- 2017 oil benchmark set at $42.50, exchange rate N290/$, economy to grow at 3%
- Avoid Jonathan’s pitfalls, Sanusi warns Buhari
As the federal government fine-tunes preparations for the 2017 budget, wednesday it approved the Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) for 2017-2019, estimating that the nation’s economy will grow at an average of 3.73 per cent in the next three years.
The Minister of Budget and National Planning, Udo Udoma, who disclosed this in Abuja, after the Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari, said the economy is projected to grow by three per cent in 2017, 4.26 per cent in 2018 and 4.04 per cent in 2019.
“The reason the GDP growth rate for 2019 is slightly lower than 2018 is because it’s an election year and usually in an election year, because of the uncertainties, we have also made provisions for that,” he clarified.
The minister said government set $42.50 as a reference price in 2017 for oil and projected that it would rise to $45 in 2018 and $50 in 2019.
He said: “Government is being very conservative in terms of the reference price of crude oil, even though we are expecting it to go higher than this, but we are keeping to an extremely conservative price scenario.”
In terms of oil production, he said government would retain this year’s estimate of 2.2 million barrels per day for 2017 despite the fact that the militancy in the Niger Delta has forced oil production to below one million barrels per day.
For 2018, government remained ambitious and expects production to rise to 2.3 million barrels per day, while in 2019 it is targeting an increase to 2.4 million barrels per day.
The minister said: “The Federal Executive Council meeting approved the Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) for 2017-2019.
“As you know, the Fiscal Responsibility Act requires the executive to prepare the MTEF/FSP and send it on to the National Assembly for their consideration.
“And it is on the basis of the MTEF that the next budget will be fashioned. So, in short, we have started the process of preparing the 2017 budget.
“Before the MTEF was presented to FEC for consideration, there were extensive consultations with the private sectors, governors and NGOs.
“In the 2017-2019 MTEF, the government intends to intensify efforts in pursuing a manpower driven economy.
“So we intend to intensify efforts to diversify the economy; we intend to go on with the implementation of on-going reforms in public finance; we intend to enhance the environment for ease of doing business so as to generate private sector investments.
“We intend to continue to pursue gender sensitive, pro-poor and inclusive social intervention schemes, similar to what we did in 2016 – our social intervention programmes is going to be sustained.
“We intend to devote even more resources to critical infrastructure projects, just as we did this year. So we will continue to spend more on roads, rails, transport infrastructure, ports and so on.
“We intend to focus on governance and security and we intend to maintain the zero-based budgetary approach.”
Also speaking at the briefing, the Minister of Industries, Trades and Investments, Okechukwu Enelamah, said FEC also approved the ratification of the World Trade Organisation (WTO) Trade Facilitation Agreement.
He explained that the agreement was approved by all the members of WTO at the ministerial conference held in 2013.
He said: “What that agreement seeks to do is basically to lower the cost of trade generally for everybody.
“There was a clear understanding that everyone benefits from lowering the cost of doing trade, it is particularly beneficial to developing countries that want to access the international market.”
He said Nigeria was one of the countries that approved the agreement.
“We have been going through the process to ratify the agreement so that it will come into effect. The idea is that the agreement will come into effect when it is ratified by two thirds of all the countries that approved it originally, we think that will happen sometime this year,” he added.
He said that given the importance of trade to Nigeria, it was appropriate that Nigeria not only ratifies the agreement but also that it should champion the cause of lowering the cost of doing businessm which the agreement seeks to achieve.
When asked to produce figures of what other sectors such as mines and agriculture would contribute to the economy in view of government’s diversification programmes, Udoma said that the MTEF included projections for other sectors, but did not disclose the figures.
He said: “Even though we want to diversify, we still have to use a particular number to plan in terms of revenue from crude oil. It doesn’t mean we don’t use numbers for other receipts. I was just reading the highlights.
“We have numbers for everything, we have numbers we expect to get from customs, VAT, independent revenue, etc. So we have numbers for all the things we expect but because oil is volatile and is an area that has caused us to be where we are today, we want to assure Nigerians that we are not going back to using high estimates even though we sense that prices may be moving towards $60 per barrel in the next year or so, we are still going to use conservative numbers.”
On the exchange rate projections, he said government would use N290 to $1 as the exchange rate in 2017.
He said: “We believe that the naira will stabilise and we believe that N290 to $1 is a fair estimate from the central bank of what the naira is worth.”
On the level of implementation of this year’s budget, the minister said: “In terms of the performance of the current budget, in terms of the capital budget, we have released over N400 billion and we are up to date in terms of the recurrent, all salaries have been paid, overheads are released, statutory transfers have been made.”
He said the government had done well in terms of implementation of the budget.
In a related development, the Emir of Kano, Alhaji Muhammad Sanusi II, has warned that the inconsistencies in the country’s economic policies by successive administrations have plunged the nation into unprecedented hardship.
Sanusi added that if Buhari does not act fast by reviewing his economic policies, his administration might end up the way of ex-President Goodluck Jonathan.
Sanusi insisted that Nigeria has to retrace its step in terms of economic policies.
He also cautioned Buhari on the activities of those he described as “voodoo economists” in the corridors of power.
Delivering a lecture in Kano yesterday at Tahir Guest Palace, during the 15th Joint Planning Board (JPB) and National Council on Development Planning organised by the Ministry of Budget and National Planning in collaboration with the Kano State Government, Sanusi said the inconsistencies in the country’s current economic policies do not favour business and investment in the country.
The emir also advised the federal government to copy Lagos in terms of formulating policies that could boost trade, business and attract investors, adding that the Lagos example could bail the country out of its current economic woes.
He decried Nigeria’s over-dependence on oil, pointing out that more investment in agriculture, the power sector, manufacturing and infrastructure development and attractive incentives to investors would enhance the growth of the nation’s economy.
According to him, “I just saw that we are always blaming the past administration, but we have also made mistakes in this administration.
“The problem is that there is nothing we are facing today that we did not know would happen. That is the truth.
“We made mistakes, many of them deliberate. We ignored every single warning. Not building roads, not building power, and other necessary infrastructure that can boost the economy and development of the country.
“We are spending 30 to 40 per cent of every naira we earn servicing debt. The new borrowings were simply recycled into much higher recurrent expenditure. The country’s GDP was growing largely due to consumer spending.
“In 2010 when I was the central bank governor, the government increased the minimum wage to N18,000. I protested but they went ahead and borrowed money to pay.
“In 2012, as CBN governor, I said that this was an unsustainable wage bill; we needed to reduce the size of public service, which fell on deaf ears.
“I believe we have started retracing our steps and we have to retrace our steps. If a policy is wrong, it is wrong and it has to be changed.”
He further advocated for the devaluation of the naira, stating that those who are advising the president on the nation’s economy are not getting it right.
In his opinion, only very few Nigerians are benefitting from the current economic policies, noting that some of them are making the rich get richer, while the poor continue to wallow in poverty.
According to him, Nigeria has also been hampered by bad trade policies which are responsible for the collapse of industries.
Sanusi further warned that the economic downtown could engender terrorism and other crimes, because millions of Nigerian youths are jobless and restiveness.