I have directed the Petroleum Products Pricing Regulatory Agency to adjust its pricing template to reflect competitive and market-driven components. We believe this can lower input costs and attain efficiency savings that will enable the PPPRA to keep the selling price for all marketers of petrol at N87 per litre for now,” President Muhammadu Buhari said, in his 2016 budget proposal address to the National Assembly recently.
In the short passage above, the President captured the ideological contradiction/competition that will shape the Nigerian economy in 2016.
For instance, experts are wondering how will the PPPRA adjust its pricing template to reflect competition and market-driven components and at the same time keep the selling price of petrol to all marketers at N87 per litre.
Experts warn that the rent economy will continue unless the government musters the courage to resolve its contradictions, face the labour challenges and do away with the albatross of the Nigerian economy in the past nine years.
Oil and gas
Economists say the contradictions in the government manifest in its holding on to the refineries that have served more to siphon public wealth into private pockets. The government says it has no plan to sell the refineries and claims that the economy will be private sector led.
They recalled that soon after Buhari assumed office, both the Nigerian National Petroleum Corporation and the management of the refineries hoodwinked Nigerians that the plants had started working. Similar deception had been packaged when the late President Umar Yar’Adua assumed office in 2007. He had to cancel the privatisation of the refineries.
Eight years after the cancellation of the privatisation exercise, according to analysts, the patrimonies that the nation refused to let go still remain Nigeria’s drain pipe instead of giving the country a foothold to refine its petroleum products and save the nation the haemorrhage known as importation of petroleum products.
They warn that except Nigeria quickly finds a radical solution and acquire local refining capacity, the blessing of the crash in crude oil price will continue to elude the nation, while it cannot escape the gloom.
Economists says a Gross Domestic Product growth rate of 4.37 per cent set by the government for 2016 seems to be very optimistic given the dwindling revenue from oil and gas exports.
However, given the nation’s vast natural resources that remain largely untapped, they note that the GDP growth rate may well be within achievable limit in 2016.
However, a former President of the Nigerian Economic Society and Executive Director, African Centre for Shared Development Capacity Building, Prof. Olu Ajakaiye, said the citizens and the government should not panic because of the trend in oil price.
According to Ajakaiye, minimising pilferage, waste, impunity, overpricing and over-invoicing will go a long way in reducing the difference in the price of crude oil sold at its peak period and the price it will sell at its lowest ebb.
“The economy will do better in 2016. I am happy for the falling oil price because it will show the strength of the Nigerian economy,” he said.
He listed sectors that would boost the quest for the diversification of the nation’s economy to include solid minerals, processing and agriculture.
Solid minerals
Going by the budgetary allocation to the Ministry of Solid Minerals Development, the government may have signified its intention to tap into the vast natural resources in the
In 2015, the ministry and its parastatals received N250m for capital projects compared to N9.1bn in 2016 and N9.52bn for recurrent expenditure. This shows an increase of 3,540 per cent in the allocation for capital projects.
With the higher allocation going to the ministry, the President has signified his intention to lean on this sector given the dwindling resources from oil.
Solid minerals have long been touted as alternatives to oil and gas although only lip service is being paid to the sector with little or no allocation for capital development.
The current Minister of Solid Minerals, Dr. Kayode Fayemi, had at his maiden press briefing identified poor funding as one of the problems of the sector.
He signalled the plan by the ministry to seek special funding from the Central Bank of Nigeria and commercial banks to develop the sector.
The Executive Chairman, Zuma West Africa Limited, Dr. Innocent Ezuma, agrees that solid minerals have a great role to play in the diversification of the economy beginning from 2016.
To make the best of solid minerals, Ezuma said support infrastructure must be provided. The first among such infrastructure should be power, he said. Others included good road network, inland waterways and the rail system.
Science and technology
The Ministry of Science and Technology may also be repositioned to play a significant role in the development of the economy going by the allocation to the ministry in the 2016 budget and the declaration of the minister in charge, Dr. Ogbonnaya Onu.
The ministry and its parastatals are to receive allocations of N25.85bn for capital projects and N27.89bn for recurrent expenditure in 2016, up from the N3.25bn received in 2015. This shows an increase of 695.38 per cent in the capital budget allocation.
Onu, who described science and technology as the bedrock of sustainable development of the economy, vowed to change the fortunes of the sector in the country.
Experts, however, noted that what could be done in these sectors in 2016 would at best be foundational for an eventual greater role in the economy in the years ahead.
They identified agriculture as a quick low hanging fruit that could easily be plucked for economic diversification. They added that this could hardly go without the support of agro processing plants.
Buhari has never hidden his understanding of communications as one of the key sectors that can yield revenue for the government.
Social investment
Another area of contradiction, which experts urge the government to resolve, is the package for vulnerable Nigerians.
The government had initially said it was packaging N500bn for the payment of N5,000 per month to 25 million vulnerable Nigerians. In 12 months, that transfer payment will translate to N1.5tn and not N500bn.
Struggling to redefine this policy emanating from the campaign promises of the APC, the government has come out to say it has provided N300bn for vulnerable Nigerians. Excluding graduates from the package, it said 500,000 graduates would be engaged, trained and deployed as teachers in primary schools in collaboration with state governments.
If this is pulled through, analysts say that it will increase economic activities in the country in 2016 and boost education.
Labour/revenue allocation
Analysts foresee labour unrests characterising the Nigerian economy in 2016. Already, there are red flags that signify possible confrontation between labour movements and the biggest employer of labour in the country, the government, according to them.
For instance, they say one of such flashpoints is the removal of subsidy on petrol. Others are the possible retrenchment of workers, delays in the payment of salaries as well as non-payment.
State governments have clamoured for a new revenue formula so as to be able to meet their financial obligations. The most vocal states in the agitation before now were governed by the opposition party that is now at the helm of affairs in the country. Perhaps, that is why the agitation has subsided in recent times.
Economists, however, say survival instinct will likely unite the state governments again to renew the fight for a new revenue formula in 2016.
Forex/taxes/debt management
Another factor, which economists say will play a role in the direction of the nation’s economy, is the foreign exchange management. Despite the restriction in the official allocation of foreign exchange by the Central Bank of Nigeria, the local currency continues to take a beating.
The President was expected to enunciate measures to strengthen the naira in his budget speech. He pushed this to the owners of the monetary policy, the CBN.
They say that the nation’s earning capacity is weak and except this is boosted, there seems to be no sustainable measure to boost the currency in a free market economy.
This is followed by the issue of tax revenue, which the government plans to ramp up in order to boost its income.
It is significant that much of the N2.22tn the government plans to borrow in 2016 will be spent on infrastructure financing. The reverse is also true; that much of the N3.86tn to be generated will be expended on recurrent expenditure.
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