The Nation Newspaper

Tag: growth

  • Our anti-recession, growth battle strategy, by Buhari

    Our anti-recession, growth battle strategy, by Buhari

    President Muhammadu Buhari yesterday renewed his administration’s commitment to delivering on the electoral promises of the All Progressives Congress (APC), with the launch of the Economic Recovery and Growth Plan (ERGP).

    He said the rolling plan (2017 – 2020), which was unveiled at the Council Chamber of the Presidential Villa in Abuja, will not only take Nigeria out of recession but place the economy on the path of growth.

    According to him, his administration has recorded some  gains in the fight against corruption and national security.

    The President said: “As we all know, this administration inherited numerous challenges. Our political campaign was based on the recognition of the difficult situation Nigeria was in and the need to bring positive and enduring change. And we remain committed to our electoral promise to change our way of doing things and to change Nigeria for good.

    “We are committed to delivering on the three key areas that we promised – that is improving security, tackling corruption and revitalising the economy. Security in the Northeast and other parts of Nigeria is significantly better today than when we came in.

    “With regards to our fight against corruption, as you all know, our law enforcement agencies are prosecuting very many cases of corruption. Our successes in these two areas are clear for all to see.”

    Buhari assured all that his administration was handling the economic challenges with the same commitment demonstrated in the fight against corruption, against terrorism and militancy.

    “The ERGP,” he said, “brings together, in a single document, all sectoral plans for agriculture and food security, energy and transport infrastructure, industrialisation and social investments.

    “It builds on the Strategic Implementation Plan (SIP) and sets out an ambitious roadmap to return the economy to growth; and to achieve a seven per cent growth rate by 2020.

    “Our aim, simply put, is to optimise local content and empower local businesses. We seek not just to take the Nigerian economy out of recession but to place it on a path of sustained, inclusive and diversified growth.

    “We are determined to change Nigeria from an import-dependent country to a producing nation. We must become: A nation where we grow what we eat and consume what we produce. We must strive to have a strong Naira and productive economy.

    “The Plan I am launching today therefore sets out what we, as Government, are committed to do, to create the enabling environment for business to thrive.”

    According to him, state governments have critical roles to play to ensure the success of the plan, which he described as a national programme.

    He urged states to draw inspiration and strategic direction from the ERGP to articulate their economic programmes, particularly in the development of the real sector.

    The President urged Nigerians to support the administration to attain its objectives, pointing out that the ERGP contents were no longer alien to a cross-section of Nigerians because it was developed in consultation with stakeholders, including the National Assembly, state governments, the business community, labour unions, academia, civil society groups and development partners.

    “I am pleased to present this ERGP for use by the Nigerian people, our friends and partners and to guide our development efforts over the next four years”, Buhari stated.

    The Minister of Budget & National Planning, Udoma Udo Udoma, said that the Plan has 60 interventions and initiatives to be implemented in the next four years.

    Udoma, however, said that the government would be focusing on five of the interventions.

    His words: “Right from when he (Buhari) was campaigning, he has shown single-minded commitment to change Nigeria in a fundamental way.

    “He promised three things – first, to restore security, particularly in the Northeast; second, to fight corruption, and third, to repair the broken economy. And the cabinet was sworn in in November, 2015, he gave us our marching orders.

    “This ERGP is therefore a fulfillment of his promise to re-invigorate the economy. Whilst the ERGP is being formally launched today, its implementation is not starting today.

    “This is because the plan puts together in one place, for easy access, all the sectoral plans that the government has been working on, from inception, including the Strategic Implementation Plan for the 2016 budget proposals which were submitted to the a National Assembly in December last year.

    “The broad objectives of the ERGP are to restore growth, invest in our people and build a globally competitive economy. As our President has repeatedly said, our hope is to build a self-reliant economy; a country in which we can grow what we eat, use what we make and produce what we consume.

    “…A country which embraces the world of technology; ideas and investment from everywhere but domesticates these ideas for the use of the people; a country which produces high quality goods, not just for our own consumption but enough to export to our neighbours, and, indeed, the world.

    “Our aim is to create a culture where Nigeria continuously seeks ways to add value to the resources we have been blessed with. In short, our aim is to change Nigeria, and change for good.

    “To achieve this, the plan articulates up to 60 interventions and initiatives, that must be executed and/or completed within the next four years to tackle, and to remove, impediments to growth; to make markets function better; and to leverage the power of the private sector.”

    He, however, said that it will be archived without compromising the core values of the nation, such as discipline, integrity, social justice, self-reliance and patriotism.

    “And, of course, all the initiatives in the plan will be implemented in such a manner as to continue to strengthen and promote national cohesion and social inclusion.”

    The minister listed five areas of priority as: stabilising the macroeconomic environment; achievement of agriculture and food security; expansion of energy infrastructure and driving industrialisation principally through local and small business enterprises.

    Delivering a goodwill message, the Chairman of the Nigeria Governors’ Forum (NGF) and Zamfara State Governor, Abdulaziz Yari, said that the plan is not only important to the Federal Government, but also to the state governments because of its inclusive growth.

