By Udeme Clement
Nigeria’s economy will exit the current recession if government ensures timely implementation of at least 80percent fiscal elements in 2017 budget. A strong economic team is needed to aid management of the economy to predict future recession and suggest measures to minimise adverse effects. A developmental-state framework is needed to stimulate economic productivity”, says, the current Director General, West African Institute for Financial and Economic Management (WAIFEM), Prof. Akpan Ekpo.
The Deputy Governor, CBN, Mrs. Sarah Alade, middle, DG of WAIFEM, Prof. Akpan Ekpo, and a facilitator, at the seminar on ‘Overcoming recession and reduction in cost of governance in Nigeria
Ekpo made this known while delivering a lecture on, ‘Theoretical discourse and the current recession in Nigeria’, at the opening session of a seminar on ‘Overcoming recession and reduction in cost of governance in Nigeria; options and the way forward’, organised by WAIFEM in collaboration with West African Monetary Institute (WAMI) and African Capacity Building Foundation (ACBF), at the Central Bank of Nigeria (CBN) training centre in Lagos.
According to him, “Almost all macroeconomic fundamentals are moving in the wrong since the sharp decline in oil prices affecting both demand and supply side of the economy. On the demand side, there is evidence of depressed private consumption, investments and pervasive macroeconomic instability. The economy drifted into a recession in 2016 arguably the worst economic performance since 1991, when the economy was last in recession for less than a year. Misery index continues to rise as shown by rising rates of unemployment/underemployment, poverty, high lending rate and inflation. Economic performance index was 76percent in 2006, and deteriorated to 56percent in 2016; misery index stood at 35percent in 2006, and rose to 72percent in 2016; discomfort index was 30 percent in 2006, and jumped to 52percent in 2016”.
He added, “The recession is a special type affecting the demand and supply side of the economy, thus fiscal and structural policies are needed to tame the recession. The 2016 third quarter growth of selected sectors like manufacturing stood at -2.63percent, chemical/pharmaceuticals -1.53percent, construction –o.11 percent, real finance and insurance 2.85, wholesale/retail trade -1.38percent, transport/storage 0.72percent, entertainment and recreation 1.99 percent. Therefore, we need higher spending on agriculture and manufacturing to boost local production, diversification of the economy into non-oil sectors, investments in hard infrastructure like power, roads, railways and housing. Government should also facilitate teaching in skills acquisition to enhance entrepreneurship.”
Speaking on the state of Nigeria’s economy, the Minister of Budget and National Planning, Udoma Udo Udoma, said, “There are both remote and immediate causes of this challenging economic situation. The remote cause is the structure of the economy. We have an economy that has for a long time relied on a single commodity-crude oil, with an average of 70percent for fiscal revenues and 90percent for foreign exchange. This makes the economy susceptible to external shock. This is unacceptable to the current administration, which is why we are doing everything possible to reverse this trend, by partnering with all stakeholders, private and public, local and foreign. We are working tirelessly to restore the economy on the path of sustainable inclusive growth”.
He pointed out, “Government implemented a number of fiscal reforms in 2016 to address the crisis. These include CBN bailout to sub-national governments, where 23 States that had their bank loans amounting to N575.52billion restructured to 20 bonds, and 28 States benefited from the CBN’s salary bailout of N373.56billion between August 2015 and January 2016. Also, the Federal Government worked with States to develop fiscal sustainability plan for effective management at the States level.
“At the Federal level, an efficient unit was created in the Ministry of Finance to reduce cost of governance, as well as implementation of Treasury Single Account (TSA). For instance, by December 2016, 50.000 ghost workers were uncovered, saving government about N200billion. We also introduced Zero Based Budget (ZBB) system in preparation of 2016 budget to ensure prudent spending of government money. The ZBB is intended to provide justification for every item of expenditure in the budget, which is a marked departure from the old envelope system of budgeting where funds were allocated without clear identification of targets to be achieved. The ZBB also ensures that expenditures are linked to government’s strategic reforms and initiative for economic recovery.
“A new Joint Venture Cash-Call arrangement has been put in place. Under this initiative, joint venture operations will be subjected to a new funding mechanism, which allows for cost recovery. Similarly, additional oil-related revenues are being explored, which include royalty recovery, marginal field licenses and early licensing renewals. The 2017 budget of N7.28trillion is designed to speed up recovery of the economy from recession. The N2.2trillion capital expenditure provision is the highest ever in Nigeria’s history. More importantly, the 2017 budget has the objective of contributing to food security and creating a platform for agro-business in agriculture supply chains through Agriculture Green Alternative Plan.