Tag: Budget 2017

The 2017 budget is a reflection of the Federal Government’s commitment to restoring the economy onto the path of sustainable growth. LUCAS AJANAKU, MUYIWA LUCAL, OKWY IROEGBU-CHIKEZIE, COLLINS NWEZE DANIEL ESSIET and TOBA AGBOOLA, AJIBADE AKINOLA, capture the expectations of Nigerians on the ‘Budget of Recovery and Growth’

REACTIONS yesterday trailed sectoral allocations in next year’s N7.298 trillion Budget estimate proposed by President Muhammadu Buhari for consideration by the National Assembly.
The reactions came barely 24 hours after Budget & National Planning Minister Udoma Udo Udoma gave the breakdown of the ‘Budget of Recovery and Growth’ in Abuja.
Three ministries – Interior, Education, Defence and Health – got the lion’s share of the estimate. The minister put the votes of the three ministries at 70 per cent of the budget size.
Those who reacted to the sectoral allocations expressed reservations but urged the President to ensure the implementation of the budget to the letters by the Ministries, Departments and Agencies (MDAs).
Many decried the allocations to some sectors as inadequate and what they described as shoddy implementation of past budgets.
The President, Nigerian Institute of Estate Surveyors and Valuers (NIESV), Dr. Bolarinde Patunola-Ajayi, said the N529 billion allocated to the Ministry of Power, Works and Housing was inadequate.
He wondered how far the vote could go in a ministry comprising three major infrastructure sectors that require huge capital investment.
The NIESV chief contended that given the high cost of providing infrastructure, the allocation of N529 billion to a sensitive ministry was just a drop in the ocean.
Patunola-Ajayi said that about $1billion will be required to provide 1000 mw of electricity.
His words: “This is a figure that is just the equivalent of the total budget for the ministry. In solving the housing deficit alone, over N1 trillion is required; just as rehabilitation or construction of major roads across the country will take more than N529 billion.”
He, however, said that it may take up to two years before ongoing projects being implemented by the ministry would be completed for use considering their design and nature.
“Hence, there may be provisions for same in the next budgetary allocation of the coming year”, Patunola-Ajayi said, adding: “Therefore the allocation is a bit of this, and a bit of that. The question is what are we expecting as derivatives? The details of the budget are likely going to throw light on this.”
Patunola-Ajayi argued that “any time there is an appreciable mobilisation for execution of projects in these sector, the lives of many are touched, positively.
“The consultants, contractors, suppliers and manufacturers of materials, artisans, labourers, transporters, food vendors and families of all operators in these categories will be the immediate beneficiaries from the budget; while government will also be a beneficiary of the taxes that will be paid by these category of people which ultimately will mean they have contributed to the gross domestic product (GDP) of the country.”
According to them, shoddy implementations of budgets by successive administrations had stunted the nation’s socio-economic growth.
The President, National Association of Telecoms Consumers of Nigeria (NATCOMS), Deolu Ogunbanjo urged the President to monitor the MDAs for effective implementation of the budget and efficient application of the votes.
He described budget as transitional for the Buhari administration, being the one complete severance with the last administration.
Ogunbanjo counselled the Federal Government to stop the blame game and settle down to business reminding that the investment environment was inclement and that Nigerians had waited endlessly for the dividends of democracy.
The President, he said, should intensify efforts at restoring peace to the troubled Niger Delta to sustain oil production in the region.
He said: “With the spate of vandalism of oil installations and gas pipelines in the region, it will take the President’s intervention to restore peace for crude oil production to hit the 2.2 million barrels per day projection.
“Mr President should get experts around him to implement the budget to its optimum. It is gladdening the budget is being processed early. This will facilitate its implementation.
“A situation where budgets are only approved in the second quarter of the year makes a mockery of its implementation. The government must do everything within its capacity to secure peace so that oil production and even electricity supply would be assured.”
An oil and gas sector operator, Dr Diran Fawibe, described the projections in the budget as realistic, especially the 2.2 million bpd target because of the President’s commitment to end militancy in the oil-bearing communities.
Lamented the problem in the Niger Delta with the springing up of several militant groups and vandalism, Fawibe expressed the hope that the government will be able to negotiate with the different groups in the days ahead.
According to him, negotiating with the militants should not be seen as a sign of weakness on the part of the President but rather a demonstration of statesmanship.
He said the government could realise its $42.5 per barrel (pb) benchmark with the rapport between members and non-member-countries of the Organisation of Petroleum Exporting Countries (OPEC) on production freeze agreement.
Also reacting, a professor of Energy Economics, Wunmi Iledare, said the government may achieve some of its projections as contained in the 2017 Budget proposal.
He said the 2.2 million barrels per day projection and the $42.5 oil price benchmark were realistic, taking into consideration the resolution of problems in the global oil market.
Iledare said that problems such as militancy in the Niger- Delta region and low crude production among others must be resolved; arguing that oil revenue would increase once the militants stopped sabotaging government efforts.
He said: “$42 per barrel of crude oil is possible, and not probable. Even $45 per barrel of crude oil is possible. Though the likelihood of getting $45 per barrel of crude oil is low, but it can be achieved by the government, when micro and macroeconomic problems have been solved.”
Stressing that achieving the N5 trillion revenue projection from oil alone could be tough, the professor suggested the government should have set its budget below N2 trillion from oil.
Analysts at FBN Capital said in a report released yesterday that the underlying assumptions for the 2017 Budget were: average crude production of 2.2 mbpd; an average crude price of $42.5/pb and an average exchange rate of N305/$ (the current interbank rate).
The report explained that not for the first time, an outperformance on the oil price may compensate for an underperformance on production.
The Federal Government may pursue an “engagement with the oil producing communities” but will surely have to compromise with the various parties responsible for the sabotage.
They (analysts said in the report: “The FGN budgets tend to work with the exchange rate in effect at the time of submission, and for good reasons. The rate is, of course, effectively administered and not the floating model envisaged in June.
“We have to move to a flexible arrangement if the FGN’s economic vision is to be realised and we doubt very much that the rate would then remain at N305″.
The FBN Capital listed its watchlist for 2017 and beyond as the standard Value Added Tax (VAT) rate of five per cent, the mounting burden of debt service, the external/domestic mix of borrowing, its personnel costs and disbursements under its flagship social interventions.
It said: “Among events outside the FGN’s control, we have to single out the impact of the Trump presidency on United States U.S. interest rates and on the Chinese economy in addition to the oil price.
“We welcome the relatively early submission of the budget to the assembly. We also recall the suggestions from the federal finance ministry that the regrettable delay in the final sign-off on this year’s budget (to May) was balanced by important procedural victories at the expense of the legislature, and hope that these successes are visible in 2017.
“The assembly has a track record of pursuing its institutional agenda ahead of the policies of the political parties in whose names its senators and representatives have been elected”.
A member of the Ogun State Chamber of Commerce, Industry, Mines and Agriculture (OGUNCCIMA), Mrs. Cynthnia Saka, believed the planned diversification of the economy from oil to agriculture, solid minerals and other sectors would boost the budget success.
Mrs. Saka noted that according agriculture more attention would go a long way to rejuvenate the nation’s economic growth.
According to her, enhancing expenditure in the farm and rural, social and infrastructure sectors would address those sectors requiring immediate attention.
The current economic recovery plans, she added, should provide a short-term, reasonably targeted stimulus for creating jobs and boosting the economy. She suggested the implementation of strategies, fundamental and long-term re-orientation of the economy to a model to promote wealth generation.

