By Joni Akpederi with reports from Dike Onwuamaeze, Olisemeka Obeche, Osaze Omoragbon and Pita Ochai.
The 6.08 trillion naira budget for the 2016 fiscal year proposed by the Muhammadu Buhari administration holds promises of a better life and investment opportunities for Nigerian citizens and investors alike. This is in spite of the challenges posed by the crash in the international price of crude oil, Nigeria’s cash cow.
Nigeria’s 2016 budget of 6.08 trillion naira is not only 1 trillion naira (about 17 percent) bigger than last year’s, it promises a better life and economic opportunities for ordinary citizens and investors alike.
President Muhammadu Buhari whose very person represents the bold new direction for Nigeria’s economy and the discipline to surmount the challenges, says the appropriately-named Budget of Change will “ensure that our resources are managed prudently and utilized solely for the public good.”
Finance Minister Mrs Kemi Adeosun explains the administration has braced itself for the turbulence in the global oil market and is now focused on the “economic stimulus model used by countries facing a contraction in economic activities and growth,” hence the commitment to a counter-clinical budget expenditure model that increases rather than reduce investment in critical sectors. The minister says the envisaged deficit of between N0.8 trillion and N3 trillion, (about 3 percent of GDP), being within acceptable limits of international standards, is no big issue.
Her colleague, Minister of Budget and National Planning, Senator Udoma Udo Udoma concurs. “Our budget is achievable,” he declares. He lists “ongoing reforms at diversifying revenue base away from oil, plugging of leakages through zero-tolerance for corruption; sound financial management and an improved revenue collection system among measures that will help the administration to achieve the budget’s aims”.
If the pledge of the Federal Inland Revenue Service boss, Mr Babatunde Fowler to rake in N4.9 trillion (equivalent to total federal revenue in the 2016 budget) in taxes works out, the country would have little to worry about.
Majority Leader of the House of Representatives Femi Gbajabiamila is as upbeat as his counterparts in the executive branch. “It is an epic budget,” he throws in. All told, Mrs Adeosun believes the economy can post a growth rate of 4.2 percent, if budget 2016 is vigorously implemented. President Buhari’s team exudes such confidence that has not been seen in Nigeria’s economic history in decades.
Economic development experts agree that the sizeable increase in the budget, despite dwindling oil receipts, indicates the resolve to address the welfare of the people by unleashing the multiplier effects of spending on the social sectors. Economic and financial analyst Dr Biodun Adedipe believes that such spending will generate economic activities, reduce poverty and create jobs in many sectors thereby “trigger growth”.
Lagos Chamber of Commerce and Industry (LCCI) President Mrs. Nike Akande also has a good word for the country’s economic team. She commends it for raising 2016’s capital expenditure to 30 percent from the 15 percent it attained in 2015, noting that assumptions in the document truly reflect current realities and the logical spending priorities for a nation genuinely desirous of pursuing development goals.
Starting out with the youth
In the education sector alone, the Buhari administration has earmarked N406.5 billion, the largest sectoral allocation, ahead of health and defence, to drive the ‘change’ it is propagating. The beefed up budget will hopefully pay for the 500,000 ‘additional teachers’ it hopes to pull out of unemployment queues. This is no doubt a boon to the critical mass of jobless graduates that has seared the national conscience over the years.
In the third quarter (Q3) 2015, the National Bureau of Statistics data found that education was the leading source of new formal sector jobs making up 62% of total jobs generated. The government has been quick to take note and use the knowledge in policy formulation.
More important, government is at last promoting technical education by offering free tuition to students offering science and technology courses through a phased cash-transfer programme. The goal is to increase interest and build capacity in this critical area which feeds the manufacturing and productive sectors of the economy. For prospective tertiary institution students inclined towards mathematics and science, the budget and government policy on education sounds almost too good to be true or realizable. Yet, government top brass say it is doable and will surely happen.