    He assured that governors would take ownership of the plan at the state level.

    Senate President Bukola Saraki said: “We must make it work, it has to work.”

    House of Representatives Speaker Yakubu Dogara, pledged the support of the lower chamber to the implementation of the plan.

    Dogara said: “I have no doubt that if successfully implemented, it will usher in the turnaround we all desire.”

  • Recession, exchange rate adjustment and growth

    Recession, exchange rate adjustment and growth

    For more than two years now, Nigeria has been in a recession, one of the worst in its recent economic and financial history. Last year, the economy contracted by 1-3 per cent, the exchange rate of the naira against the US$ fell sharply as a result of falling oil revenues, and the inflation rate rose to nearly 18 per cent. All these economic and financial indicators caused much concern in our country. The direct consequences of the sudden downturn in the domestic economy included massive job losses, large federal budget deficits, a resort to both internal and external borrowing to cover the huge deficits, and a loss of investors’ confidence in our economy.

    Obviously, something radical and drastic needed to be done to stabilise the domestic economy and bring it back into equilibrium. In all this, domestic factors are clearly important. Some of these include our high population growth rate (averaging 3 per cent), mass poverty, high rate of unemployment, high infant mortality rates, low literacy rates, terrorist activities, a fragile political system and institutional weaknesses. All these make it more difficult to effect the necessary structural adjustment to tackle the recession in our economy and adjust to external factors. In view of Nigeria’s high import dependency, we needed to cut back on imports by introducing a barrage of fiscal and monetary measures. Of these, the most crucial is the exchange rate adjustment of the naira, the national currency.

    This is the economic and financial situation the CBN has been battling with in the last two years. Its strategy was one of managed exchange rate adjustment, instead of a free floating exchange rate adjustment. But the practical and predictable effect of its strategy was the wide divergence of exchange rates of the official market and the so-called black market, with the latter forcing the official rate down. This divergence in exchange rates has led to policy distortions. Instead of a uniform exchange rate, we have had at least five different exchange rates. These multiple exchange rates, including a different one for religious pilgrimage, indicate a form of subsidy, a negation of the policy and strategy of the removal of all forms of subsidies from the domestic economy. Now, these distortions in exchange rates lead to a loss of investors’ confidence in the economy. It makes planning of any kind virtually impossible and constrains growth in the economy.

    More recently, the increase in oil exports and revenue has allowed the CBN to increase its supply of forex into the economy. It has begun to drop its resistance to the nominal devaluation of the naira, a policy that was doomed to failure in the light of the sharp fall in oil revenues and forex. The naira remained overvalued. One indicator of overvaluation of any currency is the difference between official nominal exchange rates and parallel market rates. Where, as in Nigeria, the parallel market rate is a third higher than the official rate, there is a case of overvaluation involved. As was expected, the divergence in exchange rates between the official inter-bank market and the bureaux de change has narrowed considerably because of the increased supply by the CBN into the economy. It is reported that the CBN’s strategy and target is to get the exchange rate down to N250 to the US dollar. This is commendable and, if sustained, will be a shot in the arm for the economy.

    However, despite the obvious signs of a contraction in the recession, and the narrowing of the divergence in the exchange rates of the official and parallel markets, it is not yet UHURU. The IMF is not always right in its advice and prescriptions to poor countries that are facing a recession. Its blanket advice to cut public spending tends to intensify a recession rather than ease it. It does not take account of the variability in the economic conditions of the countries to which it is offering advice. To get out of a recession, governments need to spend more through internal and external borrowings to stimulate economic activities and create more jobs. However, our fiscal and monetary authorities cannot completely ignore advice from the IMF and the World Bank on how to end the recession and resume growth. In addition to our forex strategy, the economy needs complementary fiscal and monetary measures to bring it out of recession and resume modest growth.

    In its recent review of the economic situation in Nigeria, while commending the CBN for its forex management, the IMF advised the Nigerian authorities to ‘remove the remaining restrictions and multiple currency practices, thus unifying the foreign exchange market’, and this strategy ‘should be supported by tighter monetary policy and fiscal consolidation to anchor inflation expectations”. This is advice that should not be ignored. Inflation is now close to 18 per cent as a result of the sharp increase in money supply. Inflation undermines economic growth and tends to reinforce the divergence in exchange rates between the official and parallel markets. In addition, the injection of forex into the economy should be measured and not done too hurriedly as it has the potential of ‘overshooting’ the stability needed in the exchange rates.

    There is already a slum in the demand for forex, a clear indication that some of the demand was speculative. There is also some evidence of round tripping in the sale and disbursement of forex by the banks. It was reported recently that two directors of the CBN were implicated in the fraudulent round tripping of forex to the BDCs. Too much supply of forex to the banks will reinforce this criminal tendency in the sale of foreign exchange. Besides, there is a lot of stolen money being hurriedly converted into forex to conceal it from prying eyes, particularly the EFCC.

