The full and diligent implementation of the 2016 budget would help the federal government achieve recovery of slowing economic growth, to forestall the remote possibility of recession, Minister of Finance, Kemi Adeosun, said on Thursday.
The minister said the focus of the Muhammadu Buhari administration was to stimulate the economy and achieve real gross domestic product, GDP, growth rate of 4.2 per cent through the 2016 budget.
Mrs. Adeosun said the present administration was equally determined to reduce the cost of governance, extract efficiencies in public service and enhance revenue collections.
“The administration plans to increase government expenditure on infrastructure, namely transport, roads, housing and power with a view to achieving a substantial increase in gross capital formation and to fund the budget deficit and the negative trade balance in a cost effective and efficient manner,” the minister said.
“This will keep the government within the acceptable debt sustainable ratio expected of most emerging economies.”
The minister who presented a paper titled: ‘Nigeria’s Economy: The Road to Recovery’, noted the impact of sliding crude oil prices on the Nigerian economy, saying government’s main macroeconomic objective in 2016 was to combine an expenditure-led growth strategy with a stimulant approach based on injections of more efficiently collected revenues and blocking of leakages.
“The combination of these fiscal injections will have a catalytic multiplier effect on the GDP growth rate,” she explained.
With budget deficit at N2.2 trillion, or 2.16 per cent of GDP based on an estimated benchmark crude oil price of $38 per barrel, the minister said present realities and dynamics in the global oil markets, calls for preparation for further decline in oil prices.
She said the government has developed a “shadow budgeting process with tactical responses to build in the flexibility in the country’s borrowing needs”.
Mrs. Adeosun said the present administration would go ahead with its robust commitments on infrastructure development in spite of dwindling crude oil price.
“For an economy dependent on crude oil for 70 per cent of government revenues, the 12-year low in oil prices, the downward revisions to the global outlook and the re-ordering of the global economy, are ominous signs,” she said.
“For years, oil prices were at historic highs, and at US$114 per barrel, we spent, government spent; people spent and our economy seemingly ‘grew’. But, this growth masked much vulnerability.
“There were consistent warnings about the volatility of oil prices and the need to diversify our economy to support our huge population. Whilst we paid lip service to this need and extolled the potentials of many sectors, we did not plan adequately to ensure that we worked towards this.”
She said as long as oil was available and the dollars flowed, the country kept spending, pointing out that even when prices fell, as in 2008 during the global slowdown, the spending continued, through the cash reserves in the hope of a future oil price recovery.
Now crude oil prices have crashed, and the outlook showed that prices would be “lower for longer”, she said Nigerians have been compelled to critically evaluate their expenditure on oil proceeds.