Buhari’s 2017 budget can’t end recession – Economist

President Muhammadu Buhari presenting the 2017 Budget
President Muhammadu Buhari presenting the 2017 Budget

An economist has questioned President Muhammadu Buhari’s optimism that his 2017 federal ‘Budget of Recovery & Growth’ would bring an end to the current economic recession in the country.

The president said at the opening of the induction course for Nigerian career ambassadors-designate in Abuja that he was optimistic the current economic recession would end in 2017.

He based his confidence on his administration’s reform policies and measures outlined in his 2017 budget speech to the National Assembly to turn around the country’s macroeconomic environment.

During the presentation of the details of the budget, the Minister of Budget and National Planning, Udoma Udoma, equally expressed similar sentiments, saying the budget would help stimulate and attract investments to lift the economy out of the current recession.

But an Abuja-based development economist, who is also the chief executive of Pan-Africa Development Corporation, Odilim Enwegbara, said the budget presented last week to the National Assembly for consideration and approval would hardly achieve that goal during the year.

“If Mr. President hopes to grow the economy out of recession in 2017, this budget is not the one to do it,” Mr. Enwegbara said.

“This is because it is not an expansionary budget, but also that it is not pro-investment, pro-growth, and pro-jobs. It is not enough to expect it to perform such a magic.”

Although Mr. Enwegbara agreed the recession was not a “sudden accident”, he said what it needs urgently is serious restructuring and overhauling.

This, he said, should come with unconventional policies, designed to permanently put the economy on a path of sustainable growth.

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.”

Nigeria’s budget to gross domestic product ratio, according to him, 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, he 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.

“That is why the 2017, with all the good intentions, rather than being an expansionary budget, 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,” he explained.

He said government was not doing enough to raise revenues from taxes, as the country’s tax policy requires urgent overhaul to aggressively boost government tax revenues.

The country’s tax-to-GDP ratio, he pointed out, 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.

“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 asked.

Mr. Enwegbara 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 said government needed to consider other ways to solve the problem.

He also criticised the proposed $42.50 per barrel crude oil benchmark in the budget, arguing that in a time of recession, government should maximise all avenues to increase its revenue.

“The benchmark oil price should be increased to $50 per barrel considering that oil price in 2017 is expected to rise as high as $65 per barrel,” he said.


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  • Bello

    Very excellent analysis. This is what we should be hearing from economists who fully understand the workings of the economy, not the kind of praise-singing so-called economists who usually say things to make government of the day feel happy.

  • Muhammad

    The excellence and usefulness of the analysis hangs on Gifted Pro-expansionary Nigerians .
    Unfortunately the few are over shadowed by those who can not explain or justify their gifts .
    Anti corruption is therefore the right ethical base for discovering the gifted , because those who have overshadowed are the real cause of disorienting the economy . Ethics or Science or both make economics a social science and not just logic .

  • Kekedu

    Dem don come again with their voodoo economics. Borrowing billions just because South Africa did it is a recipe for ‘expansionary’ inflation and corruption. You need to go at the pace that your local situation can take otherwise you bite more than you can chew with the loaned money only ending in private pockets. Stop throwing useless stats to support warped reasoning.
    So you want oil benchmark increased to $50/barrel just because someone said it will get to $65/barrel next year? The same people that did not see the $30/barrel coming? Some expert indeed!

    • Bello

      Why is it that people like you just pick your pens criticise? Is it because most of you have become internal colonizers? U prefer the status quo because it benefits you. Rather than call his excellent analysis voodoo economics, why not you go further to tell us your suggested way out?

      • Kekedu

        Bello, please feel free to support the writer. My views should be clear enough: I do not agree with his ‘borrowing spree’ or raising of oil benchmark price submissions. I won’t bother to respond to your ‘internal colonisers’ comment.

        • Bello

          No problem. But, how do you want this country to reduce its growing infrastructure gap? We can’t raise taxes, we can’t borrow, so what magic can you prove? Odilim has proposed his; you can ignore whatever you want to ignore but…don’t come here and become an empty barrel.

          • Kekedu

            Bello, I thought you won’t go to new low. I can see you don’t even understand what your mentor wrote not to talk of the alternatives. Let me try and help you: you can raise taxes but you don’t need to since the bulk of the current taxes have not been collected that’s why FIRS introduced the program of self-report to encourage voluntary tax payment before going on the offensive. Lagos is a good example. Secondly, you can borrow and we are borrowing to part-finance the 2017 budget. What you and your mentor want is for us to raise our debt to GDP ratio from 14% to 44% just because South Africa has that level of debt. That, I’m against as well as his $50/barrel benchmark. You and your mentor should go and read the debt servicing element (foreign and domestic) of the 2017 budget before coming here with your more debt voodoo. You just clap out of ignorance but that’s fine; you’re entitled to that but don’t come here to force someone else’s ideas on me when even you the chief promoter don’t understand the fundamentals.

  • With all he said, i bet if Mr. Enwegbara is to serve as 1 DAY President of Nigeria at this current situation, HE WILL COLAPS, his analysis was good even though is ANALYSIS OF COMPARISON and also he didn’t take some factors into consideration. – Sidi Abdurrahman

    • Höly Wähala

      Factors like what? Propose your own ideas for getting us out of the economic mess as clearly, the status quo is untenable, share your views or shut the heck up!

      • Factors like you, and please whenever you are talking (bragging) publicly show some manners, as i recently checked your attitude towards replying comments on social media through DISQUS i realise you have lost your way (attitude). Peace

        • Höly Wähala

          If you consider, “shut the heck up” an insult then, you need proper education away from Almagiri empowerment education. You avoided the crux of my comment to pander about manners which is the last thing I will have to learn from an arid aboki with dusty education like your ignoble self… I said propose alternative ideas to the authors and quit pandering to imaginery audience, if the man’s ideas are bologne to you, what are yours? Stuppid clown indeed you are…

  • Ohnigeria Godsavenigeria

    Nigeria is blessed with abundant human and material resources enough to take Nigeria to greatest height, our problems arose because buhari is obsessed with the doctrine of cheating, marginalization, bias and ethnic, religious, tribal bigotry which have not allowed him to harness the best of Human resources that God have blessed Nigerian nation with. Buhari is a bad chapter in Nigeria book of chronicles.

    • ??????questo

      WHAT IS THE PURPOSE OF BEING BLESSED WITH ABUNDANT NATURAL RESOURCES
      IF YOU HAVE NO THINKING PRESIDENT TO DO ANYTHING WITH IT, WHAT’S THE POINT?

  • real

    2016 and 2017 budget are both jokes. what do you expect from a president that doesn’t have a clue what he is doing or allowing the right people to do their jobs. When you in a recession, the government want to spend money to reflate the economy. And the best place for the government to spend that money is on infrastructure and education. unfortunately and lucky for Nigeria we have infrastructure problem that we can spend money on solving. when America was in recession, the government spend billions on infrastructure, on education, healthcare and tax reduction. Nigeria has a few good things going for it to help come out of this recession. we have cheap labor force and capacity. we have the necessary infrastructure to update and build, and we have both the natural resources and financial resources to do this. The one think we lack is leadership and this president is not it.