    In addition, it is difficult to predict how long the increase in oil exports and revenue will last. A crisis in oil exports and revenue is always around the corner. The CBN will, in the circumstances, be well advised to keep the sale of forex to its barest minimum so as to avoid getting again into a situation of wider divergence in exchange rates.

     

  • How technology can propel Africa’s growth, by experts

    For African countries to move from a resource-based economy to a knowledge-based and innovation-driven one, there is the need to efficiently harness the power of technology, experts have said.

    At the sixth edition of the Lecture Series and 10th Anniversary of the Verdant Zeal Group, held in Lagos, recently, experts noted that Small and Medium Enterprises (SMEs) needed to embrace the power of technology to help Africa develop exponentially.

    Verdant Zeal Group Executive Vice Chairman Mr. Tunji Olugbodi cautioned that oil, which Nigeria’s economic mainstay, would dry up in the next 50 years. He, therefore, advised policy makers and governments to do the right thing by embracing technology and innovation.

    “The way to go is for Africa to gradually move from a resource-based economy to a knowledge-based and innovation-driven economy,” Olugbodi said, noting that some African countries have embraced technology to drive economic development and growth.

    According to him, this has helped to impact youths, as many of them have embraced the Internet, using it to share ideas, content and commercial opportunities seamlessly across the globe.

    “These giant strides have happened regardless of red tape bureaucracy that typifies governance across the continent,” he added.

    He said Internet penetration woud continue to grow, as Africa seeks to close the gap in Information and Communications Technology (ICT). Noting that Nigeria leads the continent, he projected that the country would be among the top 10 Internet users in the world by 2018.

    Olugbodi, however, said: “Amid these giant strides in technology, there still remains a large demography of young people, mostly women, who remain in rural and semi-urban areas, below the poverty line and seem unable to tap into this new economy.”

    Also, the guest lecturer and Founder, JC Capital (PTY), South Africa, Joel Chimhanda, said Africans should think as Africans and be aware that it can’t compete globally without industrialisation. He regretted that over 90 per cent of Africans are not banked, even with the $25 billion that flow into Nigeria yearly as Diaspora fund.

    He frowned on African governments for not encouraging ICT development on the continent, adding that Africa needs its own Silicon Valley.

    According to Chimhanda, Nigeria can help change the African narrative for the better. He said with a population of about 200 million, Nigeria can lead the pack if she so wishes.

    “We have to come up with regulations that will spur innovation not just in Nigeria, but across the continent. Chimhanda admonished, pointing out that “the continent is not growing from the manpower perspective because we do not have a well structured education system.”

    He called for all hands to be on deck to move the continent forward in terms of technological advancement rather than wait for the West to help determine the continent’s  narrative or depend on aids.

    The JC Capital founder regretted the colonial mentality in Africa that makes Africans believe that their problems can only be solved by a ‘White man’. “In South Africa, about 20 Afrikaans control the economy; globally, only about eight countries control the world Gross Domestic Product (GDP), he said.

    Chimhanda said sadly, in Africa, rather than creating African products that will solve Africa’s problems, her political leaders go cup-in-hand for aids, and in some instances, sell off the continent’s common patrimony for a few dollars.

    According to him, African nations, spear-headed by Nigeria, South Africa and Kenya should tap into the opportunity provided by technology through some of the telecoms companies and the rich Africans who are trail blazers in different fields of the economy.

    He also canvassed the need for a different education system in the country that will aggregate the interest of over 200 million people. He insisted that the educational system cannot bring the nation out of the woods, as 60 per cent of what is thought in the university is different from what the competitive work place is looking for.

    To underscore the need for African economies to embrace technology, the Founder, Lifebank, Mrs. Temie Giwa-Tubosun, said her firm has deployed technology to assist help givers offer speedy and quality healthcare to the public.

    Lifebank is a company that uses technology, big data and smart logistics to solve the problem of blood shortage in Nigeria. Giwa-Tubosun, who expressed regrets that Nigerians spend over a billion dollar yearly on health tourism in India, asked government to make the sector robust enough to drive quality health care through technology.

    Co-Founder, Leads Africa, a digital media company which focuses on young professional African women, Ms Afua Osei, canvassed the need for women entrepreneurs to access finance, skills and technology.

    Osei, who also worked with the former US First Lady, Mrs. Michelle Obama, said her organisation has enabled women to use social media to acquire skills and communicate across borders.

    She called for the reduction of data prices, stressing that it is the only way this class of people can take advantage of payment platforms that will drive their businesses.

  •  How to attain growth, by Ahmed

    Meaningful development can only be achieved in a peaceful environment, Kwara State Governor Alhaji Fatah Ahmed has said.

    Ahmed, who was represented by the Head of Service, Hajia Zarah Umar, stated this at the opening of the 4th State Triennial Delegates Conference of the Trade Union Congress (TUC), Kwara State Council at the Michael Imoudu National Institute for Labour Studies, Ilorin.

    He said his administration recognised the union as a partner in the development of the state.

