State of the economy, by Udoma, Adeosun, Emefiele

Capital-recurrent expenditures’ disbursement ratio widens

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.

“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.