The year 2019 kicked off with high hopes by the citizenry that the Federal Government will make better impact on their lives of this year and that the economy will significantly perform better than that of last year.
Unfortunately, as the country approaches the general elections, the Federal Government appears to have abandoned the economy for politics as the economy is, without any iota of doubt, on a weaker keel and there are palpable fears that despite the improvement in growth rate in the third quarter of 2018, the economy may slip into a slowdown. Only recently, the Central Bank of Nigeria alerted nation that another recession could be looming if efforts were not made by the government to achieve significant growth in the economy.
The CBN at its recent Monetary Policy Committee meeting also cautioned the Federal Government against continuous external borrowing. It said the Federal Government’s debt level could be fast approaching the 2005 Paris Club level. Coming early in the year when the Federal Government has not committed itself to any new foreign debt, the caution could not have come at a better
time.
Also, there are some fundamental problems with the 2019 budget which must be addressed by the Federal Government. For example, the Federal Government’s 2019 budget is predicated on a crude oil benchmark of $60 per barrel. Unfortunately, crude oil is trading at a price below the benchmark price and, if it persists, could rubbish the foundation of the budget. Falling oil prices is a threat to budget implementation. Therefore the authorities concerned would need to peg the budget at an appropriate
benchmark.
In the same vein, delay in budget implementation has been identified as a major reason for the country’s relapse to recession in the past. A situation, where three months after presidential assent and about three months to the end of 2018, there was no budget implementation is detrimental to the growth of the economy. We therefore implore whosoever wins the presidential election to quickly hit the ground running after the elections to implement the
budget.
We also note that the revenue targets of the Federal Government for the current year are quite unrealistic; its borrowing level is too high, while subsidy of Premium Motor Spirit is untenable at a time like this when the economy is almost on its belly. In addition, the minimum wage when it comes on stream will put more pressure on government’s finances. These all the more makes it mandatory for whosoever wins the Presidential election to be ready to move swiftly and speedily on the economy.
It is also sad to note that in spite of the natural endowments of this country, the government cannot adequately manage the population of the nation which is growing more than twice the growth of the economy. Consequently, the government has consigned well over 100 million of the country’s population into poverty. The country is also reeling under a 35 per cent unemployment rate among the youth. Added to this is federal government’s excruciating debt profile which has doubled within the last three years from 11 to 22 trillion Naira resulting in an unsustainable 55 per cent of federal government’s revenues going towards debt service. All these point to the fact that the Economic Recovery and Growth Plan of the government is not working and must be amended for better economic growth of the country.
We, however, commend the Federal Government’s plan to broaden the base of the Value Added Tax from this budget year as this is a step in the right direction. At the five per cent Nigeria’s VAT is the one of the lowest in the world and for a country that spends much of its income service loans, there is a need for it to, among others, raise VAT. There is no doubting the fact that increased tax collection will help in reducing pressure on government for funds to manage its debts and the economy.
Going forward, 2019 is a year of multiple challenges for the Federal Government and for the country as a whole. There would be less foreign loans to finance infrastructure projects. So, the government must be ready to embrace privatisation and concessioning of some of its assets and use funds so generated from the privatisation and concessioning to finance its fiscal
challenges. Also, with a new minimum wage a bigger monthly pay out on salaries is expected. Thus, the Federal Government must take a look at the Oronsanye report with a view to right sizing the civil service and make it more
efficient.
Now that President Muhammadu Buhari is seriously battling for
his re-election, government’s economic managers must take note of the predicament facing the economy and put in
place appropriate measures that will significantly help the economy to grow and also achieve inclusive
growth.