    Praising  TUC, Kwara State Council for its effort towards members welfare,a he urged them to always use labour’s best practices in approaching the government on issues relating to members’ welfare.

    The Acting Director-General/Chief Executive of Michael Imoudu National Institute for Labour Studies, Dr. Babatunde Onaeko,  stressed the need for labour to be accorded recognition in view of its strategic role in wealth creation in any economy.

    Emphasising the critical and dynamic roles of labour, he said the effectiveness of human resource depended largely on the efficient utilisation of labour in its role as the main driver of economic growth.

    Onaeko, who thanked the Kwara State Government for its continued support to the institute, urged stakeholders on harmonious relationship which, according to him, will enhance not only economic growth, but create a viable and conducive work environment for maximum labour output.

    He enjoined them to see the institute as their own and as the only institute that could give them quality education in labour and industrial relations.

    The Trade Union Congress State Chairman, Comrade Kolawole Olumo, canvassed commitment, dedication and hardwork from members.

    He said it was the only way the Congress could move to the next level.

  • Obi: education key to growth

    Former governor of Anambra State Mr. Peter Obi has reiterated the call for African leaders, especially Nigerian leaders to invest more in education to ensure a guaranteed future for the people.

    Obi spoke at the Oxford University Business School, Africa Forum in Oxford, United Kingdom.

    He said, “The future of the continent lies in tapping her greatest resources – human resources and the only way to realise this is that Africa must aggressively educate her people.”

    Obi said that billions of Naira wasted by Africans in epicurean consumption was enough to raise the standard of education in the continent.

    He called on wealthy Africans to devote part of their wealth to education as the Indians are doing, saying that once Africans get it right, the continent would experience economic explosion.

    Speaking further, Obi decried the level of hunger in Africa, insisting that it was only through massive investment in education, especially basic education, that such calamities would be overcome.

  • ‘Infrastructure vital to economic growth’

    ‘Infrastructure vital to economic growth’

    Sohail Ahmed Khan is the new Managing Director of MAN Diesel & Turbo Nigeria Pvt. Ltd. With its Nigerian subsidiary, the German engineering company seeks to contribute to industrial growth in Nigeria and the West Africa sub-region. Assistant Editor Okwy Iroegbu-Chikezie  met him.

    What is MAN Diesel & Turbo’s business focus in Nigeria?

    Our products are at the heart of various key industries. Examples include large diesel engines and power plants, as well as compressors and turbines, especially in Nigeria. We are a strong partner for the oil and gas industry, for power generation and large-scale industrial production. And from here, we serve customers across the West African region, namely the ECOWAS countries.

    Your company opened its subsidiary in Lagos in 2015. Now the industrial growth rate in Nigeria is declining, how does it impact on your plans?

    It is true that the economy has suffered lately, mainly from dropping oil prices. But we are convinced that this will not interfere with the long-term growth potential. A positive example is a multi-million dollar order that we were able to book some weeks ago, to provide turbo machinery equipment for the Dangote Refinery in Lagos. It is nothing less than Africa’s largest refinery that is being built here in Nigeria. This billion-dollar investment by the Dangote Group is a good example of the added value we bring in terms of technology.

    What is the most important need of the economy?

    Infrastructure is the important need the economy can build on, whether a stable power supply or a dependable transport network for oil and gas. An example, one can think of the West African pipeline and the Trans Sahara pipeline project, the second one still to be built. Both are infrastructure projects opening up new markets for natural gas from Nigeria, requiring a safe and reliable technologybase.

    On the other hand, an evolving economy like Nigeria requires more depth of added value, and this has  started.We see it in projects with our customers, including requirements for in-country value. The country will profit from broadening its industrial footprint. An illuminating example is again the Dangote Refinery project: by prolonging the value chain into the downstream sector, more value will be created within the country, while also reducing the need for fuel imports.

    What about the industries not related to oil and gas?

    Irrespective of business sectors,  reliable energy supply is crucial for Nigeria. Whether for the booming banking sector, or just for powering the many mobile phones, the country needs electricity. We see an instant demand here for generation capacities of around 4 GW.

    As a country rich in oil and gas, many economic questions are obviously related to that business. But apart from that, or from power generation, MAN Diesel & Turbo provides products and services to a range of industries. We are here to support the Nigerian growth path as a whole, be it with equipment for the fertiliser industry, for the steel or cement industry oreven for paper production.

    Your company is one of the oldest in Europe, with a history of more than 250 years. What experience does it have in doing business in Africa?

    We have been doing business in Africa for about six decades. The initial projects of the company date back to the 1950s, when we first delivered power generation technology to Mali and Senegal. Today, we have an installed base of almost 1000 turbo machinery casings and an engine base of far more than 3 GW, delivered to more than 35 countries in Africa.

    As an ambassador of Germany-based technology, MAN Diesel & Turbo also has subsidiaries in Kenya, South Africa and Egypt, and we are about to expand this network in Africa in the near future. Our service workshops enable us to process service and maintenance orders regionally. And with more than 250 employees on the continent and a pool of field service engineers, we are available with a single call, wherever our customers in Africa are.

