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Economy: Nigerians should brace up for hard times – Chizea

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Macroeconomic stability, by Boniface Chizea

Seasoned economist and CEO of BIC Consultancy Service, Dr. Boniface Chizea has pointed out that that hard times awaits Nigeria as according to him, the country’s revenue shortfall which has warranted cut down in capital votes in 2020 budget estimates means that there would be little to stimulate the economy and it would therefore be unrealistic to expect poverty reduction next year.

Chizea noted that the N2.45 trillion allocation for debt service in 2020 continues to highlight the country’s fiscal dilemma, even as he regretted that capital vote in the Budget has been reduced by N1.3 trillion to N2.05 trillion as against N3.18 trillion for 2019.

“Yesterday (Tuesday) the Minister of Finace, Budget and Planning presented the draft proposals of the Medium Term Expenditure Framework (MTEF) to critical stakeholders in Abuja,” he said.

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“Again since we communicate with a broader audience, it might be necessary to shed some light on the meaning of MTEF. This is a Prudential requirement of the Fiscal Responsibility Act which is essentially a three year rolling plan hence 2020/2022 aimed at ensuring that we have a focus and agreed direction as we prepare the Annual Budgets and most importantly to imbue the process with the badly needed discipline of staying the course in our budget preparation and execution which hopefully should minimise the incidences of abandoned projects.”

“This document is programmed by the Act to be presented to the National Assembly (NA) by the end of August for a budget year expected to commence on the first day of January. This document should receive the input and approval of the NA before the budget is prepared and presented as it gives needed direction and content to the Budget.

“So we salute the fiscal authorities for keeping fidelity to this requirement of the Act even as it is correct to note that we are now a wee bit behind schedule. The indications are that as a country we are in for hard times. In the first place the Budget size at N9.78 trillion represents a reduction of N360 billion from the Budget size of N10.06 trillion for 2019.

“The critical index of price of oil used for the Budget is 55 dollars a barrel (dpb) compared to 60 dollars that was assumed for the 2019 Budget. This is realistic as the current price of oil is below the benchmark 60 dpb particularly as there is the technically informed expectation that production from non OPEC producers is targeted to increase by about 2 mbd next fiscal year.

“The capital vote in the Budget has been reduced by N1.3 trillion to N2.05 trillion as against N3.18 trillion for 2019. One of the major challenges we have confronted with our budgeting as an instrument to catalyse rapid growth and development of the economy is the relatively non commensurate allocation for capital expenditure which even then is hobbled with challenges of non timely releases for execution of capital projects which only have the potential to account for growth in employment opportunities. So now that we don’t have a choice but to take a cut on this budget, it is stating the obvious to note that it would be unrealistic to expect poverty reduction next year.

“The allocation for debt service at N2.45 trillion in 2020 continues to highlight the dilemma confronting the fiscal authorities as they attempt to manage the economy. To put this dilemma in context, we must recall that currently we are expected to allocate 60 per cent of annual revenue for debt servicing. Therefore the allocation this year is set to increase except we are prepared to incur more default and further complicate the debt situation.

“The challenge which we must confront is to strive for private sector led economy by providing the much sought after macroeconomic stability. Last year we rolled out the drums to celebrate the establishment of the Ministry of Budget and Planning. We commended the Executive on that initiative since the Plan can only be implemented through the instrumentality of the budget and realistically speaking the fact remains that the budget is an annual plan.

“May be there were experiential challenges with this arrangement hence the reversal. But there is definitely overload as it is today! Not most of us realise that NDIC, NEXIM Bank, Securities and Exchange Commission, Debt Management Office of the Federation probably some other agencies all report to the Minister of Finance.

“We hope also that the culture of half yearly briefing on Budget performance will be reinstituted as it helps to keep eyes on the ball. At this juncture, I wish to recalled that memorable article by late Tai Solarin as a columnist for Tribune Newspapers; ” May your Road be Rough.” We are most certainly in for rough times ahead which we have been informed does not kill. But we must deploy our creative ingenuity if we must weather the gathering storm.”

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