An economist has questioned President Muhammadu Buhari’s optimism that his 2017 federal ‘Budget of Recovery & Growth’ would bring an end to the current economic recession in the country.
The president said at the opening of the induction course for Nigerian career ambassadors-designate in Abuja that he was optimistic the current economic recession would end in 2017.
He based his confidence on his administration’s reform policies and measures outlined in his 2017 budget speech to the National Assembly to turn around the country’s macroeconomic environment.
During the presentation of the details of the budget, the Minister of Budget and National Planning, Udoma Udoma, equally expressed similar sentiments, saying the budget would help stimulate and attract investments to lift the economy out of the current recession.
But an Abuja-based development economist, who is also the chief executive of Pan-Africa Development Corporation, Odilim Enwegbara, said the budget presented last week to the National Assembly for consideration and approval would hardly achieve that goal during the year.
“If Mr. President hopes to grow the economy out of recession in 2017, this budget is not the one to do it,” Mr. Enwegbara said.
“This is because it is not an expansionary budget, but also that it is not pro-investment, pro-growth, and pro-jobs. It is not enough to expect it to perform such a magic.”
Although Mr. Enwegbara agreed the recession was not a “sudden accident”, he said what it needs urgently is serious restructuring and overhauling.
This, he said, should come with unconventional policies, designed to permanently put the economy on a path of sustainable growth.
He noted that the restructuring of the economy had not yet happened, because gifted pro-expansionary Nigerians were yet to be brought together by the government to perform the “inevitable economic diversification surgery.”
Nigeria’s budget to gross domestic product ratio, according to him, had remained very low, because the country’s tax to GDP ratio was the lowest among its peer economies, like South Africa, over the years.
While South Africa’s tax to GDP ratio was as high as 26.3 per cent, he said that of Nigeria was still close to what it used to be in the mid-2000s commodity booms.
Again, despite South Africa’s 2016/2017 fiscal deficit at 3.2 per cent, he said the country’s budget spending last year was about $143.966 billion, against Nigeria’s proposed $23.928 billion in 2017.
He also criticised the proposed $42.50 per barrel crude oil benchmark in the budget, arguing that in a time of recession, government should maximise all avenues to increase its revenue.
“The benchmark oil price should be increased to $50 per barrel considering that oil price in 2017 is expected to rise as high as $65 per barrel,” he said.
“That is why the 2017, with all the good intentions, rather than being an expansionary budget, is a contractionary budget, because it is smaller than the 2016 appropriation, especially with such low fiscal deficit of 2.18 per cent to GDP against South Africa’s 3.2 per cent,” he explained.
He said government was not doing enough to raise revenues from taxes, as the country’s tax policy requires urgent overhaul to aggressively boost government tax revenues.
The country’s tax-to-GDP ratio, he pointed out, should be raised close to 30 per cent, as about 70 per cent of the collection from value added tax was being diverted by officials of the revenue collection agencies, in connivance with the paying businesses.
A casual look at the proposed N7.298 trillion 2017 budget, against the N6.06 trillion figures for the previous year, he stated, might seem higher in size, but a closer review would show otherwise.
According to him, taking the exchange rate of N305 to a dollar, and over 18 per cent inflation average into consideration, against N197 per dollar in 2016 and 16 per cent inflation average, the 2017 budget was actually smaller.
At the proposed exchange rate of N305 to a dollar, he said the N2.24 trillion provision for capital projects would translate to about $7.344 billion only, against about N1.8 trillion capital spending in 2016, which came to about $9.137 billion at 197 per dollar exchange rate.
“What economic sense does it make that a country with $350 billion infrastructure deficit is okay with 14 per cent debt to GDP ratio (with external portion less than 2 per cent), compared to its peer economies, such as South Africa, with such low infrastructure deficits and world-class infrastructure, and a debt to GDP ratio as high as 44 per cent, with external debt component of about 39.38 per cent?”, he asked.
Mr. Enwegbara however hailed the N2.36 trillion deficit in the 2017 budget as a welcome development, saying about N1.067 trillion, or 46 per cent provision for external borrowing, was a departure from the usual less than 5 per cent provision in the past.
With about N1.66 trillion, or 40 per cent of government revenues to be spent on domestic debt service next year, Mr. Enwegbara said government needed to consider other ways to solve the problem.