2017 budget: Trigger for Economic Recovery and Growth Plan

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The National Assembly passed the 2017 Appropriation Bill of N7.441 trillion last week.  Chima Nwokoji, in this report, examines the 2017 budget as a springboard to the implementation of Nigeria’s Economic Recovery and Growth Plan.

Nigeria‘s 2017 budget has been passed. It is a budget from which much is expected. Greater things are expected from the budget not just because it represents an increase of N143 billion from what was presented last December by President Muhammadu Buhari. Or because  much effort has been put into its drafting  process as confirmed by the Chairman, House of Representatives Committee on Media and Public Affairs, Abdulrazaq Namdas, who  explained that “everything was done to give Nigerians a sense of belonging… as we were very thorough this time around.”

But the 2017 Appropriation Bill of N7.441 trillion will kick-start the implementation of the Economic Recovery and Growth Plan (ERGP), a more hopeful document. The budget has come at a time when the current administration has merged the budgeting and planning functions into one ministry to create a better and stronger link between annual budgets and the Economic Recovery and Growth Plan.

President Muhammadu Buhari, on April 5, 2017, launched the much awaited ERGP. The plan envisages 21 programmes, 60 strategies and 265 key activities. Its objective is to enable Nigeria achieve sustained inclusive growth by increasing national productivity and achieving sustainable diversification of production. Economists describe inclusive growth as a concept that advances equal opportunities for everyone during economic growth with benefits incurred by every section of society. The plan also aims to significantly grow the economy and achieve maximum welfare for the citizens, beginning with food and energy security.

Minister of Budget and National Planning, Senator Udo Udoma, said at a media briefing in Abuja recently that by merging the Budget Office with the Ministry of Planning, President Muhammadu Buhari showed a determination to ensure that the government’s plans are effectively implemented.

“This ensures the NERGP will be effectively implemented. As you are aware many of the initiatives in the ERGP are captured in the 2017 Budget Proposal currently before the National Assembly. For instance, the 2017 Budget Proposal makes provision for the sum of N50 billion as FGN’s contribution for Special Economic Zones. Provision has also been made of N100 billion to support the Social Housing Fund. Also counterpart funds for the rail projects and for the Mambilla Hydro-Electric Power Project.”

The Strategic Implementation Plan (SIP) for the 2016 Budget of Change was developed as a short-term intervention for this purpose. Visible successes and achievements have been recorded. The Economic Recovery and Growth Plan, a Medium Term Plan for 2017 – 2020, builds on the SIP and has been developed for the purpose of restoring economic growth while leveraging the ingenuity and resilience of the Nigerian people – the nation’s most priceless assets. The ERGP is also consistent with the aspirations of the Sustainable Development Goals (SDGs), given that the initiatives address its three dimensions of economic, social and environmental sustainability issues.

Available records show that oil accounts for more than 95 per cent of exports and foreign exchange earnings while the manufacturing sector accounts for less than one per cent of total exports, but, as the ERGP document clarifies, “oil revenues will be used to develop and diversify the economy, not just sustain consumption as was done in the past.”

Indeed, the hope of increased oil revenue that will fast track diversification as envisaged in the ERGP was confirmed by the Chairman of the Senate Committee on Appropriations, Senator Danjuma Goje, who explained that the 2017 budget was raised by the National Assembly “as a result of increased revenue coming to the government due to increase in the crude oil price benchmark to $44.5 per barrel as against $42.5 proposed by the executive.”


ERGP and national productivity

The plan is aimed at increasing national productivity and sustainable diversification of production base to significantly grow the economy and achieve maximum welfare for citizens beginning with food and energy security.

Stakeholders agree that through the implementation of the ERGP, the economy will run on multiple engines of growth, not just the single engine of oil. This is because the Plan focuses on growth, not just for its own sake, but for the benefits it will bring to the Nigerian people.

