2017 APPROPRIATION BILL: THE BUDGET OF ECONOMIC GROWTH AND RECOVERY?

2017 APPROPRIATION BILL: THE BUDGET
OF ECONOMIC GROWTH AND RECOVERY?

On
Tuesday, Television Continental (TVC) reported that the Nigerian Senate would
start the review of the 2017 Appropriation Bill which has been tagged; ‘The Budget of Economic Growth and Recovery’
by the executive. However, an extensive analysis of the budget figures and
allocations would only reveal one thing – the government is not serious about
reversing the current recession that has stalled economic growth and
development.

The
projected budget which was prepared by the Ministry of Budget and National
Planning headed by the Minister Udoma Udo Udoma would be the highest budget in
the history of our dear country in terms of projected expenditure at NGN7.3
Trillion which is a 20.4% increase in the 2016 budget -The Budget of Change at
NGN6.1 Trillion.

In
consequence, this article would examine the critical allocations and
projections of the 2017 appropriation bill and discuss in layman terms how
these figures would affect every one of us – me and you. However, I would
encourage my readers to study the bill passionately so that it would make my
discussion and total evaluation of the bill understandable. You can study the
budget projections and allocations in the Ministry of Budget and National
Planning’s official website – //www.budgetoffice.gov.ng/

Perhaps,
it is worthy of note that the strategies employed by the Federal Government to
reverse the destiny of the country from the economic recession are commendable;
they have been highlighted in subsequent paragraphs.

v Recognize
inherited debt profile through a robust audit process   
v Mobilize
private capital to complement Government spending on infrastructure 
v Strengthen
fiscal/monetary handshake    
v Incentivize
exports
v Encourage
investment in specific sectors through fiscal incentives
v Revenue
enhancement and cost consolidation of the fiscal space
v Improve
fiscal discipline at Sub-National level
v Enable
and accelerate Recoveries process
v Rebalance
debt portfolio to extend maturity and optimize debt service cost
v Improve
capacity and access to finance for MSME
An
Analysis of the Budget Allocations and Projections

ª     Capital
Expenditure – 30.7% of the total expenditure in the 2017 Appropriation bill which
is about NGN2.2 Trillion has been earmarked for Capital Expenditure. However,
will this be achieved? This is predicated on the fact that the implementation
of capital expenditure in 2016 achieved barely an average performance. Will
capital projects suffer again in 2017 while personnel & overhead costs take
pre-eminence?
I
also believe that a mere 30.7% of the total expenditure is too small to record
any significant achievement, this is because there is a whopping $350 billion
infrastructure deficit with 14% debt to GDP ratio (with external portion less
than 2%), 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%, with external debt component of about 39.38%.

ª     Debt
Servicing & Deficit Borrowing – It is catastrophic to discover that a
whopping NGN1.66 Billion which is 22.5% of the total projected expenditure
would be used to service debt. This only validates the fact that there has been
a lot fiscal recklessly and it is also heartbreaking to note that the budget deficit
will be financed mainly by borrowing which is projected to be about NGN2.32
trillion. While presenting the 2017 Appropriation Bill to the joint session of
the National Assembly on the 14th of December, 2016 the President
noted that; ‘Our intention is to source
N1.067 trillion or about 46% of this borrowing from external sources while,
N1.254 trillion will be borrowed from the domestic market’
. He concluded. I
totally disagree with this initiative, this is because the country would be at
the mercy of creditors and it would surely create problems for future
generations. I would like to remind the President that the main reason we got
to this point was because the country failed to save at the time of plenty (which
he also noted in the speech) so borrowing such huge amount at this critical
time when we should be modest is like doing the same thing, the same way and
expecting a different result.

ª     Non-Debt
Recurrent Expenditure – The highest single allocation in the 2017 appropriation
bill was budgeted for Non-debt expenditures at 39%. The need for innovation in
governance cannot be over-emphasized. The Federal, state and local governments
as well as other arms of government in these three levels need to significantly
cut cost. The constant verification and elimination of ghost workers in all the
levels of government is commendable but it should not stop there. The purge in
the number of political office holders and their remunerations is highly
important because the economy is at a sinking point, we are witnessing the
worst economic recession in the history of our great nation. It is simple
common sense that there can never be any significant improvement when recurrent
expenditure exceeds capital expenditure.
2017
Appropriation Bill and the Nigerian Economic Recession

Most
mainstream economists believe that recessions are caused by inadequate
aggregate demand in the economy, and favor the use of expansionary
macroeconomic policy during recessions. Strategies favored for moving an
economy out of a recession vary depending on which economic school the
policymakers follow. Monetarists would favor the use of expansionary monetary
policy, while Keynesian economists may advocate increased government spending
to spark economic growth. Supply-side economists may suggest tax cuts to
promote business capital investment. When interest rates reach the boundary of an
interest rate of 0% (zero interest-rate policy) conventional monetary policy can
no longer be used and government must use other measures to stimulate recovery.
Keynesians argue that fiscal policy—tax cuts or increased government
spending—works when monetary policy fails. Spending is more effective because
of its larger multiplier but tax cuts take effect faster. (Culled from
Wikipedia.com – Recession)
The
information above explains in clear terms the reason why the Federal government
is proposing an expansionary budget for the present fiscal year but a close
examination of the figures would reveal that the 2017 appropriation bill is
smaller than the 2016 budget. According to the budget estimates, with an
exchange rate of NGN305 to a dollar and over 18% inflation average, against NGN197
per dollar in 2016 and 16% inflation average, the 2017 budget is actually
smaller.
At
the proposed exchange rate of NGN305 to a dollar, N2.24 trillion provision for
capital projects would translate to about USD7.344 billion only, against about
NGN1.8 trillion capital spending in 2016, which came to about USD9.137 billion
at 197 per dollar exchange rate. (Odilim Enwegbara – The Chief Executive of
Pan-Africa Development Corporation – Dec. 27, 2016)
In
my candid opinion, I do not believe that the 2017 appropriation bill is enough
to get the country out of the present economic recession but I hope and pray
that I am wrong.

God
Bless Nigeria


Olusanya,
Oluwole Sheriff
Oluwole Olusanya
Oluwole Olusanya is the Founder and Chief Executive Officer (CEO) of one of the fastest-growing lifestyle and entertainment website in the country. He is a banker, writer, blogger, public affairs analyst and a tax consultant. He anchors Trending Topics on SHEFFA where he shares his thoughts and opinions on trending issues. He is currently studying for a Master’s Degree in Business Administration at the University of South Wales, Wales, United Kingdom. He has diplomas in Banking and Finance, Investigative Journalism, Creative Writing, and Linguistics from Lagos State Polytechnic, Isolo, Lagos, University of Strathclyde, Glasgow, Scotland and The Open University, Milton Keynes, United Kingdom.