As is the case with Nigeria’s income and expenditure plans in the past 18 years, hopes of economic recovery through President Muhammadu Buhari’s N7.3 trillion budget for 2017 may be a pipe dream after all.
Apart from oil price estimate of $42.5 per barrel, all four major benchmarks — oil production, exchange rate, inflation rate and Gross Domestic Product (GDP) growth rate — set in the President’s Budget presentation speech to the National Assembly remain uncertain. Economists yesterday argued that it would serve better for government to set its income and expenditure template closer to current prices and economic realities.
Wrong assumptions in the Appropriation Bill will undermine government’s priorities and plan for economic recovery and job creation in the coming year. “Without looking at how they want to spend the money, the assumptions on the revenue side are unreal,” Mr. Leo Ukpong, a professor of Economics at the University of Uyo, Akwa Ibom State, told The Guardian last night.
Buhari’s expenditure plan as contained in the 2017 Appropriation Act, to be passed by the legislature, expects oil price to average $42.5 per barrel next year, just as the country projects an ambitious 2.2 million barrels/day oil production. The budget also sets exchange rate at $305/dollar. Although the National Bureau of Statistics (NBS) announced an 18.48 per cent rate of increase for consumer prices in November, government anchors the 2017 budget on a more stable average inflation rate of 12.92 per cent (well over five percent deceleration) in the new year. GDP growth rate, which has been on a negative trend in the last three-quarters, is put at a positive 2.5 per cent, meaning that government expects total recovery from recession in the next 12 months.
“So, the 2017 budget benchmarks represent a back-of-the-envelope calculation,” Dr. Bongo tells The Guardian. “There is no rigour, no basis for the statistics being reeled out, especially when we are in recession (we are actually grappling with stagflation),” he explains.
“The budget’s oil price benchmark to my mind appears to be the only realistic estimate by the presidency,” Ukpong said by telephone Sunday night.
He said that OPEC set Nigeria’s daily oil production at 1.8 million barrels but could “not deal with the problem of militancy and pipe line vandalisation in the Niger Delta for us.” Ukpong also believes that an exchange rate benchmark of N305/dollar, though official, is not realistic enough to meet the country’s expenditure. “The exchange rate is almost N500/dollar in the real market. By benchmarking at N300, you are understating the cost of consumer goods by assuming that greater majority will not be part of the economy (and will not buy dollars).
Price of crude was put at $38 but price volatility saw the commodity hitting $20 per barrel at some point before it rallied to the current price of above $50. 2016 GDP growth benchmark was 4.37 percent, only for the economy to slide into recession in the third quarter following persistent negative growth. GDP growth in the first quarter shrank by -0.36 percent followed by another negative growth of -2.6
Prof Pat Utomi told The Guardian that the phenomenon of failed budget estimates is not new in Nigeria. “It is a development that reflects poor planning and budgeting,’ he said.