The Ministry of Budget and National Planning says it has designed a fiscal
stimulus strategy that will help the country to come out of its economic
recession.
This is contained in a document entitled “ Turning a Crisis into an
Opportunity: the Economy and the 2017 Budget,’’ obtained by the News
Agency of Nigeria (NAN) on Tuesday in Abuja.
The document was presented by the Minister of Budget, Sen. Udoma Udo
Udoma, at the recent Ministerial Retreat, to harvest ideas to come out of
the economic crisis.
Udoma said that Economic Management Team had been working on a plan to
generate an immediate large injection of funds into the economy.
He said that the team had plans to generate and inject large amount of
funds, principally in foreign currency, estimated at 10 to 15 billion
dollars into the economy.
The minister said that funds would be generated through Asset Sales,
Advance Payment for Licence renewals, infrastructure concessioning, use of
recovered funds etc, to bridge the funding gap.
“To achieve this speedily, we will need to fast-track procedures through
Presidential directives and legislation; a bill is almost ready for
submission to National Assembly.’’
The minister, however, emphasised the need for the country to spend its
way out of recession through injection of large amount of money into the
economy.
“The 2016 Budget performance is reflective of the low revenue out-turns
attributable to the global and domestic developments earlier highlighted.
“Oil revenues fell significantly in the second quarter compared to the
first quarter as a result of increased oil pipeline vandalism and
production shut-ins.
“Non-oil revenues also declined due to the acute shortage of foreign
exchange,’’ Udoma said.
The minister said that the failure to diversify the economy and implement
the national goals due to lack of discipline in the past had made the
country witness negative growth.
He said that the government had put measures in place to diversify the
economy.
He said some of the measures included “ tackling challenges inhibiting
private sector participation in the upstream petroleum sector and building
on the petroleum products deregulation (7.9 billion dollars or about 30
per cent of Forex demand in 2015).
It will also boost agricultural production for food sufficiency, as food
imports has the third highest demand for Forex (3.4 billion dollars in
2015 or about 8 per cent of total demand).
The minister said another measure was “growing non-oil exports in the
light of competitive and comparative advantage created by devaluation
following the introduction of a market reflective exchange rate’’.
In addition, he said that the government was working hard to resolve the
militant disruptions in the Niger Delta.
Udoma said the major factor responsible for the recession was the over
dependence of the economy on revenues from a single commodity, petroleum.
According to him, revenue source is not sustainable since the country
doesn’t control the price of crude oil.
He said unsustainable structure was characterised by some indices,
including “oil sector less than 9 per cent of Gross Domestic Product (GDP)
but about 80 per cent of government revenue and 95 per cent of Forex.
Other indices are “non-oil sector about 90 per cent of GDP (of which 52
per cent was indirectly dependent on Oil) but less than 20 per cent of
government revenue.
According to him, another index is declining capital expenditure with
rising recurrent expenditure (2015 about 10 per cent capital) and import
dependent consumption growth model with stagnant growth in Investment to
GDP.
Other indices, the minister said, included collapse of crude oil prices
from over 110 dollars per barrel in 2014 to less than 30 dollars per
barrel in the first quarter of 2016 (recently rising but still less than
50 dollars per barrel).
The collapse in the crude price has also led to reduced confidence,
leading to declining Equity and Foreign Investment Capital Inflows from
9.7 billion dollars by end of second quarter 2014, to 0.64 billion dollars
at the end of second quarter of 2016.
NAN reports that Nigeria’s economy formally entered recession in the third
quarter of the year when its Gross Domestic Product (GDP) in real terms
declined by -2.06 per cent in second quarter, according to National Bureau
of Statistics.
The figure was lower by 1.70 per cent points from the negative growth rate
of 0.36 per cent recorded in the preceding quarter.
By economic principles, an economy enters recession when the contractions
are observed at least two quarters.