According to her, policies put in place by the government should seek to support viable food production, with a particular focus on income support for farmers and boost employment and growth and tackle poverty in rural areas.
She said the infrastructure sector should receive greater attention as the government is keen to step up investment despite a challenging fiscal situation.
Mrs Saka also urged the government to initiate a policy that would stimulate investments in waste management and recycling, which said has a lot to offer the economy.
The Director General of the Lagos Chamber of Commerce & Industry (LCCI), Mr. Muda Yusuf, commended the budget for two reasons.
He hailed the lifting of the ban on the Export Expansion Grant (EEG) component, noting that it would improve the non-oil export sector as exporters were uncomfortable for as long as the ban lasted.
Yusuf demanded for better coherence and harmonisation between the fiscal, monetary and trade policies as against the 2016 Budget when the policies worked at cross-purposes with each other.
On the Oil & Gas sector, the LCCI chief praised the discontinuance of Cash Call, as according to him, the practice affected the financing of the upstream sector.
Though he described the renewed commitment on Public Private Partnership (PPP) in the delivery of infrastructure as a welcome development, Yusuf, however, knocked the budget on its silence on the foreign exchange policy.
“Government needs to fine tune or come up with a more credible forex policy to complement the economy”, he added.

He also advised the government on the need to not only attract Foreign Direct Investments (FDIs) but also domestic investment with the right policies.
Yusuf lauded the government on its enlightened interest and consequent high budgetary allocation to capital expenditure, power, works, and housing and transportation sector noting that it will lift the economy if adhered to strictly.
He expressed reservation on the N1.66 trillion allocation to debt servicing, which he said, represented a 34 per cent of the total revenue and 74 per cent of the total capital budget.
His words: “Though we cannot walk away from prior commitments and debt obligations, going forward the figure should be reduced. If not, it would crowd out the private sector and consequently impact negatively on financial intermediation as a lot of fund would go into Treasury Bill and Federal Government Bonds investments.
“People would shy away from manufacturing and agriculture and look for the easy way out by investing in government bonds and other financial instruments that are low risk.”

Carpeting the government on its silence on the interest policy regime, Yusuf advised on the need to stimulate consumption by increasing income and reducing the cost of goods and services.
He said: “The average man on the street is facing the burden of high cost of goods and services and the need to encourage the manufacturers with low interest rates which will translate to cheaper goods and services for the average person on the street cannot be over-emphasised.
“The government should of necessity work on checking the high energy costs facing manufacturers all these will add up to ease the burden on consuming public.”
According to Yusuf, all the assumptions in the budget look realistic except that the oil output projection of 2.2 million barrels per day may be a far-cry with the unrest in the Niger Delta.