The Minister of Budget and National Planning, Senator Udoma Udo Udoma is optimistic that the Nigerian economy will continue to maintain its recovery in 2019 as the real GDP growth is expected to increase from 0.8% in 2017 to 2.1% in 2018 and 3.01% in 2019, with the sustained implementation of the ERGP.
Senator Udoma who was speaking at the Deloitte Dialogue on Nigeria”s Economic Outlook for 2019, in Lagos on Thursday, said the proposed 2019 Budget is intended to further reposition the economy on the path of faster, inclusive, diversified and sustainable growth, and to continue to lift significant numbers of our citizens out of poverty.
The Minister explained that with the improved coordination of fiscal and monetary policies, exchange rate stability, improved oil export earnings and capital inflows, as well as the continuation of the current prudent management of foreign exchange reserves by the CBN, inflation is expected to trend downwards to single digit of 9.98% in 2019 from 11.44% as at December 2018.
“Government is committed to growing the economy, and accordingly the 2019 Budget Proposal has been designed to continue to provide the stimulus and support required to spur growth in the economy.” he stated.
While indicating that the 2019 Budget is another step in the country’s journey to ensure diversified, inclusive, sustainable growth, creating jobs for the teeming population and prosperity of Nigerians, Senator Udoma said government expects more diversified and inclusive growth in 2019 and over the medium term.
He said though the current real GDP growth performance is still a little sluggish, which is expected as we are just recovering from recession, it however indicates a positive momentum, especially with regard to the growth of the non-oil sector. “Our aim is to take all measures necessary to ensure that we increase the growth rate whilst maintaining fiscal sustainability.”
Explaining the basis for the oil price projections in the budget, the Minister said oil prices depend on the interaction between supply and demand for oil in international markets. It is however the supply-side factors that have been mainly responsible for the price increase in 2018 and the recent decline, he added.
Although Crude oil price soared in the second half of 2018, rising as high as US$81.20/b on September 24, 2018 – a four year high – it declined towards the end of 2018, falling below the 2019 budget benchmark of US$60/b. Whilst the Government is obviously concerned about this recent trend, most analysts believe the price will recover in the course of 2019, and so the Federal Government has not seen any need to adjust its benchmark price of US$60. However, he assured the gathering that if, at any time prior to the passage into law of the 2019 Budget by the National Assembly, there is strong reason to believe that this benchmark price of US$60 is unlikely to be realised then the Executive will, of course, engage with the National Assembly to agree a lower benchmark price.
On oil production levels, the Minister said that President Buhari has directed the NNPC to work hard to achieve the 2.3mbpd budget target. “The ERGP Oil production target for 2019 is 2.4mbpd, NNPC production submission is 2.45mbpd. We have revised the ERGP target and NNPC forecast downwards to 2.3mbpd for the 2019 Budget proposal,” he pointed out.
He explained that the 2019 proposed budget size is smaller than the 2018 Budget because of the need to contain the size of the deficit so as to keep our borrowing within prudent limits. The Minister pointed out that the proposed deficit of N1.859 trillion in 2019 is about 1.33% of GDP, which is within the 3% threshold stipulated in the Fiscal Responsibility Act (FRA) 2007.
The Minister indicated that even though Government has been increasing allocation to infrastructure government spending alone will be insufficient to address the infrastructure needs of the country. This, he explained, is why Government is encouraging PPPs. Tax incentives are being provided to encourage private sector investment in infrastructure. Hence the Executive Order 007 on Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme which was signed by the President on January 25, 2019.
“The Scheme seeks to leverage private sector capital for the development and refurbishment of road networks in industrial clusters and key economic areas in the country. It entitles private investors to full recovery of the cost incurred on the road project(s) in the form of a Road Infrastructure Tax Credit which can be utilized against participants’ future CIT payable to the Federal Government”, he explained.
The Minister said that Government will continue to provide improved access to funding and supporting infrastructure to encourage small businesses, in particular. Government will also continue with the current emphasis on power, roads and rail. “We shall continue to expand generation, transmission and distribution of power from the national grid while developing innovative off grid solutions for schools, hospitals and markets.
“Efforts to improve hard infrastructure will be complemented by expanding reforms in the ease of doing business. We will continue to remove obstacles, reduce costs and ensure timely delivery of services so as to improve the environment for the private sector,” he explained.
On the issue of the minimum wage, the Minister assured that Government is committed to an increase in the minimum wage, and that, accordingly, some provision has been made for this in the 2019 Budget proposal. In addition, a high-powered Technical Committee has been inaugurated by President Buhari to identify additional sources of revenue to ensure that the rise in the Government’s wage bill does not crowd out the other responsibilities of government. The Committee is also to advise on ways to implement any consequential wage adjustments in such a manner as to minimize its inflationary impact.
Other speakers at the Deloitte Dialogue include the Minister of Finance, Mrs Zainab Ahmed, who spoke on “Revenue Growth and Economic Development: Expectations for 2019”.
The event featured panel discussions with sector experts including the Kaduna State Governor, Mallam El Rufai (who was represented); Statistician General of the National Bureau of Statistics, Dr Yemi Kale; and the Senior Special Assistant to the President on Industry, Trade and Investment, Dr Jumoke Oduwole, among others. The event was chaired by the Chairman of Zenith Bank, Mr Jim Ovia.