Nigerian economy still down weeks after passage of N6.06trn budget

Over a month after President Muhammadu Buhari assented to Nigeria’s record N6.06 trillion 2016 budget, which many economic analysts had projected would kick-start the process of reviving the nation’s ailing economy, the economy is still in doldrums as government ministries, departments and agencies (MDAs) are yet to receive funds to begin implementation of the budget items, BDSUNDAY has learnt.

“Nothing is happening in this economy. There is no money anywhere. Funds have not been released to MDAs. Economic activities are just not happening,” said a very knowledgeable source close to BDSUNDAY.

Prior to the passage of the budget, many analysts had said the ambitious budget would reflate and reawaken the nation’s slumbering economy and save it from an impending recession.

“Companies that had laid off staff and those that had abandoned projects are going back to sites and the economy will bounce back,” Kemi Adeosun, minister of finance, said in a statement in March, adding that the government planned to spend N350 billion in capital expenditures in the second quarter alone.

Recall that on May 6, after months of delay and uncertainty, President Buhari finally signed the 2016 Appropriation Bill into law in a brief ceremony that took place in his office.

In his address shortly after appending his signature to what would be his administration’s first budget, the president said, “In designing the 2016 budget, we made a deliberate choice to pursue an expansionary fiscal policy despite the huge decline in government revenues from crude oil exports. This is why we decided to enlarge the budget deficit at this time, to be financed principally through foreign and domestic borrowings. All borrowings will, however, be applied towards growth-enhancing capital expenditures.”

He assured that the signing of the budget would trigger concerted efforts to reflate the Nigerian economy, a key element of which was an immediate injection of N350 billion into the economy by way of capital projects.

Following the passage, many analysts expressed hope that the dark days of the Nigerian were finally coming to an end.

“After all the drama and avoidable delays, the reflationary N6.06 trillion budget has been passed and I believe the Federal Government is about now injecting huge sums of money into the economy. I can see contractors being paid and the road and rail projects resuming,” said Sam Ohuabunwa, renowned industrialist and founder, Sam Ohuabunwa Foundation for Economic Empowerment (SOFEE).

Over a month after the budget was passed, however, the much-touted reflationary impact is yet to be felt.

This is even as some analysts have said it would now take a miracle for the country to avert an imminent recession as the economy contracted by 0.36 percent in the first quarter of 2016, its first quarterly negative since 2004 and on an annual basis since 1992.

“All that is left for the economy to be officially classified as in recession is for a second consecutive quarterly negative GDP growth in Q2 2016,” said Opeyemi Agbaje, a Lagos-based public policy analyst, in a recent article.

“Given that April and May 2016 by and large amplified the factors that may have pushed the economy into negative territory – fuel shortages; sectoral declines in manufacturing, construction, government, hotels and restaurants, and oil and gas; absence of a budget hence zero capital spending; declining consumer activity plus higher inflation; constraints to food production due to insecurity in the North-East and disruptions particularly in the North-Central, but elsewhere too, caused by the menace of murderous and pillaging herdsmen; and lack of investment and currency inflows due to a grievously flawed foreign exchange regime – only a June miracle (and more practically, large budget releases, full fuel sector deregulation which appears finally underway, and the much-touted ‘flexibility’ in FX policy) will avert an official economic recession,” he added.

Meanwhile, Udoma Udo Udoma, minister for budget and planning, said on Wednesday that the impact of the incentives to boost the economy would become visible in the third quarter, adding that “substantial releases” of a N350 billion ($1.8 billion) stimulus provided for in the budget would be made available in the next few weeks.

“As for the N350 billion which was indicated, the money is available but there is a process and this is part of the reasons we briefed council and there is a need to fast-track those processes so that very soon most of those monies will be released. We expect that, in the Ministry of Works, they should have substantial release in the next week or so,” Udoma said while briefing journalists after the Federal Executive Council (FEC) meeting.

“By the third quarter we will start to see the impact of what we are doing to reflate the economy,” he added.

BDSUNDAY, however, gathered that the budget implementation is already suffering a setback due to lack of capacity on the part of government MDAs, some of who are said to lack the capacity to execute even the projects that they submitted in the N6.06 trillion estimates.

BDSUNDAY was reliably informed that most MDAs were yet to complete the procurement process which should prepare them to access disbursements and that the situation was currently affecting the ability of government to release part of the N350 billion initial capital to them.

Consequently, the Federal Government has sent a memo to the affected MDAs, giving them August deadline to complete the procurement process or be severely sanctioned.

CHUKS OLUIGBO