State of the economy, by Udoma, Adeosun, Emefiele
The recessed condition of the economy has been described as “bottomed”. The next direction is thus upward, as series of interventions lined up as palliatives begin to hit the system.
The three major economy managers- Udo Udoma, Budget and National Planning minister; Mrs. Kemi Adeosun, Finance minister; and Godwin Emefiele, Central Bank of Nigeria (CBN) governor, made the disclosure in a monitored chat.
They expressed optimism that the ongoing collaborative efforts of the fiscal and monetary authorities would surely guide the economy back to its rhythm and the populace will feel it better.
Expectedly however, the rate of implementation of the 2016 budget has tilted in favour of the recurrent expenditure, a usual trajectory that left the development of wealth regenerative infrastructure at the fringes.Udoma, noted that the recurrent component of the 2016 budget has been virtually fully implemented, with emoluments being paid in full alongside salaries at the federal level. Government has also met all debt service bill, except overheads, that were marginally short of the target.
“The problem has been capital expenditure. In the capital budget, we planned to spend about N1.8 trillion, but we’ve only spent about N400 billion. So, we have not been able to meet up with the level of capital releases.“The reason for this is that if you look at the first six months of the year, the revenue performance was N1 trillion less than we projected. Given that rate, it means that at the end of the year, there will be N2tr less revenue than we expected. There is no economy and person that can manage that without being where we are today,” he said.
This shows a less than 23 per cent performance of capital budget four months after approval and less than four months to the end of the year. By interpolation, this means that an approximation of 46 per cent or a little above that would be achieved before the year runs out. How this would tackle the recession is still challenging.
He said that strategies to mobilise funds are being weighed at the moment, as the release of more money, would first require getting the money.“So, we have a fiscal stimulus plan which we have been developing over the last months. We intend to do a number of things. We are looking at asset sales, concessioning, and getting advance payments from licensing rounds and all that. We are targeting to raise between $10 to $15bn, and we have started that process.
“Why are we looking for dollars? It is because what we need to charge this economy is actually foreign currency. It is foreign currency shortage that is really responsible for where we are today. So, we have to look for foreign currency. We have a plan already. We have prepared a bill because we want to fast track some of these processes in order to be able to get the money from concessioning and all that,” Udoma said.
For a fact, while assets stripping, as proposed can fetch the government money, the option may not be promising in the short term when the money is needed. The reason is that the legislative grandstanding and bidding processes required to access the proceeds in the country would frustrate the expectation. The remaining months in the lifespan of the budget might not be enough. Next option please!
Speaking on the funds recovered by the Economic and Financial Crimes Commission, he explained that until the legal processes are completed, government cannot take those funds. He assured that as soon as the legal processes are completed, the funds would be injected into the system.However, Adeosun raised the hope that there are quick wins that would drive the anticipated rebound of the economy, as she reiterated the positive effect of the planned social intervention programme, due to take off soon.
“That is money in people’s pockets. A meal a day for Primary 1-3 pupils in the states. For a lot of people, that is very significant; N5, 000 for some of the most vulnerable people and then the teacher programme. That will come on stream this month as well. “Police recruitment of 10,000 new officers are currently at the final stages. It is the savings that we have made from cleaning up the ghost workers that is enabling us to create additional jobs. You see recruitments going on in FIRS, in Railway Corporation and it is being done transparently. I think there is hope for Nigerians,” she said.
Admitting that it is really a tough time now, she assured that government is doing everything possible to ensure that we come out of this condition in a way that is sustainable, so that we never get back there again.“The biggest problem we have is the cost of living. It is not wages. It is not how much money you have. It is what it costs you to live. And the problem we have is that many of the things that people are spending money on are things that government should be doing- roads and power. The cost of living is so high, but when you address infrastructure, you address the cost of living,” she added.
For Emefiele, he became optimistic that the economy would come out of these challenges after there was a record of $1 billion foreign direct investment in three months.“I feel very confident that there will be more inflow into the system and more and more people will have foreign exchange available for them to do their business, which will improve the industrial capacity.
“The rate may be high now, but there’s high possibility that with more availability of foreign exchange, the rate will come down. I am very optimistic that a lot of positive things will happen,” he said.He called on everyone not to forget that even the United States under the same crisis had to stimulate the economy with about $900 billion and subsequently injected $85b monthly for an extended period of time.
He explained that while the government has resisted increased tax rate proposal due ti its understanding of the suffering and the yearning of the Nigerian people, it is also on record that the country has one of the lowest Value Added Tax rate in the world.
According to him, as a strategy in navigating the current challenges, the government admitted that there are so many people side tracking and avoiding payment of VAT, but is now working to widen the scope to capture more people to pay their taxes.
Again, CBN Governor chided those criticising the Treasury Single Account (TSA), querying: “Is it fair that the government allows ministries and agencies to release its money to the banks and those banks don’t pay any interest to the government. At best they pay 1 or 2 per cent, but at the same time lend the same money to government by buying treasury bills at 12 per cent, 13 per cent or 14 per cent.
“This is colossal waste of resources on the part of government. So, people believe that because TSA is sitting in the central bank it is part of what is causing the crunch, it is not true.”He recalled that the country have always abandoned laudable schemes in pursuit of oil money, which has remained uncertain over the years, starting from the “green revolution” project to the “back to farm” initiative.
“An adjustment is ongoing- the adjustment in the currency has happened and there is a need for us to follow through with some structural reforms that would lead to diversifying the economy.“For instance, we are lucky to have somebody who has decided to invest in a refinery with the capacity for 650,000 barrels per day. The same person has decided to invest in petrochemical, and fertilizer. These three projects alone will cost nothing less than $11 billion.
“And these three products take nothing less than 35 per cent of our import bill. What happens by the end of 2017 to 2018 when we stop the importation of these products? You will see that we are able to conserve our reserves because the demand for foreign exchange for these items will reduce.
“For the first time I’m seeing a toothpick that is produced in Nigeria. Vice President Osinbajo gave me a sample of that toothpick on Wednesday. And what does it take to produce toothpick, bamboo and the machine you need to produce toothpick is less than $50,000 to buy. The machine can be installed in a room that is half the size of this place we are right now. We must embrace structural reforms to the extent that you must tell yourself that lessons have been learnt,” he added.
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