FG Begins Review of 2017 Budget, Excited by GDP Report

Budget 2017 year on wood cube with pencil and clock top view on wood table,New year business concept.Budget 2017 year on wood cube with pencil and clock top view on wood table,New year business concept.
  • FG Begins Review of 2017 Budget, Excited by GDP Report

Two weeks after the National Assembly transmitted the 2017 budget to the executive, the federal government wednesday said it has commenced the review and assessment of the budget passed by the legislature.

Making this disclosure while briefing journalists at the end of the weekly Federal Executive Council (FEC) meeting in the Presidential Villa, Abuja, the Minister of Budget and National Planning, Senator Udoma Udo Udoma, said ministers were currently reviewing and analysing the budget.

Udoma, who said the government took cognisance of the expiration of the lifespan of 2016 budget this month, added that when the review is eventually completed, a decision on the budget would be taken.

Udoma also reported that the council was excited with the Gross Domestic Product (GDP) report of the National Bureau of Statistics (NBS), which had revealed on Tuesday that the country’s economic contraction decelerated in the first quarter of 2017.

He said FEC was excited because the reported also revealed that the manufacturing sector grew by 1.36 per cent, while agriculture grew by 3.9 per cent during the quarter under review.

Nigeria’s manufacturing sector, for four consecutive quarters, had contracted.

According to Udoma, the GDP results on a sectoral basis for the first quarter of the year were the best that had been recorded in the last four quarters, explaining that the council was also excited because it showed that the government was on the right trajectory.

“One of the things that we discussed in council were the GDP results for the first quarter which were released yesterday (Tuesday) by the National Bureau of Statistics.

“We found the results for the first quarter GDP performance encouraging, even though we are still in a recession but we found it very encouraging.

“It’s the best result we’ve had in the last three or four quarters and it’s a sign that we are moving out of the recession. In particular, we were encouraged by manufacturing that grew by 1.36 per cent, whereas previously, the sector had been contracting. But now it is growing.

“Of course, agriculture is growing at 3.9 per cent; in mining and other metals, we are also growing in those areas, but we realised that we still have to work very hard.

“We are committed to continuing with the economic growth and recovery plan. We also believe that with the interventions we are making and all the steps we are taking, we are in the right direction. So we are encouraged by the economic trajectory,” Udoma said.

Also briefing the press, the Minister of Labour and Employment, Dr. Chris Ngige said council approved the constitution of a National Minimum Wage Committee to be made up of 29 members drawn from the federal and state governments, labour federations and employers’ associations.

“On May 11, 2016, there was deregulation of the oil and gas downstream sector in Nigeria and that resulted in an increase in the price of petrol. The labour unions kicked and resolved that government should put in place mechanisms that would ensure that we don’t have further increases. That was the reason the board of the Petroleum Products Price Regulatory Agency (PPPRA) was put in place.

“Also, labour asked for a review of the minimum wage of workers to enhance their purchasing power. Prior to that, they had asked for N56,000 as minimum wage.

“Thirdly, they said they wanted palliatives put in place to cushion the effects of the increase in the price of petrol. So the government put in place a committee.

“That committee finished its work on 21st of April and handed it to the Secretary to the Government of the Federation (SGF).

“Today at council, I presented the report with the recommendations therein. I am happy to let you know that government approved the National Minimum Wage Committee comprising 29 persons with a chairman and secretary.

“For the composition of the committee, the federal government will contribute five persons from the public sector, while state governors who are major stakeholders on government side will contribute six governors – one from each geopolitical zone.

“Labour federations will present eight persons and the organised employers’ associations represented by NECA, Manufacturing Association of Nigeria (MAN), National Association of Chambers of Commerce Industry, Mines and Agriculture (NACCIMA) and Small and Medium Enterprises Association (SMEA), will contribute nine persons. All together, you have 29 members,” Ngige stated.

Also in his briefing, the Minister of Interior, Major-General Ibrahim Dambazau said council reviewed the poor state of prisons in Nigeria and found that the facilities are congested by 70 per cent of prisoners awaiting trial, while only 30 per cent of them had been convicted, of which 10 per cent have death sentences.

According to him, the situation constitutes an impediment to rehabilitation of inmates, feeding and provision of amenities in the prisons.

He said the council resolved to possibly pardon prisoners who had been convicted for less than 10 years and commute the death sentences to life imprisonment.

“Today, council looked at the situation in Nigerian prisons including the conditions of inmates. This came out as a result of council’s directive a few weeks back. We looked at the criminal justice administration and some of the things we briefed the council about were on the condition of the prisons.

“Most of them are old. They are dilapidated and they lack the platform for rehabilitation of prisoners. So the major problems in terms of congestion or overcrowding, is the issue of awaiting trial inmates who constitute the bulk of 70 per cent. Thirty per cent are convicted, of which about 10 per cent of them were sentenced to death.

“This causes a lot of strain in terms of rehabilitation, feeding and in terms of provision of amenities.

“So we made suggestions about steps involving those that can be released, looking at the prerogative of mercy or state pardon, those who are condemned and who had stayed for 10 years in prison, whether those convictions can be commuted to life imprisonment, and those who have served for 10 years can have some relief. These were some of the suggestions considered,” Dambazau stated.

Debt-to-GDP Ratio

Meanwhile, the International Monetary Fund (IMF) has stated that Nigeria’s debt as a percentage of GDP could hit 24.1 per cent by 2018.

At the end of 2015, the nation’s debt-to-GDP ratio stood at 12.1 per cent, then climbed to 18.6 per cent at the close of the 2016 fiscal year.

Should it meet the IMF mark of 24.1 per cent by 2018, this would mean that the nation’s debt as a fraction of GDP would have doubled within a space of four years.

The IMF, in its World Economic and Financial Surveys, released yesterday, equally forecast that Nigeria’s present level of indebtedness would have peaked at 23.3 per cent of GDP by the end of 2017.

The Debt Management Office (DMO) had put Nigeria’s total debt stock as at December 31, 2016 at $57.39 billion (N17.36 trillion).

Of this amount, the external debt component stood at $11.41 billion (N3.48 trillion), while domestic debt stock stood at $45.98 billion (N13.88 trillion).

Nigeria’s debt consists of domestic and foreign debts owed by the federal and sub-national governments.

While the nation’s debt-to-GDP ratio is considered one of the lowest in Africa, there is growing apprehension over the country’s debt accumulation in recent years.

The World Bank also recently expressed concern over the ratio of debt as a percentage of revenue.

The Bank had argued that reduced revenue earnings might render the country’s debt unsustainable.

A total of N1.84 trillion was provided in the 2017 budget for debt service, while N2.35 trillion was projected as borrowings. Similarly, the 2016 budget projected borrowings of N1.84 trillion to finance the deficit.

According to the Senior Economist at the World Bank office in Nigeria, Yue Man Lee, for the nation’s interest payment to remain sustainable, the country has to boost its revenue base or work towards balancing the budget.

“Nigeria’s debt-to-GDP ratio is relatively low. What is of concern is the ratio of interest payment relative to revenue. That is what is concerning. This reflects the fact that there has been a massive drop in revenue because of the drop in oil revenue.

“There are two main strategies to reduce this debt burden. One is to increase revenue. Here, in order not to be vulnerable to the volatility of the oil sector, the critical thing is to increase non-oil revenue – VAT, income taxes and excise outside of oil.

“This is something we have been discussing with the government,” Lee said.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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