President Muhammadu Buhari |
Chief
Executive Officer of Financial Derivatives Company Limited, Mr. Rewane Bismark, sees growth in the
budget saying that the spending and revenue estimate was based on the Keynesian
model of countercyclical spending aimed at stimulating growth, as spending in
real terms is up 20 per cent and the deficit is to expand to $11billion – 2.16
per cent of GDP.
According to
him, for an austere and frugal leader, deficit financing – requiring an
additional N1.84trillion is a bitter pill to swallow especially the reference
to both domestic and more importantly, international borrowing.
He explained
that the Eurobond market would be a real test of Nigeria’s credit worthiness.
Bismark
said: “The most notable shift in his economic ideology
remains the mute but tacit acceptance of the adoption of a flexible exchange
rate- a no go area up to a few days ago.
The
budget is clearly consistent and is part of the 3-year Medium Term Expenditure
Framework (MTEF). It seeks to stir Nigeria off the path of oil dependence.”
He affirmed
that the budget hopes to achieve this through a focus on non-oil revenues by
broadening the tax base and improving the effectiveness of our revenue
collecting agencies.
He, however,
stated that the renewed drive to boost non-oil revenues may not be sufficient
to cover the gap from lower oil revenues.
“It
seeks it boost growth to 4.37per cent in 2016. From a relatively static and
dogmatic ideological position, Buhari has moved forward in the spectrum of
economic reform, which is a welcome development for most economists and
investors,” Financial Derivatives CEO said.
The fiscal
responsibility campaigner and Lead Director at Centre for Social Justice
(CSJ), Eze Onyekpere, lauded the
proposals, describing it as a mix of welfare and development plan.
He was
particular about the tax reduction plan, employment of graduates as teachers
and audacity in allocation of 30 per cent to capital projects, adding that
there was need to pursue vigorously the diversification of revenue sources to
avoid tasking the treasury.
He however,
expressed worry that the fixing of the crude oil price benchmark at $38 per
barrel when the commodity already sells below it was worrisome.
He said: “The implication is that the resources to finance the budget
may not be fully available. The fact that the country shall borrow about 1.84 trillion
to finance the deficit and also have set aside N1.36 trillion for debt
servicing. We are accumulating debts in geometric proportions whilst our
ability to repay is not growing as fast.”
He also
expressed concern that the administration cannot make up its mind on the
removal of petroleum subsidy, urging the National Assembly to thoroughly review
the budget and ensure that any frivolous or inappropriate expenditure is
weeded out; set a framework for the identification of beneficiaries of the
conditional cash transfer scheme to avoid fraud in the system.
A civil
society activist and Executive Director at OJA Development Consult, Abuja, Jide Ojo, said the budget actually
seeks to stimulate the economy, making it more competitive by focusing on
infrastructural development; delivering inclusive growth; and prioritizing the
welfare of Nigerians.
He said: “The home-grown public primary school feeding and free
education for science, technology and education students in our tertiary
institutions is appealing. Federal Government’s plan to collaborate with states
and local governments to tackle the ‘chronic shortage’ of teachers in public
schools across the country by planning to recruit, train and deploy 500,000
unemployed graduates and NCE holders to strengthen basic education, especially
in rural areas is also laudable.
“It
is also commendable to note that this government will be encouraging a
reduction in tax rates for smaller businesses as well as subsidised funding
for priority sectors such as agriculture and solid minerals.”
However,
given the continuous fall in crude oil prices, he noted that $38 on which the
budget is predicated has become grossly presumptuous as oil now sells for
about $32 in international market.
“I
still believe that PMB should have announced the removal of fuel subsidy rather
than ordering the price to still be N87 per litre. This is one albatross the
country can ill-afford to continue,” he added.
A team of
analysts in an investment and research banking firm, Afrinvest West Africa,
led by the head, Mr. Ayodeji Ebo,
affirmed that the planned fiscal expansion on the Medium Term Expenditure Framework
(MTEF) of the Federal Government may be positive for banks and other company
earnings in 2016.
The MTEF
highlights the federal government’s revenue and expenditure framework for the
next three fiscal years and provides a sketchy view of the policy direction of
the fiscal arm of the government. They stated that the MTEF would be a sigh of
relief from the one-sided drive of the economy embarked on by the monetary
authority since the inception of the new government.
According to
the investment banking firm, federal government’s policy thrust is centred on
implementation of policies to ensure fiscal stability, improve fiscal non-oil
revenue, lower inflation rate and ensure real sector growth. It stated that
the projected doubling of domestic borrowing (mostly by issuance of bond
instruments) might likely trigger an upward re-pricing of yields in the fixed
income market in 2016 given the anticipated increase in supply of fixed income
instruments.
