing its debt, leaving it N3.2 billion for recurrent and capital spending. Expectedly, this will be augmented by borrowings from mainly foreign and, to a lesser extent, local sources.

It is noteworthy, however, that the 2017 budget, which was premised on a benchmark crude oil price of US$44.5 per barrel and oil production estimate of 2.2 million barrels per day, appears to be standing on attainable economic variables considering the near-stability in the international oil market and the relative peace in the Niger Delta region, following the peace overtures made by the federal government late last year and early in 2017 to militants in the region.

Giving further fillip to this is the resumption of oil loading from the Trans Forcados Pipeline (TFP), following its repair, which should raise the country’s oil production and foreign exchange earnings.

Oil prices have averaged $50 per barrel between January and June this year and are not expected to drop drastically, should the Organisation of Petroleum Exporting Countries (OPEC) sustain measures to rebalance the crude oil market. This is expected to help the country grow its foreign reserves and by extension the Excess Crude Account (ECA).

The government has also committed to improving its non-oil earnings so as to achieve its revenue projections. This would come largely from taxes, levies, excise duties, improved agriculture output, and the mining sector.

Crucially, the deceleration of the country’s economic contraction to 0.52 per cent in the first quarter of this year, compared with a contraction of 2.06 per cent in the first quarter of 2016, as well as declining inflation to 17.24 per cent in May 2017, are all pointers that the economy is on a recovery path.

This, coupled with the improvement in the Purchasing Manager’s Index (PMI), the growth recorded in the manufacturing and agriculture sectors in first quarter of 2017, plus improved liquidity in the foreign exchange market, should instill confidence in the economy and impact positively on companies’ earnings and profitability.

In turn, this would lead to increased revenue generation for the federal government by way of taxes and from other non-oil sources. Clearly, this would empower the government to pursue the implementation of all its important executive projects, such as the railway standard gauge projects, the Mambilla power project, Second Niger Bridge, and the Lagos-Ibadan Expressway, among other critical infrastructure projects that could create more jobs and reduce unemployment.

Of greater significance, the executive and legislatives arms of government have reached an agreement that a virement request will be sent by the executive to the National Assembly for the restoration of the budget alterations to the original document presented to the lawmakers by President Muhammadu Buhari last December.

This means that the N500 billion, which THISDAY gathered was shaved off by the National Assembly for these infrastructure projects will be restored, while the 4,000 projects that the federal lawmakers surreptitiously included in the budget will be reviewed to ensure that executive remains largely within the budget estimates that it proposed for the year.

This is crucial if the government is to fund its infrastructure projects, as many of them such as the rail and power projects would require it to provide its own share of counterpart funding in order to access foreign loans from the China Exim Bank, among other multilateral lenders.

Another notable inclusion in the budget is the expansion of the government’s Social Investment Programme (SIP) targeted at creating jobs for unemployed graduates through the N-Power initiative, the home-grown school feeding programme which will be extended to more states of the federation from the current nine, the Government Enterprise Empowerment Programme (GEEP) for micro and small businesses in the country, and the Conditional Cash Transfer (CCT) scheme for indigent Nigerians. Sustained implementation of the SIP should see more Nigerians lifted out of poverty this year.

During the budget’s signing into law on Monday, Osinbajo expressed confidence that the 2017 budget will deliver positive economic growth and prosperity – one that is self-sustaining and inclusive. According to Osinbajo, the 2017 budget will be implemented in line with the Economic Recovery and Growth Plan (ERGP). He also acknowledged that the budget provides significant opportunities for partnership with the private sector.

But for the Director General of the West African Institute of Financial and Economic Management (WAIFEM), Prof. Akpan Ekpo, what is critical at this point is for the government to fast-track implementation of the budget, considering the delay in its signing.

Ekpo, however, expressed concern over the high amount to be expended on debt service, just as he cautioned the government to keep an eye on the country’s mounting debt.
“Implementation is crucial now. They should ensure that they implement more of the infrastructure projects such as in the power, works, transport, health, agriculture and other sectors.

“They need to implement 80 per cent of the budget so as to take the economy out of recession and place it on the path of sustainable growth,” he noted.
The WAIFEM boss also stressed the need for constant budget monitoring by members of the civil society groups, NGOs and other stakeholders in the economy.

The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, noted that the signing of the budget into law would end the uncertainty in the system. He, however, pointed out that the onus will lie on the government on its speedy and effective implementation so that Nigerians can get the desired value from the budget.
The LCCI boss also called for a review of the entire budgetary process and to set timelines for every stage of the process.

“Specific timelines must be set for the presentation of the budget to the National Assembly, for the consideration of the Appropriation Bill by the National Assembly, and for the assent by the president.

“We need to bring the discipline of timing into the budgetary process. Delivering a budget halfway into the financial year does not augur well for the overall economy,” he added.
According to Yusuf, there is also urgent need to define the limits of authority for the executive and the legislature with respect to the passage of the budget.

“A judicial pronouncement is imperative to determine the extent to which the National Assembly can make changes to the Appropriation Bill. This issue has become a recurring decimal, contributing to its delay,” he said.

After the six months delay, it is imperative that the government would have to hit the ground running so as to improve Nigeria’s economic fortunes and the quality of life of the citizens. Effective implementation of the budget would also go a long way in quelling social tensions and unrest in the country, which are on the rise due to frustration and joblessness.