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Fresh fear grips policy makers over 2017 budget funding

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Fresh fear grips policy makers over 2017 budget funding

Fresh fear has gripped Nigerian policy makers following reports that the United States twin-policy of Green Energy technology and emphasis on consumption of more of shale oil than Brent oil may not allow the sustainable rise in price of crude oil as to back up the country’s N7.4 trillion budget for the year.

The feeling is said to be emanating from the suspected inability to have none oil sectors contribute to the expected 30 per cent rise in revenue for the budget.

As at last review of the oil price in May 25, 2017, the initial quantum jump in price, from $42.5 a barrel to $53.5 has been slightly reduced by 5.12 per cent, with a barrel selling at $51.5 in the first week in June.

Though the budget has been benchmarked on $44.7 per barrel, the expectation is that the excess crude revenue will be used to shore up Nigeria’s sovereign wealth fund and boost its foreign reserves.

The $2.3 billion to be borrowed from local and international lenders to fund the deficit in the budget may not be actualised, if the U.S. goes ahead to push in more of its programme to affect the oil price eventually, said some analysts.

The Green Energy policy of Trump administration is a major threat, capable of reducing OPEC planned control of the market price in the next couple of months leading to March 2018, as less demand may be made of the cartel’s oil.

Read also: INVESTIGATION: Asian company rakes in billions, pollutes Lagos, Ogun in illegal manufacture of black oil

However, Minister of State, Petroleum, Ibe Kachikwu, said there is no cause for alarm, adding that OPEC-member countries had a solution to any eventuality towards any crash in the market price.

“I know we cannot fall back to the level of desperation, as was the case before now, given programmes on the ground.” he told CNBC Tv.

But beyond the minister’s optimistism, stakeholders say they doubt effective funding of the budget from oil alone.

Members of the Organized Private Sector (OPS) reaffirm similar pessimism, noting that the non-oil sector is currently heavily burdened with various taxes and levies amidst a challenging operating environment, to be able to contribute profitably to government’s expenditure plan.

According to them, government’s agenda to make the non-oil sector the major revenue earner will have to take the back burner till businesses are able to operate profitably in the country.

Said the Executive Secretary of the National Employers Council (NEC) , Mr. Gab Osuigwe, the economy is still not free from the devastating effect of recession; to most private sectors, until government direction is seen as being inclusive, by way of accommodating opinions of key players in all sectors, there is no much hope yet.

“Some of us had thought that the country would have used the recession to divert up to 50 per cent interest to the non oil sector,

“The potential from solid minerals alone would have seen the economy breathing back to life, now that oil price is picking up, but with all the negative information from the market, I doubt if we can go far, still relying on the oil sector alone,” Osuigwe stated.

Other experts on the economy say that government’s promise of letting agriculture come up by contributing 20 to 25 per cent to the GDP is yet to be seen, given that the Minister of Agriculture Audu Ogbe said recently that unless the country’s border is shut, there will be no means of stopping the waste of estimated $2.5 billion on rice importation into the country.

Mr. Ganiyu Kolawale, an Agroeconomist, with the College of Agriculture Abeokuta, Ogun State, said the sector has all it takes to contribute more than 25 per cent to GDP, but there is no commitment and the will to drive the policy that could see that being feasible.

“From all indications, it will take some time for the government to gain the kind of revenue it seeks from the non-oil sector, which agriculture is supposed to be the leader.

“Even the banks’ attitude to the growth of the economy with agriculture is a factor, because in Kenya, for instance, two third of the banks woo even rural farmers to come for loan, hence the country is never said to be lacking in food security and in its general economic growth.

“If the incentive is given, more than 60 per cent of the unemployed would have been engaged in agriculture and related services, as is done in Pakistan, Singapore and other countries without oil.

“As it stands today, only about 30 per cent of the real sector is in full operation in Nigeria and the number may shrink further, if the 2017 budget fails to hit the expected projection,” said the President of the Manufacturers Association of Nigeria (MAN) Dr. Johnson Jacobs.

He said the Purchasing Managers’ Index (PMI) of Nigeria has been growing to a point of being reliable for both the short-to-medium-term planning, but all that is needed is policy initiation to diversify the economy better than what is currently obtainable.

 

 

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0 Comments

  1. yanju omotodun

    June 6, 2017 at 12:47 am

    No need to worry about the funding, we will surely get funds to finance the budget. First thing first. Sign the budget

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