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| Presentation of the 2017 Budget |
-Ewegbara said the budget is neither an expansionary budget, nor is it pro-investment, pro-growth or pro-jobs
An economist and the chief executive of Pan-Africa Development Corporation, Odilim Enwegbara, has questioned President Buhari’s optimism that his 2017 federal ‘Budget of Recovery & Growth’ would end the economy recession the country is currently battling with.
President Buhari, along with the minister of budget and National Planning, Udoma Udoma had on different occasions optimistically expressed a belief that the 2017 will lead Nigeria out of recession.
But the Abuja-based development economist, Enwegbara has now countered this belief. According to him, the 2017 budget which was presented on December 14, 2016 to the National Assembly for consideration and approval is unlikely to lead the country out of the current economic recession.
Enwegbara said If Mr President hopes to grow the economy out of recession in 2017, this budget is not the one to do it.
According to him, the budget is not an expansionary budget, also it is not pro-investment, pro-growth, and pro-jobs. It is not enough to expect it to perform such a magic.
Enwegbara agreed the recession was not a sudden accident that happened during Buhari’s term in office but something that has been brewing for long, he said what the country economy needs urgently is serious restructuring and overhauling which should come with unconventional policies.
He noted that the restructuring of the economy had not yet happened, because gifted pro-expansionary Nigerians were yet to be brought together by the government to perform the inevitable economic diversification surgery.
According to Enwegbara, the Nigeria’s budget to gross domestic product ratio had remained very low because the country’s tax to GDP ratio was the lowest among its peer economies, like South Africa, over the years.
While South Africa’s tax to GDP ratio was as high as 26.3 per cent, Enwegbara said that of Nigeria was still close to what it used to be in the mid-2000s commodity booms.
Again, despite South Africa’s 2016/2017 fiscal deficit at 3.2 per cent, he said the country’s budget spending last year was about $143.966 billion, against Nigeria’s proposed $23.928 billion in 2017.
He explained that rather than the 2017 budget being an expansionary budget, it is a contractionary budget, because it is smaller than the 2016 appropriation, especially with such low fiscal deficit of 2.18 per cent to GDP against South Africa’s 3.2 per cent.
Enwegbara accused the government of not doing enough to raise revenues from taxes, as the country’s tax policy requires urgent overhaul to aggressively boost government tax revenues.
In his analysis, the country’s tax-to-GDP ratio should be raised close to 30 per cent, as about 70 per cent of the collection from value added tax was being diverted by officials of the revenue collection agencies, in connivance with the paying businesses.
A casual look at the proposed N7.298 trillion 2017 budget, against the N6.06 trillion figures for the previous year, he stated, might seem higher in size, but a closer review would show otherwise.
According to him, taking the exchange rate of N305 to a dollar, and over 18 per cent inflation average into consideration, against N197 per dollar in 2016 and 16 per cent inflation average, the 2017 budget was actually smaller.
At the proposed exchange rate of N305 to a dollar, he said the N2.24 trillion provision for capital projects would translate to about $7.344 billion only, against about N1.8 trillion capital spending in 2016, which came to about $9.137 billion at 197 per dollar exchange rate.
Enwegbara asked what economic sense does it make that a country with $350 billion infrastructure deficit is okay with 14 per cent debt to GDP ratio (with external portion less than 2 per cent), compared to its peer economies, such as South Africa, with such low infrastructure deficits and world-class infrastructure, and a debt to GDP ratio as high as 44 per cent, with external debt component of about 39.38 per cent?
He however hailed the N2.36 trillion deficit in the 2017 budget as a welcome development, saying about N1.067 trillion, or 46 per cent provision for external borrowing, was a departure from the usual less than 5 per cent provision in the past.
With about N1.66 trillion, or 40 per cent of government revenues to be spent on domestic debt service next year, Mr Enwegbara advised the government needed to consider other ways to solve the problem.
While criticising the proposed $42.50 per barrel crude oil in the budget, Enwegbara argued that in a time like this, the government maximize all avenues to increase its revenue.
He advised that the benchmark oil should be increased to $50 per barrel considering that oil price in 2017 is expected to rise as high as $65 per barrel.
watch a video of President Buhari presenting the 2017 budget below:
https://youtu.be/wbTiIsxdnjM
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