“In implementing the Plan, the Government says it will collaborate closely with businesses to deepen their investments in the agriculture, power, manufacturing, solid minerals and services sectors, and support the private sector to become the engine of national growth and development. This Plan also places importance on emerging sectors such as the entertainment and creative industries.”

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It also envisages that by 2020, Nigeria will have made significant progress towards achieving structural economic change with a more diversified and inclusive economy; a view shared by Professor Olu Ajakaiye at the second edition of the Bullion Lecture organized by Centre for Financial Journalism in Lagos. Ajakaiye, Chairman of African Centre for Shared Development Capacity Building (ACSDCB), said that structural transformation of the economy is truly envisaged in the ERGP.

Hence, the plan is expected to deliver on five key broad outcomes, namely stable macroeconomic environment, agricultural transformation and food security as well as sufficiency in energy. Others are improved transportation infrastructure and industrialization with focus on small and medium scale enterprises.


Three focus areas of ERGP and 2017 Budget

Many economists have canvassed for a focus on less number of achievable areas, arguing that the content of the ERGP is too broad to be accomplished in four years, given various challenges facing project implementation in Nigeria.

Dr Ayo Teriba, the CEO, Economic Associates, advised the Federal Government to focus on only two items in the Economic Recovery and Growth Plan rather than all the projections on the list. He said that achieving energy sufficiency and efficiency in transportation would propel other items in the plan in the right direction.

Other welfare-oriented commentators believe that the government should focus more on: “Investing in our People, restoring Growth and Building a Globally Competitive Economy.”

Economic growth is beneficial for society when it creates opportunities and provides support to the vulnerable. The ERGP envisaged investment in the Nigerian people by increasing social inclusion, creating jobs and improving the human capital base of the economy. Interventions to create jobs are a core part of the ERGP, which aims to reduce unemployment and under-employment, especially among the youth. The Federal Ministry of Labour and Employment is expected to start the work of job creation with N8, 803,520,400 allocated to it in the 2017 budget. Federal Ministry of Youth and Sports Development  will begin work with N5,441,000,000 while the Ministry of Education commences work of “ Investing in our People” as a component of the ERGP  with its N56,720,969,147 allocation in the 2017 budget.

It will also guarantee access to basic education for all, improve the quality of secondary and tertiary education, and encourage students to enroll in science and technology courses.

The ERGP accordingly prioritizes job creation through the adoption of a jobs and skills programme for Nigeria including deepening existing N-Power programmes, and launching other public works programmes. The partnership with the private sector and sub-national governments for job creation will also focus on the policies required to support growth and diversification of the economy by placing emphasis on Made-in-Nigeria, public procurement which takes account of local content and labour intensive production processes. All initiatives under job creation would prioritize youth as beneficiaries. Accordingly, all capacity building and skills acquisition interventions will be targeted at youth-dominated sectors such as ICT, creative industries, and services. Furthermore, concerted efforts will be made to encourage youth to venture into other labour intensive sectors such as agriculture and construction.

On social inclusion, the Federal Government will continue to provide support for the poorest and most vulnerable members of society by investing in social programmes and providing social amenities. Targeted programmes will reduce regional inequalities, especially in the North East and Niger Delta.

In the aspect of human capital development, the Federal Government promises to invest in health and education to fill the skills gap in the economy, and meet the international targets set under the UN’s Sustainable Development Goals (SDGs). The ERGP will improve the accessibility, affordability and quality of healthcare and expand coverage of the National Health Insurance Scheme across the entire country. In this regard, the Federal Ministry of Health, with its N55, 609,880,120 is expected to begin the process of improving the accessibility, affordability and quality of healthcare as stipulated in the ERGP.

In terms of restoring growth, the Plan focuses on achieving macroeconomic stability and economic diversification. Government is optimistic that macroeconomic stability will be achieved by undertaking fiscal stimulus, ensuring monetary stability and improving the external balance of trade.

