A Cut Above Growth - Can N9.12trn Budget Do The Thrilling?

Proshare

Friday, June 29, 2018 11:40 AM /Temitope Omosuyi 

More than ever, the Nigerian economy needs substantial fiscal stimulus to invalidates the prognoses of the IMF and other agencies that her citizens will be trapped in poverty over the next decade with high unemployment rate, increase in economic susceptibility to exogenous vagaries on the back of lackluster growth, skewed growth components, capacity under-utilization, infrastructural deficit and policy misalignment between the fiscal and monetary authorities. It is, however, expected that the 2018 budget will deliver the desired quantum-leap growth rate; at least decline in the rate of unemployment and sustainable economic growth to keep per capita income afloat as well as purchasing power of an average Nigerian. 

On 20th of June 2018, the president opened another phase of the ERGP execution by assenting to a N9.12trn budget for the fiscal year. The budget was earlier presented to the National Assembly on November 2017 but was reviewed upward by 5.9% from N8.612trn in favor of certain projects the National Assembly felt were expedient for growth stimulus while proposed expenses on some projects were expunged. The President, however, complained that 4700 strategic projects were replaced with 6403 projects initiated by the Assembly.
 

Areas Affected By the Cuts

The total expenditure in the areas listed below was reduced by 18.3% from N355.02bn to N289.97bn. Expenses on UN building, terminal Airport at Enugu and Federal Ministry of Health were mostly reduced while Federal Ministry of Industry, Trade and Investments, National & Regional strategic Projects and service wide vote were the least.

 
Proshare Nigeria Pvt. Ltd.

Source: Ministry of Budget And National Planning(2018)

 
Proshare Nigeria Pvt. Ltd.

Source: Ministry of Budget& National Planning (2018), Proshare Research

 

What Countries Have For Its Citizens?

Nigeria has the lowest share of Fiscal value per person compared with other MINT countries and South Africa.

 

Countries

Budget($bn)

Population(mn)

Pop - Budget Share

Mexico

276.96

130.75

2.12

South Africa

110.44

57.389

1.92

Indonesia

140.44

266.78

0.53

Turkey

17.28

81.91

0.21

Nigeria

29.967

195.44

0.15

Source: Reuters(2018), United Nations, Proshare Research

 

What Growth Rate Can the Budget Deliver?

We envisage a 0.7% economic growth rate in 2018 premised on the stipulated oil price benchmark, inflation rate, crude oil output and exchange rate in the fiscal plan cum election year slack effect on growth owning to economic uncertainties. Besides, we are conscious of the fact that an improvement in oil price and other economic variables could lead to further improvement or increase in the growth rate envisaged. 
 

Fiscal Deficit or Deficit in Living Standard

The President emphasized that 2018 budget seeks to close fiscal deficit gap compare to the previous period by keeping borrowing at manageable threshold. Apparently, this fiscal strategy is desirable for prudency. On the flip side, effort should be intensified to reduce the deficit in living standard by strategically positioning the economy to generate more revenues from domestic productivity rather than one-sided quest to achieve a balanced budget.
 

2018  Budget: Examples of Projects Affected by Cuts by the National Assembly as contained in the President's speech                                                          

 Proshare Nigeria Pvt. Ltd.

Source: Ministry of Budget And National Planning


 Proshare Nigeria Pvt. Ltd.

 

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