National Assembly’s Blueprint for Exiting Recession
The National Assembly marked a red-letter day last week. It was the first time the two chambers of the National Assembly would organise a joint public session on the appropriation bill to discuss how to use it to stimulate the economy and exit Nigeria from the current economic crisis. It was also the first time the National Assembly would subject the appropriation bill to public scrutiny, apart from the usual meeting with the ministries, departments and agencies. The Joint Public Hearing on the 2017 Budget last week was the first time stakeholders, including financial experts, members of the Federal Executive Council, and civil society groups, would join in fashioning out the budget for efficient, effective and maximum impact on the economy.
The key objectives of the budget include focusing on the critical on-going infrastructure projects such as roads, railways, power, ICT and others that would have quick positive effects on the economy. Another objective of the budget is utilising Special Economic Zones and Industrial Parks as vehicles to accelerate domestic economic activity for innovation and wealth creation. It is also purposed to contribute to food security and create a platform for agro-business in agriculture supply chains through the Agriculture Green Alternative Plan.
The 2017 budget also has as its objective the establishment of a Social Housing Fund to deepen the mortgage system and expand its availability across all states of the federation to encourage and stimulate the growth of small and medium scale industries. This is for the purpose of innovation, job creation, especially wealth creation, and provision of social safety nets for poor Nigerians.
The public hearing on the 2017 budget was in fulfilment of Senate President, Dr. Abubakar Bukola Saraki’s pledge, as chairman of the National Assembly, to make the nation’s annual appropriation process open for public participation.
Declaring open the three-day joint public hearing on the 2017 budget, Saraki explained why the National Assembly embarked on the exercise. He said the essence was to “increase the efficiency of government and its responsiveness to citizens’ needs as well as improve overall transparency and accountability in governance.”
On the novelty of the exercise, the chairman of National Assembly said the joint public hearing “is the first public hearing on the budget that brings together all stakeholders involved in the budget process.”
He explained that the budget, “If well-crafted and implemented, remains the most potent fiscal policy instrument of government in delivering socio-economic benefits in an all-inclusive manner.
“The best way to achieve this is to ensure that all stakeholders are made a part of the decision-making process, especially as it relates to the provision of public services and distribution of social benefits.”
The senate president said the country was currently at a crucial stage of its development. He said by engaging critical stakeholders and members of the general public to make input into the 2017 budget, the National Assembly hoped to increase the efficiency of government and its responsiveness to citizens’ aspirations.
He said, “You will agree with me that the current state of the economy is needing of, among others, a credible budget that will stimulate real economic activities, fix our critical infrastructure, and provide cushion for the poor and vulnerable.
“The challenge, however, is how best to ensure that the budget is utilised as an effective policy in achieving these. It is, therefore, in line with this belief that the eighth National Assembly deemed it necessary to bring government, civil society organisations, private sector, and other key actors in the economy to deliberate on the budget proposal. “Through this engagement, and others to come, we hope to increase the efficiency of government and its responsiveness to citizens needs as well as improve overall transparency and accountability in governance.”
According to the senate president, the issues challenging the nation’s economy range from low government revenues, shortages in foreign exchange supply, slowdown in economic activities, rising unemployment and cost of living.
Saraki stated, “We are all affected in one way or another. With key economic indicators heading south, there is no better opportunity to reset the fundamentals of our economy.
“What we have before our consideration is the 2017 budget proposal of N7.298 trillion, which we believe has been designed based on a medium-term recovery and growth plan.
“At the various sub-Committees, we are objectively reviewing the planned expenditures especially as it relates to its feasibility and relevance in delivering the broad objectives of the budget, which are to: i. Pull the economy out of recession; ii. Invest in the people of Nigeria; and, iii. Lay the foundations for a diversified, sustainable and inclusive growth. “On a more specific note, the 2017 capital budget proposal is intended to support activities that will help to speed up the diversification of the economy and the promotion of the non-oil sector, as well as create jobs for our youth.
“Accordingly, it is expected that ‘Made-in-Nigeria’ (that is, domestic production of food, materials and other commodities) will be encouraged. In addition, 2017 capital budget proposal is intended to engender private sector partnership in infrastructure as well as other critical sectors of the economy such as agriculture, manufacturing and services.
“However, the extent to which the budget proposal will succeed in achieving its overall objective of pulling the economy out of recession depends on a number of imperatives.
“These include: i. how well the capital spending targets critical sectors of the economy; ii. How much of the capital allocation is devoted to real developmental projects as against administrative capital project; iii. The level of detail provided in the budget that will aid proper oversight of budget implementation; and, ultimately, iii. The realisation of projected revenues and borrowings.”
He stated that while the government had made efforts to ensure that provisions in the budget proposal aligned with the over-arching goal of pulling the economy out of recession and laying the foundations for diversified growth, “certain provisions are clearly off the path. The budget must address the critical issues setting back our national growth and development.”
