2017 Budget and lifting Nigeria out of recession
I am writing this piece as a Nigerian, who alongside millions of other Nigerians, is currently experiencing and lamenting the pervading economic recession that started this year. Coupled with this, I am writing as a historian through the lens of economic history. An analysis of Nigeria’s situation shows that this is not the first time Nigeria will be experiencing recession. One could recollect the recessions of 1925-1945, 1965-1972, 1980-1989 and 2008-2009. However, aside the recession of 1980-1989, it is becoming worrisome that the current recession may end up becoming the most devastating of all. Considering all indices and abortive attempts by the government to arrest the situation, it’s becoming clear that the government has no idea.
On a practical term without bothering yourself with the nuances of economic terms and explanations (GDP, recession, inflation, etc), any visit to the market will evidently tell you that the economy is in danger. The worrisome situation is best articulated by President Muhammadu Buhari’s statement while presenting the 2017 budget a few days ago to the National Assembly. He said: “we continue to face the most challenging economic situation in the history of our nation. Nearly every home and nearly every business in Nigeria is affected one way or the other.” No doubt, the president is right in his judgment. It is disheartening to say that it is becoming practically impossible to do viable business, to pay school fees, and to eat in millions of homes in Nigeria.
On Wednesday, December 14, 2016, Buhari presented a total budget estimate of N7.298 trillion to the National Assembly based on a benchmark crude oil price of $42.5 per barrel; oil production estimate of 2.2 million barrels per day; and an average exchange rate of N305 to the US dollar and with an expected aggregate revenue of N4.94 trillion of which oil is projected to contribute N1.985 trillion. On face value, the 2017 budget is a budget of recovery and growth. Premised on fiscal economic analysis, Nigeria will run in 2017 a budget deficit of N2.36 trillion. Accordingly, this deficit will be financed mainly by burrowing. The intention of the budget is to source N1.067 trillion (or about 46%) from external sources while N1.254 trillion will be sourced internally. Using Keynesian economics and other economic paradigms, borrowing in a recession is not alien – there’s great need to borrow during recession in order to increase spending that will trigger exchanges towards revitalisation of the economy. However, a cognitive economic analysis of the expenditure side of the budget estimates as presented shows that Buhari’s government is out to spend less on areas that could aid and foster economic enterprises and innovativeness in 2017. Infrastructural development should attract the most attention since this will help lay effective economic architecture for investors – local and foreign – which will culminate in employment for the teeming youths. Instead, budget estimates for infrastructure is put at N2.24 trillion (about 30.7% of the budget). This percentage does not show that this government is determined to solve Nigeria’s economic problems.
Buhari will spend a huge part of 2017 national revenue to service debts, pay salaries and run every day business of governance. Detailed analysis of these shows that N1.837 trillion (about 25.2%) of the total budget estimates is for debt servicing and N1.8 trillion on personnel costs or costs of governance. These aspects of 2017 budget are troubling and threatening to the economy.
There must be massive infrastructural development across the country. Other important and stimulating financial architecture must be erected to promote economic rejuvenation. It is stated in the budget that N100 billion has been provided in the Special Intervention Programme as seed money to the N1trillion Family Home Fund. If the FG can be proactive in attracting private partnership, this will go a long way in inducing productivity in the housing/construction sector. Beyond providing homes, this will create thousands of jobs and business opportunities. In the same vein, it is encouraging that in the 2017 budget, N213.14 billion is provided as counterpart funding for the Lagos-Kano, Calabar-Lagos, Ajaokuta-Itakpe-Warri and Kaduna-Abuja railway projects. Aggressive efforts should be pushed towards improving all forms of transportation system in the country. This is one of the most important business/economic structures that will help stimulate productivity in Nigeria. In the same manner, N50 billion is set aside as FG’s contribution to the expansion of existing, as well as the development of new Small and Medium Enterprises (SMEs). This is commendable; however, more can be done in this direction. What’s being done to increase access to long term and affordable credits/loan? Currently, Monetary Policy Rate (MPR) stands at 14% with inflation rate at 18%. These terrible economic stats should be given urgent attention.
Beyond the rhetoric of executing the 2017 Budget of Recovery and Growth under the auspices of the National Economic Reconstruction and Growth Plan, I will without any fear of contradiction and misconstruction, say that, Buhari’s government does not really have a clear-cut and well articulated economic ideology. Nevertheless, I believe Buhari and his team know that politics and economics are interwoven particularly when governing a complex nation like Nigeria. Economic policies must not be taken in isolation. The politicking that will follow must be well permutated as well. Same goes for political policies. I hope to see a vivid articulation of Buhari’s political economy. I stand with him when he says ‘I will stand my ground and maintain my position that under my watch, the old Nigeria is slowly but surely disappearing and a new era is rising in which we grow what we eat and consume what we make’.
Johnson is a historian and reasercher.