Despite criticisms of government borrowings, Nigeria’s fiscal deficit is still well within the three per cent (3%) limit and the government is keeping very tight control on the size of the budget to make sure the fiscal deficit remains within the 3% threshold.
The 2017 breakdown of the budget revealed developments which affected the realization of projected government revenue last year, however this administration is working hard to ensure increase in revenues to fund the 2017 budget.
According to Senator Udoma Udo Udoma, the Minister of Budget and National Planning in terms of the Budget, the government is making strenuous efforts to find the resources required, informed that there are challenges to the revenue generation efforts of the government.
But he has indicated that government will work hard to increase revenues so as to be able to fund the Budget.
Senator Udoma also said that agencies, particularly the Federal Inland Revenue Service(FIRS) and Customs, would improve their efficiencies and broaden their reach so as to achieve the targets set for them in the 2017 Budget”, he explained.
Be that as it may, the National Bureau of Statistics (NBS) has said that the Gross Domestic Product (GDP) by expenditure and income in the third quarter of 2016 declined by 2.4 per cent.
The NBS in its ‘Nigerian Gross Domestic Product Report (Expenditure and Income approach)’, said market price GDP declined year on year by 2.4 per cent in the third quarter of 2016, which was the lowest year on year growth rate in the rebased period.
According to the report, Household consumption was the largest driver of year on year growth in current price GDP in the third quarter of 2016 which was driven by an increase in prices.
It stated that the National Disposable Income recorded stronger growth than GDP in the third quarter of 2016, both in real and nominal term which it said was largely as a result of Other Current Transfers (net) which increased substantially year on year.
It said, “Market price GDP declined slightly more in real terms than basic price GDP, by 2.4 per cent compared with 2.3 per cent, in the third quarter of 2016.
“This was as a result of a larger decline in net taxes on products, of five per cent, which is the difference between the two measures.
“The GDP component to record the lowest growth rate was General Government consumption; attacks on oil pipelines affected oil output, which in turn impacted on government revenues, but weaker economic conditions also led to lower than anticipated tax revenue. Investment (Gross Fixed Capital Formation) also declined substantially
“In the third quarter of 2016, real year on year growth in household consumption deteriorated, from a (revised) decline of -0.7per cent, to a decline of two per cent. This reflects the continuing difficulties that consumers have faced in recent quarters, with rising unemployment, and high inflation eroding purchasing power.
“Unemployment rose to 13.9per cent in the third quarter of 2016, and by September year on year inflation in the Consumer Price Index (CPI) had risen to 17.9per cent. However, the higher prices resulted in year on year growth in nominal consumption remaining positive,” the report stated.
Senator Udoma, however, added that government will strive to maximize the revenues it can generate from the oil and gas sector as it is clear that the foreign exchange generated from the sector is critical for government’s plans to diversify to the non-oil sectors.
In this regard, the Federal Government’s plan to attract investment in modular refineries as part of efforts to boost local refining capacity has started gaining momentum with an Indonesian firm, PT Intim Perkasa Nigeria Ltd, a subsidiary of PT Intim Perkasa, Indonesia, indicating interest to build a refinery in Nigeria.
As government is introducing measures to improve on the efficiencies in that sector to increase Government’s take, the Minister said “we are also engaging more extensively with the communities and people of the Niger Delta to minimize disruptions to oil production”.
Reviewing the 2016 Budget performance, Senator Udoma said there was reasonable progress on implementation and achievement of set targets even though aggregate revenues was less than projections, mainly due to disruptions in oil production in the Niger Delta region.
The developments in the oil sector, according to him, adversely impacted oil revenues and foreign exchange receipts, and also negatively affected non-oil revenues as non-oil activities are critically dependent on the foreign exchange generated by the oil sector.
“As at year-end, FGN’s 2016 actual revenue was N2.95 trillion (76.4% of the N3.85 trillion budgeted). Oil revenue was N697.8 billion (97.2% of budget); Company Income Tax (CIT) and Value Added Tax (VAT) collections were N457.91 billion and 108.72 billion respectively, representing 52.8% and 54.8% of amounts budgeted; while Customs collections of N247.42 billion implied a 63.6% performance, he explained.
Despite the shortfall in revenue, he said government met its debt service obligations and personnel costs while overhead costs were largely covered.
