Udoma: Recurrent Burden, Dwindling Revenue Make Full Implementation of Capital Budget Impossible

•  NBS: Unemployment rate rises to 18.8%, to peak in Q4

By Ndubuisi Francis on Abuja

The Minister of Budget and National Planning, Udoma Udo Udoma has explained that the federal government had been unable to achieve full implementation of the 30 per cent capital components of the 2016 and 2017 budgets because of high recurrent burden and dwindling revenue.

In an interview with THISDAY, Udoma said when the Buhari administration emerged in 2015, it inherited a budget with a capital component of 16 per cent from the previous government.

Udoma said, “We committed to take it up to 30 per cent, and so in 2016, it was 30 per cent and in 2017, it was 30 per cent. It has not been easy to achieve that 30 per cent because recurrent is very high. The major part of it is salary and some overheads. We can’t cut down the overheads – salaries and pensions; that’s the reason.

“The only way we can bring it down, which we will like to do, is to take up revenues. Then, what will happen is as a percentage of the budget, you can now have a much higher percentage in terms of capital. That is why revenue is so important because we don’t think it is right to embark on retrenchment.”

Reminded that the Oronsaye panel had recommended the rationalisation of some agencies and departments of the federal government as a cost-cutting measure, Udoma said: “In the short-term, the government does not believe that we should retrench. So, I believe that when the economy begins to improve, we will be able to look at some of those issues, and I think the president is very concerned about that.

“He’s not the type of person who can, after advocating for employment at the federal level, now throw people out. So, he believes that we should try and weed out any fake claims but any real claims should be paid. When we are growing at 7, 10 per cent, then there will be expansion of the economy, there will be so many opportunities for the people.”

On the delay in the release of funds for capital projects in the 2017 Budget, the minister explained that the delay arose because a major chunk of the capital vote was to be funded by borrowing, with some of that to be sourced internationally.

He noted that the approval of the National Assembly had to be sought, adding that until the approval was secured recently, borrowing could not commence.

Udoma said it was after the approval that government officials embarked on a road show abroad to float a Eurobond for the funds.

He pointed out that in spite of these challenges, the current administration had done well in terms of capital projects, as over N1 trillion was released in the 2016, a record he said, previous administrations could not achieve.

Udoma said: “We are working closely with the National Assembly. For instance, in the start of 2016, we released over N1 trillion capital vote. So, we have actually done very well compared to the previous administrations in terms of the amount released. So, this year, the budget year started in the middle of June. For a budget that has not run for six months (the budget that was passed is valid for one year) and to achieve that level of implementation on the capital and the recurrent is good.

So far, the federal government has released N450 billion of the capital vote in the 2017 Budget with another N750 billion to be released, bringing the total released to N1.2 trillion. 

Unemployment Rate Rises to 18.8%, to Peak in Q4

Meanwhile, the nation’s unemployment rate increased from 14.2 per cent in the fourth quarter (Q4) of 2016 to 16.2 per cent in the second quarter (Q2) of 2017, and 18.8 per cent in the third quarter ((Q3) of 2017. 

According to the ‘Unemployment and Under-employment Report – Q1 to Q3 2017’ released by the National Bureau of Statistics (NBS), the number of people within the labour force who are unemployed or underemployed increased from 13.6 million and 17.7 million respectively in Q2 2017  to 15.9 million and 18.0 million in Q3 2017.

The economically active or working age population (15 – 64 years of age) increased from 110.3 million in Q2, 2017 to 111.1 million in Q3, 2017. 

The labour force population increased from 83.9 million in Q2 2017 to 85.1 million in Q3 2017. 

The total number of people in full-time employment (at least 40 hours a week) declined from 52.7 million in Q2 2017 to 51.1 million in Q3 2017.

The NBS pointed out that a loss in full-time employed workers may not necessarily be due to job losses.

It may also be due to people choosing to work fewer hours hence becoming underemployed or people like intending students or new mothers choosing to leave full time employment entirely or temporarily.

Total unemployment and underemployment combined increased from 37.2 per cent in the previous quarter to 40.0 per cent in Q3 2017. 

During the quarter (Q3 2017), 21.2 per cent of women within the labour force (aged 15-64 and willing, able, and actively seeking work) were unemployed, compared with 16.5 per cent of men within the same period. 

The NBS stated that in Q3 2017, 16.4 per cent of rural and 23.4 per cent of urban dwellers within the labour force were unemployed, adding that unemployment was increasing at a slightly faster rate for urban dwellers than it is for their rural counterparts. 

The report indicated that underemployment was predominant in the rural areas, with 26.9 per cent of rural residents within the labor force in Q3 2017) underemployed (engaged in work for less than 20 hours a week); compared to nine per cent of urban residents within the same period. 

NBS reports: “For the period under review (Q3, 2017),  the unemployment rate for young people stood at 33.1 per cent for those aged 15 to 24, and 20.2 per cent for those aged between 25 and 34. 

“Underemployment within the same quarter rose slightly among the 25 to 34 age group from 22.2 per cent in Q2 2017 to 22.3 per cent in Q3 2017; and declined slightly amongst the 15 to 24 age group from 35.1 per cent in Q2 2017 to 34.2 per cent in Q3 2017. 

“As of Q3 2017, 67.3% of young people aged 15-24 years were either underemployed (engaged in work for less than 20 hours a week or low skilled work not commensurate with their skills and qualifications) or unemployed (have no work at all but willing and actively seeking to work), compared to 64.6% in the previous quarter. 

“The combined underemployment plus unemployment rate for the 25 to 34-year age group stood at 42.5% within the quarter under review, compared with 39.6% in the previous quarter. 

“Combined unemployment and underemployment rate for the entire youth labor force (15-35 years) was 52.65% or 22.64 million (10.96 million unemployed and another 11.68 million underemployed), compared to 45.65% in Q3 2016, 47.41% in Q4 2016 and 49.70% in Q3 2017. 

“Unemployment tends to be higher for people within the labor force that have post-secondary school,” the report said.

Nigeria’s economic growth started decelerating since Q2 2014 culminating in an economic recession in Q2 2016. 

The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP). 

The economic recession was technically over in Q2 2017. 

However, several economic activities are still contracting or recovering sub-optimally. 

“An economic recession is consistent with an increase in unemployment as jobs are lost while the creation of new jobs is stalled. 

“A return to economic growth provides an impetus to employment.  However, employment growth may lag, and unemployment rates worsen especially at the end of a recession and for many months after. The unemployment rate, induced by a recession, typically peaks about 15-18 months after the beginning of a recession or four-eight months after the end of a recession before it returns to its pre- recession trend. 

“Thus, in the case of Nigeria, there will be a peak in Q4 2017, which means that unemployment is expected to return to its normal trend in 2018. 

The NBS’ report added that the length of the lag depends on how deep and long the recession was.

“It also depends on how stable and fast the recovery is as well as on the economic sectors driving the recovery (labour or capital/technology intensive),” reports NBS.