The same can be said of the school feeding programme for primary school children. The idea is to encourage indigent parents to send their wards to school while government achieves the additional goal of ensuring that Nigerian children get the right nutrition at least once a day. The obvious indirect beneficiaries of the programme are food vendors and the beleaguered food and beverage packaging industry looking to supply the school system. At a go, government hopes to use the education budget and policy to create jobs, enhance healthy living, improve the quality of education and stimulate demand for the benefit of the productive economy.
Infrastructure renewal: Reanimating the construction industry
As Nigeria’s youth take in the pleasant news of fresh openings in the labour market and better career prospects, folks in the construction industry also have a cause for cheer. Concerned about the deplorable state of the country’s infrastructure, government fused the ministries of Power, Works, and Housing into one mega – ministry with a capital budget of N433.4 billion, several times the sum committed in previous budgets. The new ministry is run by Mr Babatunde Raji Fashola, a former governor of Lagos who has pledged to pay up debts owed road contractors to encourage them to return to abandoned projects and sites across the country.
Fashola’s pledge to get contractors back to work has met with applause in the slumbering industry. The minister disclosed that the ministry has as many as 206 outstanding road contracts covering 6000km for a total whopping contract price of over N2 trillion. The lifeline he proposes will restore jobs lost when the industry went bust owing to mounting government debts and past administrations’ indifference to the contractors’ plight. The minister agonized that an unnamed company owed N3 billion has laid off 4000 workers over the past couple of years. And there are many others in similar dire financial straits.
The 2016 budget, Fashola assures, will enable a turnaround in the precarious financial situation of the scores of companies bogged down in government contracts. Already, a few are showing signs of revival, dusting offices and idle equipment in preparation for the recall to abandoned sites. A Lagos-based construction company engineer told TheEconomy he is excited about the new lease of life promised by the minister. He says the benefits would reverberate in the larger economy as his firm is already planning to recall trusted hands it had been forced to lay off. He disclosed that the company’s bankers have indicated readiness to open up blocked credit lines once government starts the debt payment programme. The bankers, he says, are happy that clients will be able to service old loans and obligations and perhaps take up new facilities.
Fashola has not left the challenge of funding unattended. While he is certain that adequate funding of the nation’s road infrastructure would “generate jobs, reduce travel time, cost of transportation of goods and services,” he believes that tolling, which requires users to pay token sums, “is necessary to support government funding.” The minister expects the cooperation and understanding of everyone and assures that through the “use of technology,” the proceeds from tolls will go to the right place and those in charge would be made accountable.”
The simple act of paying debts owed contractors can potentially open up clogged business opportunities in the construction, job and financial markets.
More power coming
Nigeria’s power needs, according to former Minister of Power, Professor Chinedu Nebo, are 160,000 megawatts. The country’s underfunded and badly degraded electricity grid currently churns out, epileptically, 4,800 megawatts. The new administration knows that there is no dodging the power issue and is jumping in with all the gusto it can muster. Even though the newly created Ministry of Power, Works and Housing sits right atop the priority list in budgetary allocation, government is sourcing funding for power projects from wherever and whoever can provide it without losing its penchant for caution and prudence.
Of the N431 billion capital budget, the ministry’s Permanent Secretary Louis Edozie says government will provide N99.3 billion while N309.7 billion will be financed through facilities from various sources. Arrangements for facilities of $50 million, $100 million and $200 million are ongoing from the African Development Bank (AfDB), HSBC and Rand Merchant Bank respectively. These will hopefully go into the completion of such projects as the 3,050mw Mambilla Hydroelectric Project, the Zungeru 700mw Hydro Project, the 215mw Kaduna Project, the 10mw Katsina Wind Farm Project and 81 transmission projects. The short-term target is to add some 2,000mw of electricity to the national total by year-end.
Enumerating the benefits of improved power supply to the Nigerian economy would be the equivalent of flogging a dead horse. The Manufacturers Association of Nigeria (MAN) has issued statements claiming that some of their members spend as much as 40 percent of total production costs on self-generated electricity. The obvious benefits of improved power supply to the numerous SMEs and the few large corporations that have dared to remain in business would be lower costs and better margins. Extrapolated, the business environment would hire more people, generate more revenues and, invariably, more taxes to arm government with the financial power to prosecute development programmes.
