As the International Monetary Fund (IMF ) predicts
that Nigeria’s economy will contract this year, the
Minister of Budget, Senator Udoma Udo Udoma on
Thursday has painted a more bleak picture for the
economy this year, saying government revenues
reached only 55 per cent of what had been targeted
in the first quarter of the year, blaming attacks on
that Nigeria’s economy will contract this year, the
Minister of Budget, Senator Udoma Udo Udoma on
Thursday has painted a more bleak picture for the
economy this year, saying government revenues
reached only 55 per cent of what had been targeted
in the first quarter of the year, blaming attacks on
oil facilities in the southern Niger Delta region.
This came as the Secretary to the Government of
the Federation (SGF ), Mr . Babachair David Lawal
said earlier on Wednesday that the Federal
Government may not fully implement the 2016
national budget; also attributing the situation to the
activities of militants in the Niger Delta region.
The SGF spoke when he appeared before a joint
Senate Committee on Ethics, Privileges and Public
Petitions; Appropriation and Finance over his
comments that the Federal Government might not
implement constituency projects in the 2016
budget. He said Nigeria’s daily oil output has fallen
to 800 ,000 barrels per day, saying the situation has
led to government not being able to finance the
budget. “It is the duty of government to prepare the
minds of Nigerians ahead that there will be
challenges in implementing the budget, ” he said.
He added that the MDAs are already facing
challenges in implementing the budget based on
the funds available to them. It is against this
backdrop that IMF resident representative in Nigeria,
Gene Leon said: “ I think there is a high likelihood
that the year 2016 as a whole will be a
contractionary year. ”
He said while the economy should look better in
second half of the year, growth will probably not
“be sufficiently fast, sufficiently rapid to be able to
negate the outcome of ” the first and second
quarters.
The economy shrunk by 0.4 per cent in the first
quarter, the first contraction in more than a decade,
as oil output and prices slumped and the passing
of the 2016 Appropriation Act was delayed.
A currency peg and foreign- exchange trading
restrictions, which were removed last month after
more than a year, led to shortages of goods from
fuel to most consumables and contributed to the
contraction in the first three months of the year.
Leon, who spoke in a recent interview in Abuja,
said, while conditions that impeded growth in the
first half of the year, including shortages of power,
fuel, and foreign exchange, as well as the higher
price of dollars on the parallel market, may have
been reduced, they still weigh on the economy. IMF
cut its 2016 growth forecast for Nigeria to 2.3 per
cent in its April Regional Economic Outlook from
3.2 per cent projected in February.
The World Bank lowered its forecast to 0.8 per cent
last month, citing weakness from oil output
disruptions and low prices. Last year ’s expansion
of 2.7 per cent was the slowest in two decades,
according to IMF data.
Q
“Most people would agree that if you should fix one
thing in this country, it should be power, ” Leon
said. “There is a need to start changing the power
equation from 2016 , from today, not tomorrow or
later. ” Nigeria generated an average of 2,464
megawatts of electricity on June 6, according to
information from the power ministry. This is less
than half of the installed capacity of 5,000
megawatts for a nation whose population of 180
million people is the highest on the continent.
“Most people would agree that if you should fix one
thing in this country, it should be power, ” Leon
said. “There is a need to start changing the power
equation from 2016 , from today, not tomorrow or
later. ” Nigeria generated an average of 2,464
megawatts of electricity on June 6, according to
information from the power ministry. This is less
than half of the installed capacity of 5,000
megawatts for a nation whose population of 180
million people is the highest on the continent.
It compares to power generating capacity of more
than 40,000 megawatts in South Africa, which has a
population a third of the size . While inflation will
probably continue its upward trend through the end
of this year, it is unlikely to exceed 20 per cent,
Leon said.
Price growth accelerated to 15.6 per cent, the
highest rate in more than six years , in May and
probably quickened to 16.2 per cent last month,
according to the median of seven economist
estimates compiled by Bloomberg. The Monetary
Policy Committee (MPC ), “May be open to
tolerating a little more inflation if growth emerges
as the priority, as opposed to choking inflation and
squeezing the little life out of growth,” Leon said.
“But the CBN , in conjunction with the MPC, needs
to be clear to participants in markets what exactly
their priority is. ”
The CBN left its benchmark rate unchanged at 12
per cent in May and will announce its next decision
on July 26. The MPC is likely to increase the rate
by 500 basis points in the next year “ to address
the prevailing inconsistencies between an
accommodative monetary policy and a more
flexible exchange rate ,” Goldman Sachs said in a
note on July 8.
Nigeria ’s huge budget of N6.1 trillion , with a
deficit of 2.2 trillion, or 2.14 per cent of gross
domestic product, came into operation in May after
a delay of four months. If had earned all the
revenue it targeted, the fact that the budget was
passed late means it’ s likely not all the capital
spending planned to boost growth will take place,
or it will not be as prudent as initially set out, Leon
said. If growth falls to zero per cent “then that ’s a
huge gap the country has to fill,” Leon said.
If expenditure stays as planned, and revenue is less
due to the lack of growth “then we should see not
smaller but potentially a larger deficit ,” he said.
