2017 budget is not a promissory note -By Lekan Sote

Lekan Sote

First, Minister of Finance, Kemi Adeosun, suggested that Nigeria was “technically” in recession. Finally, the National Bureau of Statistics officially admitted that Nigeria slipped into recession after two consecutive quarters of negative growth of the Gross Domestic Product in 2016.

Possibly echoing ratings agency, Moody’s, Adeosun predicted that the economy, that contracted by 1.5 per cent in 2016, would grow by 2.5 in 2017. Prophet S.K. Abiara, of the Christ Apostolic Church Worldwide, also prophesied (what else?) that “Nigeria will be out of recession soon… 2017 will be a year of victory, happiness, and grace.”

The Central Bank of Nigeria’s Purchasing Manager’s Index, which measures business purchase orders, recorded a marginal increase from 44.1 points in October to 46 in November-with growth in four sub-sectors: cement; food, beverages, and tobacco; rubber and plastic products; and electrical equipment. The remaining 12 of the 16 sub-sectors declined.

Crude oil prices rose, soon after the Organisation of Petroleum Exporting Countries, and non-OPEC members, like spoilsport Russia, agreed to reduce daily production from 33.7 to 32.5 million barrels per day. Nigeria and Libya were however exempted from the cutbacks because of their domestic challenges.

Yet, Peter Obi, a former Governor of Anambra State, thinks there is no assurance that the nearly N7.3 trillion 2017 Appropriation Bill will reverse the recession soon. His dismal conclusion is based on what he calls extravagant cost of running government. Nigerians whose standard of living dipped in 2016 may likely accept his verdict.

The reversal in the economies of Nigeria’s critical trading partners, America and China, led to reduction in crude oil demands. The Nigerian National Petroleum Corporation reports that India imported 10.12 million barrels from Nigeria in September 2016, lower than 12.54 million imported in August.Indonesia reduced import from 4.79 to 1.89 million. Europe also reduced import from 20.77 to a fearful low of 16.25 million barrels.

Crude oil production reportedly rose by 9.91 per cent from August figures, to 1.64 million barrels per day in September. But Niger Delta militants’ blowing up of pipelines leading to Bonny Terminal, and force majeure by oil companies at Forcados and Qua Iboe Terminals brought production down by 24.92 per cent, when compared to September 2015 figures.

Some international companies declared profit in 2016 only after divesting from Nigeria. South Africa’s food manufacturer, Tiger Brand Limited, recorded 19 per cent profit after divesting, and selling its interest in Dangote Flour to founder, Aliko Dangote.

“Pabambari,” the final straw of the woes, is the depreciation of the naira. Minister of Budget and National Planning, Senator Udoma Udo-Udoma, concedes that the N2.24tn appropriated to capital expenditure in the 2017 budget, nominally higher than the N1.75tn in 2016, is lower in value because of drastic devaluation of the naira. An inflation rate of about 18 per cent means you will need more money to buy fewer goods.

The violence done to the naira; daily production of 2.2 million barrels of crude being dependent on the whims of the militants; the “guesswork” $42.50 oil price benchmark, also dependent on the fickle international oil market; and frivolous expenses,like buying new kitchen utensils for Aso Rock Villa, make one wonder if Budget 2017 is realistic for growth. Every patriot would wish it was.

The President says that Budget 2017, an Economic Recovery and Growth Plan, will optimise local content, and empower local businesses, diversify the economy into agriculture, manufacturing, solid minerals and services, while still retaining investment in oil and gas. This is no news.

Minister Udo-Udoma assures the nation that the budget will pull the economy out of recession, and lay a foundation for a sustainable economy. The President wants to promote import substitution through fiscal, monetary, and trade policies. He should start by harmonising the varied exchange rates for pilgrims, the budget, interbank and airlines transactions, fuel import, Western Union, Bureaux de Change, and the black market.

The budget proposes new airport terminals; extension of roads, railways, and waterways; rehabilitation of the Lagos-Ibadan Expressway; and (sorely needed) expansion of electricity transmission capacity. These infrastructure projects, about 56 per cent of capital expenditure, should reflate the economy, and scratch Nigeria’s huge infrastructure deficit.

The proposal of the critical Calabar-Lagos railway line, omitted by the colonialists, is commendable. This, and the Ajaokuta-Itakpe-Warri railway line, should enhance the movement of cement, steel, crude, and refined oil. But this budget that emphasises infrastructure, housing, and railway lines is surprisingly silent on local steel mills.

Anyway, what Nigerians urgently need these days is cheap food: One hopes that the rains will come early this year. Nigeria desperately needs every bushel of food crop, and tonnage of cash crops, that can be harvested. People are hungry.

The prices of foodstuffs that rose after the devastating devaluation of the naira, which shrank the nation’s Gross Domestic Product, remain in the stratosphere. It doesn’t look like they will come down soon.

Government must improve irrigation, and farm produce storage capacity, and explore the farm settlement option.

There is a need to broadcast the findings of better funded research institutions like Nigerian Institute for Oil (palm) Research, Benin; Federal Institute of Industrial Research Oshodi; universities of agriculture; and private agencies like International Institute of Tropical Agriculture, Ibadan, to Nigerian entrepreneurs.

After India, Nigeria has the highest nutritional challenges of stunted growth in children’s height and weight, and susceptibility to diseases. This budget allocates only N51bn to health care. Abandonment of farming due to Boko Haram insurgency has led to acute food shortage affecting more than three million people in northeast Nigeria.

It is cheering news that the Federal Government recently signed a Memorandum of Understanding with Morocco to revive Nigeria’s fertiliser blending plant, reduce demand for foreign exchange to import fertiliser, and enhance agricultural production.

Were it not a tax credit, one would have suggested that the N20bn proposed as Export-Expansion grant should be added to the mean, meagre, measly, N91bn allocated to agriculture. If Nigeria grows more farm crops, it will need less foreign exchange, which crude oil already provides anyway.

The Economist’s 2016 Food Sustainability Index ranked Nigeria 23rd out of 25 countries, below Ethiopia and Indonesia. The FSI measures and compares food loss and waste, water resources management, crop diversification, climate change mitigation, agricultural Research & Development, and agricultural subsides, among countries.

Mr. President should please note that late presentation of budget proposals leads to late Appropriation Acts. This stalls implementation of capital projects. An unofficial source says unexecuted capital projects of Budget 2016 will be carried over to 2017.

Section 82 of the constitution that empowers the President to spend “for the purpose of meeting expenditure necessary to carry on the services of the Government of the Federation” if the Appropriation Bill “has not been passed by the beginning of the financial year,” appears to emphasise recurrent expenditure only. That will slow down progress.

Folks, the overly cautious Budget 2017 won’t radically improve the economy. Consumer goods, foodstuffs, building materials (cement, roofing sheets, and iron rods), textiles, and petroleum products, will still be imported in quantum.

And with the naira likely to suffer more buffeting, and the unavoidable additional burden of servicing debts, Budget 2017 is a promise that may fail, not a promissory note to be paid “dole,” without fail on a due date.

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