2018 Budget Proposal Not Audacious Enough – Rewane
Popular economist and Chief Executive Officer of Financial Derivatives Company, Mr Bismarck Rewane, says the 2018 budget proposal is not audacious enough.
President Muhammadu Buhari had on Tuesday presented to the National Assembly the 2018 Appropriation Bill which proposed a total expenditure of N8.612 trillion naira, which is an estimated 16 percent higher than the figure for the 2017 budget.
When inflation is factored in, however, there has been no real increase in total expenditure, according to Mr Rewane.
“The figure of N8.6 trillion is 15.7 percent higher than the budgeted figure for last year. The rate of inflation this year is 15.9 percent. So, in real terms, there has been zero growth in expenditure,” he said during an appearance on Channels Television’s Politics Today, about four hours after the budget presentation.
“Because a thousand naira that you had in January will be equal to a thousand naira less 15.5 percent in December. So, if you have increased your budget expenditure from N7.4 trillion to N8.6 trillion which is 15.7 percent, effectively, you have actually increased your budget by zero.”
For Mr Rewane, when the parameters of the budget and the realities of the Nigerian economy are taken into consideration, it is clear that this is a time for economic stimulus, a time to increase spending and to be audacious.
“Not just for the sake of spending, but for impactful spending,” he said. “What the President has done today is an impactful spending programme, but my fear is that it is not audacious enough; it is not bold enough”.
Another problem the economist has with the budget is its exchange rate assumption. President Buhari had told lawmakers that an exchange rate of N305/per dollar was used in drafting the budget, an assumption which contrasts with the realities of the foreign exchange market.
“The effective exchange rate by the IE Window (Investors and Exporters Foreign Exchange Window) today is N360 (per dollar). Let us stop deceiving ourselves that there is an exchange rate of N305 (per dollar),” Mr Rewane said. “The exchange rate today is N360 and N363 on the parallel market.”
Mr Rewane, however, has no problem with the assumption for crude oil export, which is $45 per barrel.
“The budget assumption of $45 per barrel is very realistic because today, oil is trading at $64 per barrel which is 40 percent higher; there is a 40 percent headroom,” he said.
“The production estimate of 2.3 million barrels per day is a bit optimistic but if you add our condensates to the picture of what we are actually producing, it is about fair value.”
Without the condensates, there is a 20 percent shortfall in what is actually being produced and what the government wants to achieve, the economist added, noting, however, that even such a shortfall is covered by the current price of crude which is 40 percent higher than the budgetary assumption.
Mr Rewane also believes the budget deficit at about two percent of GDP is in order as it is “within the convergence area for the West African region”.
Although Mr Rewane admitted that the budget is one of consolidation, he stressed that “you only consolidate after you achieve the growth you want to achieve”.
“We are not there yet, we are still at 0.55 percent growth,” he said.
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