    What about your projection for Nigeria in the near future?

    Nigeria is surely more than oil and gas, if you just think of the booming online sector, especially for mobile payment and banking. Yet, the country’s economy still strongly depends on the worldwide oil prices. Happily, we are  seeing first signs of relief here.

    I see more diversification and a growing industry base in Nigeria. Again, the refinery sector is a good example, which the government is opening up for private investment. Not the least, this will help Nigeria to profit from increased in-country value. The country is about to choose its path when it comes tostrengthening its industrialinfrastructure with reliable and even eco-friendly technology.

  • Waiting for the Budget of Recovery and Growth

    Waiting for the Budget of Recovery and Growth

    Barring the unforeseen, efforts to pass the N7.298 trillion 2017 Budget will peak with the scheduled resumption of the National Assembly this week. But the level of implementation and performance of the N6.07 trillion 2016 Budget, which was targeted at raising revenue from non-oil sectors, including taxes, and increasing capital spending, has come to the front burner. NDUKA CHIEJINA writes on the shortcomings of the previous appropriation  and the expectations of this year’s.  

    Last year, the implementation of the budget ran into stormy waters from the outset with the continued decline in oil revenue. The fall was a carryover from previous years.

    The N6.6 trillion appropriations dubbed: “Budget of Change” by the President Muhammadu Buhari administration remains a milestone in the annals of budget making. It was the first time the Federal Government would be allocating 30 per cent of the budget to capital expenditure. It was also the first in modern day Nigeria, where the National Assembly would reduce the proposal submitted by the executive as against the usual ‘ritual’ of increasing it.

    According to the Budget Office of the Federation (BoF), tracking annual budget entails “monitoring and evaluation of the process of implementing the approved revenue and expenditure; conduct of field visits to ministries/agencies and periodic evaluation of the performance of the capital and recurrent budget.

    A communications’ officer in the Office of the Accountant-General of the Federation (AGF), Ifeanyi Okereke, noted:  “To ensure the ‘Budget of Change’ delivers on its set goals and impact positively on the lives of Nigerians, the President must ensure that things are done differently now through a deliberate mechanism and plan to track implementation of the 2016 budget, using modern monitoring and evaluation system.”

    Budget tracking, he explained, “enables the government and its stakeholders to examine the flow of public funds from the point of disbursement to the point of utilisation, as it helps to identify funds breakdown as well as cases of mismanagement and corruption within the budget implementation chain.”

    Armed with the Monitoring and Evaluation (M&E) framework for tracking the implementation of last year’s budget, the Minister of State for Budget & National Planning, Mrs. Zainab Ahmed, said tracking the budget and its implementation will be anchored nationally by the ministry of Budget & National Planning with the Department of Planning Research and Statistics in the Ministries, Departments and Agencies (MDA’s).

    The government, Okereke said, “should go beyond official pronouncement to enthrone a culture of monitoring and evaluation in the MDAs. It must develop realistic, thorough, but simple result-based strategies to trap and track fiscal spending in the 2016 budget plan.

    “More importantly, efforts must now be geared towards restructuring the MDAs to establish M&E units. Presently, capacity for carrying out result-based monitoring and evaluation in the MDAs are lacking.

    “If government implements the 2016 Budget, by ensuring that there is a systematic tracking of the funds to the actual projects, the budget will indeed signal the birth of a New Nigeria.”

     

    Key budget components Revenue

    Using the PricewaterhouseCoopers (PwC) analysis of the budget, the government planned to reduce over-reliance on oil revenue and reduce the country’s exposure to oil price volatility. Non-oil revenue like Corporate Income Tax (CIT), Value Added Tax (VAT), Customs & Excise Duties, federation levies and FGN independent revenue were estimated at N2.96 trillion.

    Expected earnings from the non-oil sectors account for about 77 per cent of budgeted revenue of N3.86 trillion for 2016. To shore up the nation’s financial base, changes were made to the leadership of the revenue generating agencies. These included appointment of Mr. Tunde Fowler as the Executive Chairman of the Federal Inland Revenue Service (FIRS) and Hamid Ali, a retired Colonel as the Comptroller-General of the Nigerian Customs Service (NSC).

    The government re-emphasised the need to focus on increasing tax collection. The gross receipts from corporate tax and VAT were expected to rise to N1.8 trillion and N1.4 trillion compared to N1.4 trillion and N1.3 trillion respectively in the previous year’s budget (i.e. increase of 22 per cent for CIT and eight per cent for VAT).

    Independent revenue and remittance of operating surpluses from MDA’s was projected to improve significantly with the full implementation of the Treasury Single Account (TSA) system.

     

    Recurrent Expenditure (non-debt)

    Spending was planned to increase last year (compared to 2015) by about 35 per cent to an aggregate expenditure of N6.08 trillion. Non-debt recurrent expenditure for 2016, representing about 39 per cent of the aggregate expenditure was projected to drop by nine per cent to N2.3 trillion. It excluded a N300 billion vote for Social Intervention Programme (SIP).

