A civil society group, Centre for Social Justice, CENSOJ, on Monday described the Nigerian government’s projections in the Medium Term Expenditure Framework, MTEF, and the Fiscal Strategy Paper, FSP, as “unrealistic, overly optimistic and unachievable.”
In its preliminary response to fiscal estimates by the Minister of Budget and National Planning, Udoma Udoma, the group asked the federal government to reconsider some of its economic policies to attract more foreign investors and unlock available local capital.
The minister has been meeting with critical interest groups to seek their inputs on the draft MTEF 2018-2020 for next year’s budget.
The minister said the federal government was proposing an expenditure of about N7.9 trillion in 2018 based on key parameters, including crude oil production of 2.3 million barrels per day; oil benchmark price at $45; increase in fiscal deficit to N2.77 trillion; increased revenue and 4.8 per cent growth in the economy.
But the Lead director of the group, Eze Onyekpere, said the government’s estimates were unrealistic, over optimistic and unachievable.
Mr. Onyekpere said the proposed total budget outlay of N7.9 trillion, which is about six per cent higher than the 2017 appropriation, would translate to about $25.85 billion.
When divided per capita over Nigeria’s population of over 180 million people, Mr. Onyekpere said the budget would come to a paltry N43,888 per Nigerian.
The group said it would have accepted the N7.9 trillion budget as a welcome development if government was “very sure of the sources of its financing, or if we are not banking on a good dose of deficit financing.”
He criticised the 2.3 million barrels per day oil production capacity and benchmark, saying it demonstrates the country’s continued focus on oil rents.
Although he said the production volume was an increase from the 2.2 million approved in the 2017 budget, Mr. Onyekpere noted that with the proposed cuts by the Organisation of Petroleum Exporting Countries, OPEC, the capacity appeared ambitious and unrealistic.
“Even if we have the capacity to produce this volume, the dynamics of the international oil market may not likely allow us to produce this much,” he said.
Dismissing the oil benchmark price at $45 as overly optimistic, he drew attention to developments in technology and climate change dynamics, which point to a progressive reduction in demand for crude oil over the coming years.
Mr. Onyekpere was also not comfortable with government’s stance on fiscal deficit, expected to rise to N2.77 trillion in 2018, from the current N2.35 trillion in 2017.
He said the Minister’s assurances of government’s commitment to maintain the deficit and debts within sustainable limits, while gradually restructuring debt financing in favour of foreign financing to lower debt service burden and free up more fiscal space for the private sector, was contradictory.
“More foreign borrowing at a time of currency volatility, when exports are falling, may not be the best option in borrowing,” he noted.
“For the first half of the year 2017, the Monetary Policy Committee of the Central Bank of Nigeria reported in its July meeting that FGN incurred a deficit financing of N2.51trillion. Prorating with this dynamic will create a deficit in excess of N5 trillion at the end of the year 2017.
“This does not appear sustainable in the short, medium to the long term. Our debt is growing in geometric proportions without infrastructure and regenerative capital investments to show for it as demanded in the Fiscal Responsibility Act,” he said.
He also faulted the increment in expected revenue, saying at a time some revenues that were due in the previous year (2016) underperformed, the expectation was another exercise in unnecessary optimism.
“If the expected revenues had been coming in as projected in 2017, the government would not have created the N2.51 trillion deficit financing,” he said.
On growth rate, the CENSOJ director said with the country still in recession in the third quarter of 2017, the plan to achieve 4.8 per cent growth in 2018 would be a “dramatic and quantum leap which the economy has not been sufficiently primed to do.”
Mr. Onyekpere said the group was convinced the country would need more than the proposed figure to meet its pressing developmental needs, particularly in infrastructure, in view of the dearth of investors and public-private partnerships.
“Nigeria needs to unlock her potentials and drive the economy away from its crude oil dependence through a process of evidence led restructuring that allows the states or groups of states to take targeted, concrete and calculated steps to improve infrastructure, ease of doing business, access to credit, and land reforms,” he said.