Nigeria’s 2017 Budget too small to end economic recession
by LOLADE AKINMURELE
December 15, 2016 | 4:05 pm| | | Start Conversation
The only solution to Nigeria’s deteriorating economy lies in attracting massive private capital, economists say, as the country’s N7.2 trillion spending plan for 2017, a meagre 7 percent of the country’s N90 trillion Gross Domestic Product (GDP) in 2015, may fail to scratch the surface.
“What this means is that we will never be able to solve Nigeria’s economic problem by government spending alone especially with the stipend it makes,” said Taiwo Oyedele, a partner and head of tax and regulatory services at PriceWaterhouseCoopers (PWC).”This why we must incentivise private capital. To do this, we must have a market-driven economy and the right policy framework to stimulate private capital,” Oyedele added.
Nigerian President Muhammadu Buhari, yesterday (December 14) presented a N7.02 trillion Budget to the National Assembly, a budget the 75-year old tagged “The Budget of Recovery and Growth.”
“Using the official interbank exchange rate of N305/$, there is a contraction of about 25 percent in the 2017 budget compared to the 2016 budget,” said Bismarck Rewane, an economist and CEO of Financial Derivatives Company (FDC).
Although there is an increase in naira terms, the 2017 budget, in dollar terms, is 23.17 percent less, at $23.6 billion, compared to 2016’s $30.7 billion budget (N6.06 trillion- at an exchange rate of N197/$).
Africa’s largest economy would probably contract by 1.7 percent by year-end according to the International Monetary Fund (IMF), the first full-year contraction in 25 years.
A knowledgeable source who did not want to be named says Nigeria is shooting itself in the foot to think it can single-handedly revive the economy.
“There must be more policies that can attract private capital, which is missing in the 2017 budget,” the source said. “Until we understand that economic recovery will be a function of oil output and market efficiency, we are going nowhere.”
The 2017 Budget is based on a benchmark crude oil price of $42.5 per barrel; an oil production estimate of 2.2 million barrels per day; and an average exchange rate of N305 to the US dollar.
Based on these assumptions, aggregate revenue available to fund the federal budget is N4.94 trillion which is about 28 percent higher than 2016 full year projections with oil revenues projected to contribute N1.985 trillion of this amount.
Non-oil revenues, largely comprising Companies Income Tax, Value Added Tax, Customs and Excise duties, and Federation Account levies are estimated to contribute N1.373 trillion. Independent Revenues are projected at N807.57 billion while N565.1 billion is projected as receipts from various recoveries. Other revenue sources, including mining, amount to N210.9billion.
Nigeria fell into recession in the first quarter of 2016 and has since gone to fall deeper in the third quarter following negative growth of 2.24 percent, according to the National Bureau of Statistics (NBS).
However, key sectors of the Nigerian economy like Construction, Industry, Manufacturing, Accommodation and Food services have all been contracting since 2015.
Big Read |