    In order to reduce the recurrent expenditure, the government pledged to focus on initiatives such as the Government Integrated Financial Management Information System (GIFMIS) and Integrated Payroll and Personnel Information System (IPPIS).

    The top recurrent expenditures heads were N369.6 billion for Education; Defence (N294.5 billion); Police (N283.1 billion); Health (N221.7 billion) for and Interior (N145.3 billion).

     

    Debt service and capital expenditure

    Since the government relied on borrowing to fund last year’s budget, it projected to increase its debt service expenditure. The debt service cost was expected to rise by 42.8 per cent (N1.36 trillion), accounting for about 23 per cent of the budget. The total debt profile would become 14 per cent of the Gross Domestic Product (GDP).

    The capital expenditure was proposed to increase by about 216 per cent to N1.8 trillion. The challenge of previous administrations was the implementation of the capital expenditure budget.

     

    Statutory transfers

    There was a decrease in statutory transfers from N375 billion in 2015 to N351 billion in 2016. Based on the Medium Term Expenditure Framework (MTEF), the aggregate amount was expected to increase in subsequent years.

     

     Priority sectors

    Agriculture

    In last year’s budget speech, President Buhari spoke of a plan by his administration to subsidise funding for the agricultural sector to encourage participation in the sector and increase job creation. As part of the plans to boosting activities in the sector, the administration also projected the attainment of self-sufficiency in rice production and wheat.

    The overall objective was to make agriculture one of the drivers of the economy. To achieve the feat, other challenges, including infrastructure, fiscal and investment policies, were to be giving priority. 

    Solid minerals

    The government also proposed to boost investment in the mining sector, where 34 minerals had been identified across the country. However, only 13 of the minerals are being mined, processed and marketed. These are: coal, kaolin, barite, limestone, dolomite, feldspar, glass sand, gemstones, gold, iron ore, lead-zinc, tin and its associated minerals and recently gypsum.

    Some of the initiatives of the Federal Government that are targeted at boosting the solid minerals sector include: the revival of the Ajaokuta and Aladja Steel Companies through policies and proper funding/ownership arrangements; gold exploitation through policies and adequate funding to increase output.

    In the budget under review, plans were made to provide subsidised funding to the solid minerals sector.

     

    Tax changes

    There was no proposal to change tax rates or impose new taxes in 2016. The budget speech was silent on the government’s proposals to introduce a National Security Tax (NST) and the proposed increase in Tertiary Education Tax (TET).

     

    Custom duties

    Levies and duties on the value of imports were projected to reduce last year compared to 2015. However, there is expected to be an increase in custom collection from N862 billion in 2016 to N921 billion next year. This is highly dependent on monetary policies of the Central Bank of Nigeria (CBN) and security at the borders to check smuggling.

     

    Corporate taxes

    The projection for corporate taxes is quite optimistic. Corporate tax collection is expected to grow from N1.87 trillion in 2016 to N2.23 trillion in 2018. This is as a result of heightened effort by the FIRS towards tax collection. Some of the initiatives include collaboration with financial institutions on tax collection and partnering with the Corporate Affairs Commission (CAC) in identifying non-compliant taxpayers.

     

    VAT

    The budget makes no mention of an increase in the VAT rate from five per cent other than the fact that the rate was meant to increase to 10 per cent by mid-2015 which was not implemented. However, VAT collection is expected to increase due to more enforcement of compliance.

     

    Luxury tax

    There was no mention of luxury tax in the 2016 budget speech. But based on the MTEF paper for 2016-2018, the surcharge on luxury items was expected to generate about N15 billion in 2016.

     

    Taxes for smaller companies

    The unemployment situation was also priority. There was a plan to reduce tax rate for smaller businesses. It was not clear what taxes would be reduced and what constitutes “smaller companies”. It was, however, noteworthy that a lower CIT rate of 20 per cent (rather than 30 per cent) is currently applicable to small companies that meet certain conditions.

     

    Further insights on the MTEF 2016-2018

    The MTEF is the roadmap for the implementation of the various plans and social development programme. It provides a high-level strategic policy direction of the government over the next three years.  A social welfare package of about N500 billion was proposed for 2016 in the MTEF. The package is aimed at three areas of school feeding programme initiatives, conditional cash transfer to the most vulnerable and post National Youth Service Corps (NYSC) grant to promote entrepreneurship.

    The government must be deliberate with implementation of the budget and take periodic stock of how well programmes are being implemented. The value of each programme to the economy and social wellbeing of citizens must be measured. Any programme that does not add value beyond its associated cost should be discontinued or reviewed very quickly as the huge borrowing has to be justified by clear results.

     

    Diversification of the economy

    The MTEF reiterates the emphasis on diversification of the economy. The main areas of focus are agriculture and solid minerals. The Buhari administration needs clear policies and regulatory framework for investors to thrive in the identified sectors. Ultimately, these sectors should be able to earn significant foreign exchange to replace the shortfall from crude oil earnings. This will have a positive impact on the exchange rate and the economy as a whole.