Closing the housing deficit
Estimates of Nigeria’s housing deficit could be anywhere between five and 20 million depending on whom one listens to. What is, however, certain is that Nigeria suffers a serious housing shortage, made worse by the insurgency in the North-east. Fashola reflects government thinking when he says “the housing sector presents an enormous opportunity for positively impacting the economy to promote not only growth, but also inclusion”.
The government proposes to spend N10 billion for low-income housing estates in each of the 36 states plus the Federal Capital Territory (FCT). The good news is that government this time will lead the aggressive intervention in public housing but will ultimately enable and allow the private sector to drive the process. Using the successful template of LagosHom Model he pioneered as governor of Lagos State, the minister aims to start off with 40 blocks of 12 flats in each state. It does not take much thinking to see the economic activities to be generated in each of these projects, involving masons, carpenters, electricians, plumbers and many more artisans. The multiplier effect would shoot up when the private sector is galvanized to jump into the industry in response to incentives put in place by government via the financial markets.
Re-imagining transportation
At N215.8 billion, the Transport Ministry’s 2016 budget is a gargantuan 1428 percent higher than the combined 2015 budgets of the old Ministries of Transport and Aviation it replaced. Transport Minister Mr Chibuike Amaechi now has a good portion of what he needs to change the face of the transport sector and he is rearing to go. Starting out with the ailing rail system, the administration hopes to enhance national integration by facilitating mass transit of passengers and goods across the country’s geographical regions.
“The immediate impact,” the minister says, “will be the reduction in the haulage of heavy cargoes by trucks, thus reducing the pressure and damage to roads” that were the only viable option for freight movement in the past three decades of visionless national planning. This year will see the commencement of movement of petroleum products by rail, giving the much-needed respite to the road infrastructure.
Work on standard gauge rails will commence on the Lagos – Kano; Calabar – Kano; the Obudu Cattle Ranch – Port Harcourt and the Yenagoa – Lagos lines to connect cities and seaports around the country. Amaechi is particularly delighted that these projects will generate over 250,000 direct and indirect jobs, to say nothing of the multiplier effects on the economies of the communities the rails run through.
Still on transportation, the administration is going ahead with the remodeling work at the airports in Lagos, Abuja, Kano and Port Harcourt. The joker in the pack is the invitation held out to the private sector to encourage participation and the attraction of private resources to augment layouts in the budget. All these will be concretized with the completion of the transportation master plan. The minister would want the sector to contribute a lot more than the paltry 1.4 percent it currently does to GDP. The short-term goal is to unlock the potential in all subsectors including maritime, which is still poorly regulated and administered.
Agriculture: back to business
Like in most developing countries, agriculture employs close to 70 percent of Nigeria’s working population. Many commentators dream of the good old post–independence days when agriculture supplied virtually all the government needed to run the country while the best businesses were in the agro-allied industry. The Central Bank’s recent monetary policy initiatives have been influenced by Nigeria’s well-known comparative advantage in agriculture. It recently restricted foreign exchange sale to players in the agro-allied industries on the grounds that they can source raw materials from the country’s hugely endowed agricultural sector.
The need to return to agriculture in the face of the decline of oil is reflected in the substantial 434 percent increase in resources allocated to the sector. From N8.79 billion in 2015, provision for capital expenditure for this year climbed to N47 billion.
To encourage young people to till the land and engage in aquaculture, the AfDB is in the process of extending a $150 million loan to support Nigeria’s agriculture and fishery projects. The challenge remains how the ministry can ensure that the funds don’t end up in the pockets of phantom farmers. Agriculture Minister Chief Audu Ogbeh, incidentally, is a farmer with the distinction of being, arguably, the largest single castor oil producer in Africa. He is now working on how to improve on former Minister Dr Akinwunmi Adesina’s legacy of ensuring that only genuine farmers access government guaranteed facilities and incentives to revive the sector. Nigerian bankers last month agreed to set up a N300 billion fund for agriculture but want farmers organized in cooperatives that will act as guarantors for the loans.
