It was on a contagiously sanguine note that the Minister of Budget and National Planning, Senator Udoma Udo Udoma, rounded his public presentation of the 2017 budget to a select group of stakeholders and journalists December last year:
“I wish you all a Merry Christmas and a better New Year during which we shall get out of recession.”
This bohemian tinged farewell to his (Minister’s) audience exemplifies the outlook of the Nigerian economy in 2017; ‘the year when Nigeria will work,’ in the expressed optimism of the Minister.
This is not an assertion out of place, yes, it can be conceded that 2016 had not been particularly ennobling, it’s the year Nigeria officially got listed as a country afflicted with recession for the first time in 25 years. With its associated distress and unpredictability, all vital economic indicators rushed south with inflation trending up to the discomfort of policy makers and Nigerians as a whole.
Missed revenue targets leading to fiscal shortfalls and acute foreign exchange shortage in its wake, all consequences of plummeting oil price in the first six months of the year exacerbated by an unrelenting oil and gas pipelines vandalism.
The nation groaned in truth, yet the challenges of implementing Budget 2016 defines a new national character and leadership capabilities for Nigeria. The President Muhammadu Buhari’s led Federal Government held steady the rudder of state, leading a strong initiative in revamping the agricultural sector with record massive harvest in rice and other grains. Nigeria processed rice brands, many of such, now proudly sit on super markets shelves and adorn open markets stalls.
Plus the record N760 billion released to target Ministries, Departments and Agencies (MDAs) in the realisation of infrastructure projects enabled the return to sites of contractors that had been owed since 2013, now, an aggregate of more than 1000 kilometres of roads are being worked upon by these contractors facilitating recall of sacked workers and employment of new ones.
In acknowledgement of the Federal Government commitment to economic recovery and growth, Moody, the respected global rating agency, has, in its latest report, predicted that the country; ‘going by the Federal Government’s fiscal policies and anti-corruption fight, will get the economy right.’
The year 2016 set new tone in managing the nation’s resources, for the first time, imports figures reduced exponentially with historic improvement in our balance of payment and trade and current accounts.
Going forward, it is obvious Budget 2016 laid a strong foundation for the expectations of Budget 2017. The Federal Government has apparently learned from the circumstances and the forced and unforced errors of Budget 2016. There’s now a declared emphasis on public and private sectors collaboration both in projects financing and actualisation added to a planned vigorous delivery on target infrastructure spanning roads, power, railways and social intervention. It must have been the expected impactful outcomes of these that inspired Senator Udoma to declare that the 2017 Budget is an Infrastructure Budget.
A total of N1.047 trillion is dedicated to key infrastructural spending. According to the Minister of Budget and Planning the spending focus will be on critical economic sectors that have quick transformative potentials captured as new initiatives in the 2017 Budget. This one year budgetary allocation to infrastructure is in fact, more than the total allocation to infrastructure between 2011 and the first half of 2015.
Some of the new initiatives introduced in the 2017 Budget are:
(i) A new Social Housing Programme; the Federal Government has provisioned the sum of N100 billion as takeoff capital for this Programme. The new Social Housing Programme is purposed to revolutionise housing delivery to Nigerians both in the public and private sectors. A major intendment of the programme is to, through active collaboration with the private sector funding and estate developers, bridge the country’s more than 17 million housing deficit.
Housing units are to be delivered on very liberal payment terms on an impressive mortgage facilitation anchored on long term repayment of more than 25 years.
This will be a welcome departure from the current exploitative practice where Shylock landlords charge a minimum one-year rent for occupation even as they increase rate annually.
The one billion Naira provided in the 2017 budget is the seed capital of the target N1 trillion funds proposed for the New Social Housing Programme. The activation of the programme comes with huge potentials; creating employment openings, enabling use of local resources in the construction sub sector, trends a new financial template for the capital and financial markets on mortgage and related businesses with the liquidity expected from the #1trillion fund.
(ii) Special Economic Zone Projects: The Special Economic Zone Projects are part of the strategies to fast track the Federal Government’s diversification of the economy away from the nation’s dependent on oil and gas.
The concept is pivoted on each geo-political zones of the country exploiting and developing resources indigenous to the zones so as to galvanise manufacturing activities and add value to commodities to enhance exports. This should drive the vision of taking the country away from import dependency to being export dependent.
The Special Economic Zones are to be enabled through active participation of the private sector. In realisation of this, the Federal Government has allocated the sum of #50billion in the 2017 budget.
(iii) Export-Expansion Grant (EEG): The Export-Expansion Grant (EEG) has been a long running programme but it has been suspended several times over the last 15 years since its inauguration because of abuse and corruption inherent in the conduct of government businesses in the past. However, the Buhari Government, driven by transparency, seems to be persuaded of its essentials as part of the larger efforts to diversify the economy.
The EEG is an incentive based programme for Nigerian exporters. Qualifying exporters earn a 25% rebate on the total value of goods exported.
To this end, the Federal Government has earmarked the sum of N20 billion in the 2017 budget for the revival of EEG in the form of tax credit
(iv) Recapitalization of Bank of Industry (BOI) and Bank of Agriculture (BOA): The BOI and the BOA had, historically been playing economic facilitation roles but there performances in this regard have been limited by funds available to these development banking institutions to trigger more engaging activities in the economy through small, medium and large enterprise in the case of the BOI and small holding, estate and mechanised farmers in the case of the Bank of Agriculture.
These institutions lend money to their respective target sectors at rates below 10 percent, a range far away from the 25 percent to 32 percent charged by Money Deposit Banks, (Commercial banks)
Of course, cheaper funds given to entrepreneurs impact manufacturing and farming cost process, enables profitability and encourage easy repayment schedule. These generally generate increased productivity and goods delivery to the public at cheaper rate thus curtailing inflationary momentum.
To serve these purposes, a sum of N15 billion has been provisioned to support these development finance institutions to support Micro, Small and Medium Scale Enterprises (MSMEs) in the 2017 budget.
Historically speaking, no Federal Government in Nigeria had consciously made effort to nurture and harness the country’s multiple prosperity centres as the Buhari’s government had exemplified in the 2017 budget. It would seem that Nigeria is in reset mode on the ground of the nation’s perilous embrace of sheer consumption funded with dollars earned from oil and gas the mono product category that have, up till now define our national tendency for criminal and irresponsible consumption of goods made in other lands.
These new initiatives, though coming at a time of vastly reduced revenue to the nation’s coffers, will support the needed economic diversification and inclusion in the country’s growth-drive.
Written by Chief Niyi Akinsiju, Policy Analyst.