MAN pre­dicts de­pre­ci­a­tion of naira in 2019 …says 2019 bud­get falls short of ex­pec­ta­tions

Business a.m. - - MANUFACTURING -

THE MANUFAC TURERS ASSO CIATION OF NI GERIA, MAN, has ex­pressed fears that there may be a slight de­pre­ci­a­tion of the value of Naira due to the re­cent pres­sure on the coun­try’s ex­ter­nal re­serves due to the con­tin­u­ous dip in oil prices and cap­i­tal flight oc­ca­sioned by the po­lit­i­cal uncer­tainty sur­round­ing the 2019 gen­eral elec­tions.

In its re­view of the eco­nomic per­for­mance in 2018 as well as 2019 out­look, the as­so­ci­a­tion ob­served that the pro­posed 2019 bud­get ap­pears to be an ex­ten­sion of 2018 as no new grounds were ex­plored.

“There is the need to prop­erly align the as­sump­tions of the bud­get with eco­nomic re­al­i­ties. No doubt, some of the pro­vi­sions of the bud­get would be very im­por­tant in sup­port­ing eco­nomic ac­tiv­i­ties in the com­ing year. The huge em­pha­sis on in­fra­struc­ture de­vel­op­ment, es­pe­cially power, road and rail is en­cour­ag­ing. How­ever, as more de­vel­op­ment on the bud­get un­folds, it will be eas­ier to un­der­stand why the bud­get fell short of 2018 fig­ures, not­with­stand­ing the im­prove­ments in the global and Nige­rian econ­omy”, MAN said in its anal­y­sis.

It noted how­ever, that the bud­get at it stands, sug­gests that a lot of works still need to be done while hop­ing that it will be passed with dis­patch, adding that in broad terms, the man­u­fac­tur­ing sec­tor could be in for a tough op­er­at­ing en­vi­ron­ment in 2019, see­ing that the needed sup­port­ing poli­cies and in­fra­struc­ture have not been given suf­fi­cient pri­or­ity.

“Tech­ni­cally, from the ob­served trends in the Nige­rian bud­get cy­cle, the 2019 bud­get pro­posal might un­dergo late pas­sage and the re­sul­tant neg­a­tive ef­fect on the over­all eco­nomic am­bi­ence of the coun­try might be colos­sal for an econ­omy whose cur­rent growth rate is still frag­ile”, the As­so­ci­a­tion stressed.

It said in the course of the year, de­vel­op­ment in the global scene such as in­creas­ing in­ter­est rates across large de­vel­oped mar­kets and tight­en­ing com­mod­ity mar­kets would likely con­tract in­vest­ment in­flow to the coun­try, ev­i­denced by the cap­i­tal re­ver­sals from emerg­ing and fron­tier mar­kets ob­served in the cur­rent year.

Also, be­ing an elec­tion year, per­for­mance of the econ­omy in 2019 would to a large ex­tent de­pend on the trans­parency and cred­i­bil­ity of the elec­tion while dis­trac­tions

from po­lit­i­cal ac­tiv­i­ties may slow down in­fra­struc­ture spend­ing and the per­for­mance of the man­u­fac­tur­ing sec­tor be­ing a sec­tor whose op­er­a­tions re­lies heav­ily on these in­fras­truc­tures.

MAN also said that in­fla­tion rate might slightly in­crease due to elec­tion­eer­ing spend­ing re­sult­ing from height­ened po­lit­i­cal ac­tiv­i­ties and lack of proper pol­icy co­or­di­na­tion while more pres­sure may be mounted on reg­is­tered com­pa­nies by Gov­ern­ment Agen­cies in a bid to vig­or­ously drive for rev­enue to sal­vage the pre­car­i­ous sta­tus of the coun­try’s debt ser­vice to rev­enue ra­tio.

It also, backed the fed­eral gov­ern­ment re­fusal to sign the Africa Free Trade Agree­ment say­ing that “gov­ern­ment should en­sure that Nige­ria’s eco­nomic in­ter­ests, es­pe­cially the pri­vate sec­tor, are not only pro­jected but pro­tected in ar­riv­ing at the de­ci­sion to sign or not to sign or when to sign. The As­so­ci­a­tion also said “As a nec­es­sary part of the readi­ness as­sess­ment and the re­sult­ing ac­tion plan, the gov­ern­ment should put in place the nec­es­sary frame­work to pro­tect and boost the ca­pac­ity of the man­u­fac­tur­ing sec­tor to thrive in the con­ti­nen­tal free trade area,” it said.