He pointed out that although capital expenditure suffered because key recurrent spending like debt service and payment of salaries had to be met first, the amount of N1.22 trillion released for capital under the 2016 budget remains the highest aggregate capital releases for a single fiscal year for Nigeria. “This was achieved despite the lower oil prices and revenue shortfalls, which underscores the government’s commitment to investing in critical infrastructure”, he noted.
The Minister explained that in designing the 2017 Budget, certain critical international factors that affect Nigeria as a country were considered, including the protracted period of lower oil prices, major macroeconomic realignments in China, increasing divergence in monetary policy in major economies, uncertain economic, political and institutional implications of BREXIT, weak demand in advanced economies and its spill-over effects; and geopolitical tensions in several countries.
On the domestic front also, the budget had to be designed at a critical time when the economy was experiencing contraction in growth (-2.06% in Q1 2016, now -0.52% in Q1 2017), insurgency and Insecurity parts of the North East, crude oil theft and pipeline vandalisation, foreign Exchange (FX) scarcity and Exchange rate tension.
External reserves were down to US$26.59 billion in May 2016 but now about US$30.28 billion, high Unemployment rate (from 13.9% as at Q3 2016 to 14.2% in Q4 2016), and inflation (18.55% as at December 2016, 16.25% as at May 2017), he added.
The Economic Recovery and Growth Plan (ERGP), which was launched early this year, is meant to address these economic challenges. The Minister pointed out that although the 2017 Budget was prepared before the finalisation of the ERGP, it drew extensively from the policies set out in the ERGP.
He explained that the 2017 Budget reflects “our fiscal plan to restore the economy to the path of sustainable and inclusive growth, the specific goals and targets of which are set out in the 2017 – 2020 Economic Recovery and Growth Plan (ERGP)”.
The Minister said the 2017 Budget is an infrastructure Budget and government takes transportation very seriously, which is why so much has been voted for roads and railways.
He also said ease of doing business is very critical to government because it wants to turn the country from a nation of importers to a nation of producers.
Reflecting on the late passage of the last two national budgets, the Minister said in the months ahead, the Executive will work with the National Assembly to ensure that Nigeria returns to a predictable January – December fiscal year, with the budget signed into law ahead of the commencement of the fiscal year in the near future.
Also speaking the Director General of the Budget Office, Mr Ben Akabueze, said the government is determined to bridge the gap between citizens and government by the measures being taken to promote greater transparency and accountability in the entire budget framework. “Our membership of the Open Government Partnership (OGP) has strengthened our resolve to enhance stronger citizen engagement and improved public service delivery”.
Mr Akabueze disclosed that the Budget Office is implementing a Citizen’s Portal on its website to enhance citizens’ participation across the entire budget cycle. In addition, a dedicated hotline for citizens with queries or questions on the budget is also being activated.
Mr. Adi Hartadi, the Head of Investor Relations of PTPP (Persero) Tbk, partners to PT Intim Perkasa Nigeria Ltd, who disclosed this current move by the government to woo his company into investing in the country, during a business meeting with the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru, stated that the proposed refinery would be located in Akwa Ibom State.
The refinery, a modular one, will have refining capacity for 10,000 barrels per stream day.
Mr Hartadi stated that their company has more than 50 years of experience in construction and engineering and it was desirous of diversifying into downstream operations in Nigeria.
Responding, the NNPC Group Managing Director, Dr. Maikanti Baru, who was represented by the Chief Operating Officer (COO), Refineries and Petrochemicals, Engr. Anigbor Kragha, stated that NNPC placed high premium on investment in the nation’s refining sector.
The GMD stated that the Corporation had a Greenfield Refinery Department that specialized in new refinery projects and also provided professional support to potential investors in modular refinery in the country in line with the Federal Government policy on modular refineries.
He explained that the country’s three refineries with a combined capacity of 445,000bpd could not function optimally over the years due to lack of investment, adding that NNPC would give necessary support to the Indonesian Company interest in the downstream sector.
“On our end, we have embarked on ambitious plan to fast-track programmes to restore our capacity utilization from 30 per cent to a minimum of 90 per cent in the next 24 months. To do that, we are working on securing financing from third parties, not just funding, but also technical expertise to help us increase our performance to world class levels that they should be,” Dr. Baru stated.
He explained that given Nigeria’s expected population, by 2025, more than 40 million litres of petrol would be required for local consumption, adding that the combined capacity of the nation’s 3 refineries would only be able to satisfy just above 50 per cent of the projected local demand.