President of
the Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs, commenting on the budget said it looks quite
promising, stressing its strong emphasis on infrastructure growth which shows
that the future of manufacturing is bright.
“We
believe that it is good, as infrastructure is key for the real sector, as the
industries would be able to thrive, and when this happens, they would be able
to create jobs,” he said.
The MAN
President also noted that the importance placed on agriculture and mineral
resources is likewise commendable, bearing in mind the country’s policy on
backward integration. According to him, raising the profile of the
agricultural and mineral resources sectors would also be beneficial to the
manufacturing sector, who could now be able to source its raw materials
locally.
He said: “This would not only boost the sector, but would also aid the
President’s project on job creation, as there would be jobs in the
manufacturing sector, agriculture, with all its value chain and the mineral
resources sector. In addition it would also reduce the pressure on the foreign
exchange as the companies would now get more of their raw materials locally.”
The Lagos
Chamber of Commerce and Industry (LCCI), in the same vein noted that despite
the fact that the details of the budget are yet to be released, the highlights
are instructive.
The Director
General of the Chamber, Muda Yusuf,
commended the President for prioritizing spending in favour of capital
projects.
The Chamber
said that the capital allocation moved up to 30% of total allocation as against
15% in the previous budget mean better focus on the current high and
disturbing deficit in the nation’s infrastructure, stating that infrastructure
is critical for job creation and economic diversification.
The Director
General considered the sectoral allocation as a good measure to diversify the
economy and create jobs, but said members of the OPS would wait for the details
and implementation framework to assess the sustainability of the various propositions
and make informed commentary.
The Chamber
however considered the debt service provision of N1.3 trillion as quite high.
“The
provision for capital budget is N1.8 trillion while the sum of N1.3 trillion is
earmarked for debt service. This is 72 per cent of the capital budget
allocation. We need to worry about the amount of resources we are committing to
debt service, especially when there is very little to show for these debts. Of
course, outstanding obligations must be settled, but going forward there is
needed to review our debt management strategy to reduce the burden of debt
service on the economy”, Yusuf said.
He also
called for the review of the exchange rate assumption of N197 to the dollar,
which he said is not in tune with the current realities of the foreign exchange
market.
“It
will understate the revenue accruable form the foreign exchange surplus form
the CBN to the federation account”, he warned.
Yusuf said
the promise by the President that the current forex policies and exchange
controls of the CBN will be reviewed is laudable, adding that such review was
long overdue bearing in mind the dislocations that the exchange controls has
caused many investors, foreign and domestic.
On the
budget stance on the petroleum sector, the LCCI said the President alluded to
the petroleum downstream sector in a rather ambiguous manner. He said: “There was no clear pronouncement on whether the petroleum
downstream sector will be deregulated or not. There was a mention of a review
of pricing template by the PPPRA. We await the details of the template and what
implications it will have for the private investors in the petroleum downstream
sector. I will reiterate that the downstream sector of the petroleum industry be
fully deregulated in the overall interest of the Nigerian economy and the
change agenda of the present administration.”
Managing
Director of Managed Healthcare Services Limited (MHS), Dr. Patrick Korie, while commenting on the budget said that a well
upgraded healthcare system and well equipped facilities with robust infrastructure
will put an end to medical tourism in the country.
He praised
the federal government for allocating N221.7 billion to the health sector
saying this will create access to drugs, medical facilities and right personnel
for the health sector. According to him, factors like inadequate medical
equipments and right personnel, and also inadequate infrastructures have
greatly contributed to the abysmal state of Nigeria’s healthcare sector, and
it has in turn made the people lose confidence in the sector. He was optimistic
that if the right infrastructure, together with the right healthcare personnel
and adequate drugs are provided, people will have faith and confidence in
public health institutions and structures, which would enable them to receive
treatment.
He said
having a physical structure called health care facilities does not
automatically translate to medical healthcare facilities. He added: “The
healthcare industry want health care facilities from primary to tertiary level
that are functional and what it takes to be functional is to have the necessary
equipments, the manpower and environment to ensure that they work. If you have
the equipments, the manpower in place and you don’t have the necessary
environment to make them work; it will still not work.
So, these
things once they are put in place within the budget to ensure that when people
walk into a hospital, require any treatment, they get that treatment that is
comparable to what is optioned in any other part of the world. So
infrastructure development is very important,” he added. (Sun)
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