In the short run, the agriculture ministry will build a mini-processing plant to make good use of the milk produced by cattle rearers in the Mambilla area of Plateau State much of which currently goes to waste. Ogbeh says the ministry and such diary giants as Friesland, WAMCO and Promasidor are discussing how such resources can be best harnessed.
Creating synergy in the sectors
In Minister Ogbeh’s opinion, agriculture is a useful tool of creating synergy among the various sectors of the economy. He sees government’s proposed school children feeding programme as progressive, noting how it might impact the poultry industry for instance. If the government gives an egg to each school kid a day, he reckons, the demand will be about 30 million eggs requiring some 46 million layers. This level of demand will stimulate investment in the industry for more hatcheries and birds. This in turn will generate more demand for maize, soya etc used in the production of feed for the birds. On and on goes the chain. The lesson: “If you stimulate an activity in one sector, you create action in another”. So much for the multiplier principle and how Nigeria’s economy can really be revitalized if officials wake up to their responsibilities.
Taking up the solid minerals challenge
The 2016 budget may have at last broached, if not solved the chronic problem of the neglect of Nigeria’s solid minerals. Ever since black gold became an easy convenient source of money for government coffers, successive administrations have left the solid minerals sector to the devises of ill-motivated, inefficient artisanal miners. Over the years, substantial deposits of such minerals as tin, zinc, limestone, marble, gypsum and Kaolin have been left untapped. By paying lip service to the need for the exploitation of these and other minerals including gold, coal and iron ore, administration after administration has allowed the easy money from oil to dampen enthusiasm over other viable national resources.
By allocating N9.5 billion to the Solid Minerals Ministry in the 2016 budget, the Buhari administration is signaling a clean break from the past. It is an incredible N8 billion more than last year’s provision. Minister Kayode Fayemi knows how significant the gesture is and how seriously the administration takes the need to enhance the sector to take up the slack in the oil sector. “This is a sector that can provide a million direct jobs. We need to formalize those jobs,” he reasons.
Analysts believe that the sector can do a lot better than the estimated N10.8 billion it generated in 2015. It currently contributes a mere 0.34 percent to GDP. Many blame the stifling law that makes the exploitation of all mineral resources the exclusive prerogative of the federal government. The nation’s state governors want to partner with the central government and the ministry to create an enabling environment for investors to make the sector a catalyst for job creation, revenue generation and industrialization. The first step therefore is to revisit the statute and make the extant Nigerian Minerals and Mining Act more investor-friendly. Then, the nation can expect global mining giants to show interest.
Energy analyst Ken Nheke thinks that, with the right laws and retooling of the ministry, “government can start to make money from solid minerals from quarter one”, by enforcing laws that empower licensed firms to get exclusive rights to fields or blocks and pay royalties.
It is a no-brainer that massive investment in the sector is the way to go. “Virtually every state”, according to Shetima Abba-Gana, Acting Chairman, Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC), “has some solid minerals it can rely on to generate revenue”.
Joining the tech race
Minister of Science and Technology Dr Ogbonnaya Onu, at a public briefing after taking over the mantle of leadership, said what everyone already knows. “The only way out of the woods”, he stated, “is the application of scientific research and innovation in harnessing the abundant natural resources the country is endowed with.”
Fortunately, government’s decision to exempt students of Science and Technology courses in tertiary institutions from paying tuition fees emphasizes its recognition of the place of technical knowledge in today’s globalised economy.
The challenge, however, is that the country is yet to put in place the structures required for the advancement of science and technology and critics say the N25 billion earmarked for the ministry is just a drop in the ocean. Government spokespersons are quick to respond that efforts at improving power and infrastructure are bound to impinge on the development of science and technology. The administration’s defence sounds plausible to Dr Biyi Oyetade, a lecturer, but notes that the country may not yet have the manpower to drive the Science and Technology policy.
He hopes that more resources will be devoted to the sector in the coming years, but believes that the current budget as a whole represents “a good start”.
The good news about Nigeria’s 2016 budget is that the more you look, the more you see. The icing on the cake is obviously President Buhari’s determination to rid the country of corruption which will ensure that Nigeria’s money works for Nigerians.