He expressed optimism that with this kind of investment coming steadily, Nigeria could serve as a regional hub of refined petroleum products for West Africa and beyond.
He called on the investors to be mindful of clean fuel policy across African countries and ensure that they produce fuels that meet specification with regards to sulphur content.
Earlier, Dr. Dwiyatna Widinugraha, Third Secretary for Economic Affairs, Indonesian Embassy in Nigeria and the leader of the Indonesian delegation, stated that the visit was a follow-up to the earlier visit by the Indonesian envoy to NNPC, the bilateral meeting between the Indonesian Trade Minister with his Nigerian counterpart as well as the visit of Indonesian Prime Minister to Nigeria.
It would be recalled that the Indonesian Ambassador to Nigeria, Mr. Harry Purwanto, had recently expressed interest in purchasing more crude oil from Nigeria during a courtesy call to the NNPC GMD, Maikanti Baru.
Mr.Jean Bakole, UNIDO representative to ECOWAS and regional director, had said in the early 2000, Nigeria was easily compared with the league of fastest growing economies in the world such as the BRICs, that is, Brazil, Russia, India and China with a growth rate put at 11 percent in 2005.
Based on the Doing business 2017 report, he said a comparative analysis of the BRIC countries and Nigeria shows that it is easiest to do business today in these countries and most difficult in Nigeria.
Out of 190 countries surveyed, the ease of doing business ranking for the BRIC is 40 for Russia, 74 for South Africa, 78 for China, 123 for Brazil, 130 for India and 169 for Nigeria, adding that there a direct correlation between ease of doing business ranking of countries and their rate of nominal GDP growth.
But there is still hope for the country going by the UNIDO’s representative statement that there is light at the end of the dark tunnel due to the reforms carried out by the government to improve the ease of doing business in Nigeria. He noted that since Nigeria was ranked 138th position on starting a business, the improved online portals can be further enhanced for greater effectiveness and efficiency.
‘’The 169th ranking position on ease of doing business also shows that it takes a multi-dimensional and multi-sectoral approach to promote the business climate of a country. This also means that Government’s reforms must be holistic in outlook in line with the performance measures for other countries in order to achieve the expected good result of doing business.
President of Lagos Chamber of Commerce and Industry(LCCI),Mrs. Nike Akande, expressed optimism that the executive orders will impact the ease of doing business, fast track budgetary administration as well as promote made in Nigeria products.
She urged the federal government to ensure that the stipulated timelines are strictly adhered to by all the parties affected by the orders. She advocated the need for continued consultation and engagement with the business community and the bureaucracy in building understanding and buy-in of all stakeholders.
She promised that the LCCI will tack compliance with the orders by relevant ministries and agencies, follow up compliance and report feedback from private sector player on an ongoing basis.
Will Nigeria get to the promised land?
The UNIDO’s representative answer to the poser was positive and he hinged the development on the fact that the mandate, targets, achievements and roadmap of the Presidential Enabling Business Environment Council which clearly show that doing business in Nigeria will be definitely enhanced in no distant time.
Furthermore, the One Stop Investment Centre (OSIC) domiciled in Nigerian Investment Promotion Commission (NIPC) needs to be revitalized. To this end, I have suggested few recommendations on OSIC’s improvement as well as on the roadmap for enhancing ease of doing business in the country to the Honourable Minister of Industry, Trade and Investment.
How rosy will the journey be?
The UNIDO’s representative also sees prospect for improved ease of doing business in Nigeria through the recently launched Economic Recovery and Growth Plan (ERGP) which is driven by the need to stabilize the macroeconomic environment; achieve agriculture and food security; ensure energy sufficiency in power and petroleum products; improve transportation infrastructure; and drive industrialization focusing on small and medium enterprises.
He said while the ease of doing business is important for the achievement of the entire ERGP, the Plan document specifically highlighted improving ease of doing business as a cardinal strategy for driving industrialization with special focus on SMEs.
He added that in addition to enhancing ease of doing business in Nigeria, efforts should be made to harness the country’s human, natural, material and other resources for national development.
He said: ’What is needed at this stage of Nigeria’s development is a collective effort of all actors, in particular the public and private partnership strongly promoted by the nation’s vision. The public and private sectors need to work together more than ever before. The capacity of the business membership.
Nigeria sure need to overcome impediments to ease of doing business through all known salutary means with a view to moving its people out of hunger, depravity as well as creating a value addition strategy to open its economy to the desired foreign investment.