     

    Zero-based budgeting system

    The MTEF is a zero-based budgeting system. If implemented properly, it will encourage the attainment of a more prudent public fund management. It should help to reduce inefficiency and wastage, especially in the recurrent expenditure and free up more funding for infrastructural development.

     

    Increase of VAT

    In the MTEF paper, the VAT rate was projected to increase by mid-2015 to 10 per cent but it was not implemented. The document did not suggest that VAT will be increased in 2016 as the projected 20 per cent increase was projected to come from improved compliance. It is also not clear whether five per cent will be maintained over the three-year period (2016-2018), especially in view of the full implementation of the Common External Tariff (CET) for ECOWAS projected for 2019.

     

    Infrastructure development and power

    The MTEF highlights some effort on increasing access to energy supply and improving transportation infrastructure. In order to achieve this, the Federal Government would setup an infrastructure development fund.

    One of the crucial extracts from the document is that the government will encourage off-grid power. Though there is no detail information on the off-grid power, it suggests that the Independent Power Projects (IPP) will be encouraged while government focuses more on ensuring adequate investment in transmission infrastructure and regulation. This will impact on the regulation of tariffs and the ability of investors to earn commercial returns across the power value chain.

    Explaining the gray areas of this year’s budget estimates, the Director-General of the Budget Office, Mr. Ben Akabueze, told reporters that “from 2016, funding of capital projects will be based on availability of funds.”

    He disclosed that changes have been made in the way budgets will henceforth be monitored and evaluated, beginning from last year. Confirming that the disbursements in first and second quarters for the 2016 budget implementation had been made public, Akabueze said the figures for the third quarter would be made public after the Federal Executive Council (FEC) approval of the report used as a baseline for the new approach to monitoring and evaluation.

    Experts have agreed that releases do not translate to implementation. According to them, what determines the success of budget implementation is the procurement process.

    In the breakdown of the first and second quarters releases for last year’s budget implementation and evaluation, the Ministry of Power, Works & Housing got the largest allocation with N170,425,193,949. A total of 40.03 per cent of the budget has so far been released and cash backed.

    The curtain is expected to drop on the implementation of the 2016 Budget next month.

  • Agriculture as driver of economic growth

    Agriculture, from time immemorial, has been associated with the production of basic food crops. Agriculture and farming are synonymous terms used long before farming became commercialised. But as the process of economic development accelerated, many other allied occupations in farming came to be recognised as a part of agriculture.

    Presently, agriculture includes forestry, fruit cultivation, dairy, poultry, mushroom farming and bee keeping, etc. Today, processing, marketing and distribution of agricultural products are all accepted as a part of modern agricultural business.

    Thus, agriculture may be defined as the production, processing, marketing and distribution of crops and livestock products. According to Webster’s Dictionary, agriculture is the art or science of production of crops and livestock on farm. It means cultivation and breeding of animals, plants and fungi for food, fiber, biofuel, medicinal plants and other products used to sustain and enhance human life.

    Agriculture was the key factor in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured development.

    The history of agriculture dates back thousands of years, and its development has been driven and defined greatly by climates, cultures, and technologies. Industrial agriculture, which is based on large-scale monoculture farming, has become the dominant agricultural methodology.

    It is safe to say agriculture plays a crucial role in the growth of any country’s economy. It is the backbone of the economy. Agriculture does not only provide food and raw material, but also employment opportunities.

    Agriculture as a source of livelihood in India provides countless jobs for the country’s working population. In Nigeria, significant percentage of our population engages in agriculture. In advanced countries, this percentage is small compared to Nigeria. This is because non-agricultural sector has not been harnessed to create source of income to the country.

    Before crude oil was discovered, agriculture was the main source of our national income. According to a report on national income, it was said 52 per cent of Nigeria’s earning in 1960 and 1961was contributed by agriculture and allied occupations. Between 1976 and 1977, agriculture sector alone contributed 42.2 per cent, while in 1981 and 1982, agriculture’s contribution was to the tune of 41.8 per cent.

    Between 1999 and 2000, agriculture contributed 32.4 per cent to national income. This was further reduced to 28 per cent in 2001 and 2002. Contrary to this, agricultural incomes in the country of the West were smaller compared to Nigeria’s before the millennium. But the development we have had in the sector is not commensurate with the earning.

    Agriculture also provides fodder for livestock. Cow and buffalo provide protective food in the form of milk and they also provide draught power for farm operations. Moreover, it also meets the food requirements of the people. Import of food grains has been very small in recent years. Rather export avenues are being explored to open the market for the product.

    Agricultural products, such as rice, tobacco and spices constitute the main items of exports in India. If the development process of agriculture is smooth, export increases and imports are reduced considerably.

    Thus, it helps to reduce the adverse balance of payments and save our foreign exchange. This amount can be well utilised to import other necessary raw-material and machinery which are useful for the growth of the economy.

    The development of agricultural sector leads to marketable surplus. As country develops, more and more people are engaged in mining, manufacturing and other non-agricultural sector.