MAN in the re­view gave some rec­om­mended mea­sures gov­ern­ment should take to achieve sus­tain­able eco­nomic growth and bud­getary ob­jec­tives of the fis­cal pro­pos­als for next year.

Among the rec­om­men­da­tions is that gov­ern­ment should re­visit the as­sump­tions of the 2019 bud­get, par­tic­u­larly crude oil pro­duc­tion and price as well as en­sure up­ward re­view of ed­u­ca­tion and health al­lo­ca­tions be­fore ap­pro­pri­a­tion. It said “the crude oil price has a $60 per bar­rel bench­mark, while oil pro­duc­tion has a 2.3 mil­lion bar­rel per day pro­jec­tion as it sug­gests that these as­sump­tions should be re­vis­ited to re­flect present eco­nomic re­al­i­ties.

It called for cau­tion in the coun­try’s ris­ing debt pro­file in view of the as­so­ci­ated ser­vices charges and fu­ture eco­nomic bur­den that it would ex­ert on the na­tion. The As­so­ci­a­tion called for cut­ting down on gov­ern­ment re­cur­rent ex­pen­di­tures to re­duce fis­cal deficit, bor­row­ing and ser­vice charges. It also can­vassed shed­ding the cur­rent bor­row­ing size of the gov­ern­ment in the do­mes­tic fi­nan­cial mar­ket so as not to com­pletely crowd-out the pri­vate sec­tor.

MAN also called for the com­mence­ment of the im­ple­men­ta­tion of the har­monised taxes and levies and to al­low the Joint Tax Board (JTB) mon­i­tor and en­force com­pli­ance by states and lo­cal gov­ern­ments. It said that the gov­ern­ment should be more in­ter­ested in re­sult-ori­ented spend­ing with fru­gal­ity, be more trans­par­ent and ac­count­able in or­der to as­suage the psy­chol­ogy of tax­pay­ers for im­proved tax com­pli­ance.

It ac­knowl­edged gov­ern­ment’s ef­forts at car­ry­ing the pri­vate sec­tor along on the is­sue of African Con­ti­nen­tal Trade Agree­ment (AfCFTA), and that the gov­ern­ment should pay ad­e­quate and un­wa­ver­ing at­ten­tion to the emerg­ing is­sues on AfCFTA in 2019 and be­yond.

MAN also called for the re­sus­ci­ta­tion of do­mes­tic re­fin­ing of crude oil and en­sure the op­er­abil­ity of In­de­pen­dent Power Pro­duc­ers (IPP) for On/Off-grid power gen­er­a­tion and the Mi­croGrid Ini­tia­tive.

It also urged the gov­ern­ment to “re-clas­sify the man­u­fac­tur­ing sec­tor into strate­gic gas users from the cur­rent com­mer­cial gas user’s clas­si­fi­ca­tion.’’

The as­so­ci­a­tion urged the Fed­eral Gov­ern­ment to con­tinue to en­trench bet­ter for­eign ex­change rate man­age­ment while al­lo­ca­tion should tilt more to the in­dus­trial sec­tor, in­clud­ing the SMEs. It also urged the gov­ern­ment to fast-track the de­vel­op­ment of key se­lected min­eral re­sources through back­ward in­te­gra­tion, es­pe­cially those with high in­ter-in­dus­try link­ages. “Gov­ern­ment should con­tinue to sup­port the re­source-based in­dus­tri­al­i­sa­tion and back­ward in­te­gra­tion in the coun­try through ap­pro­pri­ate in­cen­tives and fund­ing sup­port to in­vestors,” it said.

MAN urged the gov­ern­ment to ex­pand the tax net to cap­ture the non-tax-pay­ing firms, par­tic­u­larly those op­er­at­ing in the in­for­mal sec­tor and not in­crease the tax bur­den on the al­ready tax com­pli­ant busi­nesses. It ac­knowl­edged the gov­ern­ment’s recog­ni­tion of the need to de­velop a dig­i­tal econ­omy and the fourth in­dus­trial rev­o­lu­tion in or­der to en­hance pro­duc­tiv­ity. The as­so­ci­a­tion, how­ever, said the safety nets were not cap­tured in the bud­get pro­posal nor in Pres­i­dent Muham­madu Buhari’s bud­get speech.

“Nige­ria’s pro­duc­tion base faces fu­ture risks due to its weak per­for­mance in de­vel­op­ing pro­duc­tiv­ity driv­ers such as in­no­va­tion and hu­man cap­i­tal, and this calls for closer ex­am­i­na­tion and im­me­di­ate ac­tion,” it said.

Newspapers in English

Newspapers from Nigeria

© PressReader. All rights reserved.