The senate president added, “In this regard, the eighth National Assembly will continue to support government’s economic recovery and growth effort. To this end, we will ensure that proposed projects and programmes, and their estimated expenditure are in sync with government’s priorities.
“Beyond that, we will also ensure that, in line with the Amended Procurement Act, a sizable part of the capital expenditure is retained within the country as government patronises ‘Made-in-Nigeria’.
“In addition, the National Assembly will continue to focus on priority bills that will loosen the structural bottlenecks that are impeding the ease-of-doing business in the country. These priority bills, which include: National Transport Commission bill; National Road Fund Bill; National Road Authority Bill; National Inland Waterways Bill; Nigerian Ports and Harbours Authority Bill; Infrastructure Development Commission Bill; Petroleum Institution and Governance Bill; Federal Competition and Consumer Protection Bill will unstiffen the investment climate in critical sectors of the economy. What we want to build is a better Nigeria, and we all have a part to play.”
Several stakeholders at the public hearing gave inputs on the recession and how to take Nigeria out of this economic crisis. One of such stakeholders was the former deputy governor of Central Bank of Nigeria, Dr. Obadiah Mailafia, who blamed the recession in Nigeria on a number of factors, such as the fall in oil prices, dwindling foreign reserves, a weakened naira, negative growth, and the existing gap in public policies.
Other factors he listed were poor banking practices, the stock market crisis, speculation, regulatory failure, corruption and fraud, as well as weak macro-economic management.
Mailafia called the American depression of 1929 as one of the worst in world history, saying that though the crisis was caused by a stock market crash, it was compounded by the myopic intervention of the U.S. government at the time, which he said increased the interest rate in the face of the recession, instead of lowering it.
Mailafia warned the federal government and financial regulators against the high interest rate regime, pointing out that it would only aggravate the nation’s economic woes. He also warned against a hike in taxes, suggesting that the federal government should expand its income tax base by getting more people to pay taxes instead of increasing taxes, stating that doing so will further impede economic growth and investment.
The former CBN deputy governor narrated how the U.S. government then headed by Franklin D. Roosevelt later rescued the depressed American economy by boosting consumption and building infrastructure, which provided jobs. He advised the incumbent government of President Muhammadu Buhari against sustaining the excuse that it did not cause the recession, reminding it that the buck stops at its table. He also advised the legislature and the executive to deploy the current budget process to stimulate the economy, focus on factors that can rejuvenate growth, stabilise the exchange and interest rates and simultaneously provide a stimulus package that will ensure a synergy between economic growth and the budget package.
Mailafia said it was unfortunate that the CBN allowed the MMM Ponzi scheme to operate in Nigeria, a situation he said could be detrimental to an already crippled economy, in view of the huge involvement of Nigerians in the scheme. This involvement, he said, involved enormous withdrawal of monies from the banking system for investment in the scheme. He described the trend as risky for banking.
He further advised the government to reposition key institutions, invest in key infrastructure that can create employment for the youth as was the case in the United States, which re-invented railway operations and reduced taxation.
Speaking on the topic, “Key Challenges of Planning and Budgeting in Nigeria: A Case Study of Social Safety Net Programme Implementation in Nigeria”, Dr. Nazif Darma of the Department of Economics, University of Abuja, blamed the stagnation in the economy on the absence of planning. He noted that India’s economy had grown consistently for decades because the country had a history of national planning spanning 65 years. He also advocated a review of the Vision 20:20202 blueprint, which he said should be aligned with the Sustainable Development Goals of the United Nations.
Darma also echoed Mailafia’s views on taxation, saying, “This is not the time to increase taxes. You can increase the number of people that will pay taxes.”
According to him, a five-year development plan should be drawn from Vision 20:2020 plan.
Minister of State for Budget and National Planning, Mrs. Zainab Ahmed, said the 2016 budget failed to achieve its target because of the following factors: the contraction in GDP; the fall of the oil production from the targeted 2.2 million barrels per day to 1.4 million; galloping inflation of over 18 per cent from the projected 9.8 per cent; protracted depreciation of the exchange rate from the projected N197 to $1 to N305/$, while the revenue target of 3.8 per cent only attained 2.117 per cent.
According to her, oil revenue declined sharply due to the fall in oil prices while the drop in oil production arising from the militancy in the Niger Delta compounded the situation. She said the 2017 budget was conceived to achieve economic recovery, stimulate growth, pull Nigeria out of the recession and sustain macro-economic growth, adding that the budget would expand the frontiers of private-public partnerships, provide jobs through small and medium enterprises, create wealth, and foster social safety for the poor and vulnerable in the society.
The minister added that this year’s revenue projection of N4.942 trillion was 28 per cent higher than the N3.85 trillion target in 2016, with 11 per cent of the projection meant to be drawn from recovered loot and 4.9 per cent from value added tax, among other sources.
–– Okocha is Special Assistant to the Senate President on Print Media. (See concluding part on www.thisdaylive.com)