    As agriculture develops, output increases and marketable surplus expands. This can be sold to other countries. Here, it is worth mentioning that the development of Japan and other countries were made possible by the surplus of agriculture. There is no reason why this could not be done in Nigeria.

    Agriculture has been the source of raw materials to industries, such as cotton and textile, sugar, tobacco, edible and non-edible oils. Apart from these, many others, such as processing of fruits and vegetables, dal milling, rice husking and jaggery also depend on agriculture for their raw materials.

    According to United Nations (UN) survey, the industries with raw material from agriculture accounted for 50 per cent of value-added tax and 64 per cent of all jobs in industrial sector of developing countries. Besides, the finances of government, to the large extent, are augmented from the earnings of agricultural sector.

    As a contributor to foreign exchange resources, agriculture constitutes an important place in the country’s export trade. According to a report, agricultural commodities like oilseeds, raw cotton, and coffee accounted for about 18 per cent of the total value of exports in India. This shows that agriculture products still continue to be significant source of earning foreign exchange.

    Aside the vast employment opportunities agriculture provides in this age of mechanised farming, the sector has the potential to boost the Gross Domestic Product (GDP) in this period when the demand for oil is dwindling.

    The rapid rate of growth in agriculture gives progressive outlook and further motivation for development. As a result, it helps to create proper atmosphere for general economic development in the country. This means economic development depends on the rate at which agriculture grows.

    The development of agriculture provides necessary capital for the development of other sectors, such as manufacturing industry, transport and foreign trade. In fact, a balanced development of agriculture and industry should be the focus of the government.

    From the foregoing, it can be concluded that agriculture plays an important role in the growth of the nation’s economy. It practised properly, it would be the needed sop for achieving irreversible economic development.

     

    • Salma is of the Department of Mass Communication, IBB University, Lapai, Niger State.

  • Towards recovery and growth

    SIR: The Nigerian economy is in a quagmire and the need to draw up a framework for economy growth and recovery is key to moving this stalled economy out of a recession.

    The issue of the exchange rate has been a crucial challenge. Nigeria operates on about five exchange rates, the rate at which oil importers source for the United States dollar is different from that of people going for pilgrimage. The manufacturers have a different exchange rate used in importing raw materials and the exchange rate used to cater for the needs of tuition fees for student also differ. The black market rate also differs and the black market rate is used by majority of the populace.

    Investors will not have confidence in an economy that operates on several exchange rates and Nigeria needs investors in crucial sectors so as to drive growth and development. Investors might even be confused with which exchange rate to operate with and this might chase investors away to other African countries. The Central Bank of Nigeria needs to come up with a uniform exchange rate so as to stabilise the naira.

    Nigeria is an import-dependent economy and the pressure on the demand for the dollar outweighs the supply which leads to a rise in the exchange rate from naira to a dollar. The propagation of Made in Nigeria product is key to stabilising the naira. The rice sector is growing and over time Nigeria will not need to import rice again and this will reduce the need for foreign exchange in the importation of rice thereby strengthening the naira.

    If the importation of basic agricultural as well as petroleum products can also be reduced, there will be significant decrease in the need for foreign exchange thereby strengthening the naira. Nigeria needs to move from an import-dependent economy to a producing economy and the government needs to drive policies that will favour small scale industries, provide easy and accessible loan facilities to encourage and drive made in Nigeria products.

     

    • Folawiyo Kareem Olajoku (PhD)

    Lagos.

  • ‘Competition ‘ll stimulate growth’

    Minister of State, Aviation, Hadi Sirika has said competition will stimulated growth of the sector.  Competition driven by good service delivery will ensure operators imbibe a culture of adherence to best practices, he said.

    He spoke in Lagos during the seventh Nigerian Aviation Awards (NIGAV) organised by FCI International Limited.

    Represented by the Commissioner, Accident Investigation Bureau (AIB), Mr Akin Olateru, Sirika praised the organiser, Mr Fortune Idu, for creating a platform for operators to compete for service delivery.

    According to the minister, the award has become a catalyst for quality service delivery among competing categories.

    NIGAV service awards covers airport management, aeronautical  and non-aeronautic services, media, hospitality, airlines, sundry support vendors, lounge services, shuttle services, agencies and other institutions.

    He said: “I dare say the supervising Ministry of Transportation greatly appreciates, and is fully in support of NIGAV. May I seize this opportunity to sincerely thank the organisers of this award, FCI International Limited, under the leadership of Mr Fortune Idu, and his dedicated team, for a job well-done unrelentingly these past seven years.”

    The minister said given  the economic challenges faced by all sectors of the economy,  only the best was good enough to produce the desired improvements in the industry.

    Sirika said hard work, compliance with safety and security regulatory requirements and a customer-centric attitude were what the industry required to guarantee the flying public’s safety.

    Idu said service delivery would improve if operators were rewarded for their contributions.

    His words: ”This is the whole idea of acknowledging and rewarding the contributions of industry to stimulate enhanced services for the overall good of passengers.’’