Similarly, to achieve economic diversification, policy focus will be on the key sectors driving and enabling economic growth, with particular focus on agriculture, energy and Micro, Small and Medium Enterprises (MSMEs)-led growth in industry, manufacturing and key services by leveraging science and technology. This is also in the center of what the Central Bank of Nigeria (CBN) is doing in the real sector. CBN’s Director, Development Finance Department, Dr. M. A. Olaitan, said the apex bank’s strategy for advancing Nigeria’s real sector is hinged on agriculture, manufacturing and infrastructure. “This is because they have great potential for job and wealth creation, output growth, foreign exchange accretion and poverty eradication,” he stated at the 22nd Seminar for Finance Correspondents and Business Editors.

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Meanwhile, the Federal Ministry of Agriculture and Rural Development with a total of N103,793,201,010 and the Federal Ministry of Communications Technology with N8,434,669,142 are expected to start the journey this year.

It is believed that the revival of these sectors, increased investment in other sectors; reduced need for foreign exchange for intermediate goods and raw materials, and greater export orientation will improve macroeconomic conditions, restore growth in the short term and help to create jobs and bring about structural change.

On building a globally competitive economy, government believes that restoring Nigeria’s economic growth and laying the foundations for long-term development requires a dynamic, agile private sector that can innovate and respond to global opportunities.  Government has shown, more than ever before, that it recognizes  the role of the private sector.

Udoma explained that while implementing the plan, there will be active engagement with the private sector. “Government will leverage the power of the private sector to drive economic recovery and sustained growth and allow markets to function optimally while strengthening government regulatory oversight to minimize abuse. Government intends to collaborate closely with businesses to deepen their investments in the agriculture, power, manufacturing, solid minerals and services sectors, and support the private sector to become the engine of national growth and development.”

Also, Ajakaiye said “clearly, the bulk of the investment programme is expected to come from the private sector.”

According to him, to achieve the broad and associated sub-objectives detailed in the projected N73.03 trillion gross domestic ERGP investment, contribution from the Federal and sub-national governments will decline from 14.04 per cent to 12.61 per cent in 2017 to 8.11 per cent and 7.7 percent by 2020 respectively.

“Correspondingly, the contribution of the private sector is expected to rise from 73.35 per cent in 2017 to over 84 percent by 2020,” adding  that sub-national governments are expected to contribute at least N1.85 trillion in capital expenditure annually throughout the plan period. Ajakaiye advised government to take the options of evolving a robust tax system, strategic public-private partnership models, remittances and diaspora bonds and co-financing agreements with pension funds and foreign direct investments to finance plan.

The ERGP aims to tackle the obstacles hindering the competitiveness of Nigerian businesses, notably poor or non-existent infrastructure, and the difficult business environment. It will increase competitiveness by investing in infrastructure and improving the business environment.

Strong recovery and growth in the manufacturing, SMEs and services sectors are also anticipated, particularly in agro-processing, and food and beverage manufacturing. Ongoing strategies to improve the ease of doing business will boost all manufacturing sector activities. Overall, the ERGP estimates an average annual growth of 8.5 per cent in manufacturing, rising from -5.8 per cent in 2016 to 10.6 per cent by 2020.

The ERGP emphasizes investment in infrastructure, especially in power, roads, rail, ports and broadband networks. It builds on ongoing projects and identifies new ones to be implemented by 2020 to improve the national infrastructure backbone. Given the huge capital layout required to address the massive infrastructure deficit in the country, the private sector is expected to play a key role in providing critical infrastructure, either directly or in collaboration with the government under public private partnership (PPP) arrangements.

However, details of the bill show that 30 per cent or N2.18 trillion was allocated to capital expenditure in the budget. The breakdown of the capital expenditure shows the Federal Ministry of Power, Works and Housing having the highest capital vote of N553, 713,857,113, the Federal Ministry of Transportation allotted N241,709,000,000 and the Infrastructure Concessionary and Regulatory Commission (ICRC) N34,310,245 as key departments  to hasten infrastructure development.

The post 2017 budget: Trigger for Economic Recovery and Growth Plan appeared first on Tribune.

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