Daily Trust economists worry about budget deficit, high debts, naira overhaul and current options

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OWith varying concerns from experts over a N10.78 trillion deficit in the proposed N20.51 trillion naira budget for 2023, rising debt service and the Naira overhaul plan, the Daily Trust Board of Economists (BoE) called for a public-private partnership (PPP) and a debt-to-income ratio measurement model to loan.

Coming out of its quarterly meeting in Abuja over the weekend, the board also urged the Central Bank of Nigeria (CBN) to deepen its outreach to the masses on the gains from the naira overhaul, which includes making available more funds in banks to improve lending. small and medium-sized enterprises (SMEs), among others.

According to a statement it issued on Sunday, the Council hailed the performance of the national economy in the second quarter of fiscal 2022, based on the quarterly GDP report released by the National Bureau of Statistics (NBS). ), with a GDP growth rate of 3.54%, which is slightly higher than the 3.11% recorded in the first quarter of the year.

The Board, however, noted that the growth trajectory was slow, partly due to the lack of clarity in the government’s policy direction, particularly foreign exchange management.

He said that in the absence of key constraints, the key sectors of agriculture, ICT, SMEs and manufacturing sectors which fortunately are non-oil sectors, could have performed better. For the oil sector which has been slow to grow, the Council said this could be attributed to oil theft and the sector may be able to rebound with the full commercialization of NNPC Ltd.

Harps on Fiscal and Monetary Coordination by CBN, Ministry

Recognizing the role of the CBN in controlling rising inflation, the Council recommended the need to pursue a non-inflationary growth policy to ensure that GDP growth benefits citizens.

“The CBN has an obligation to ensure price stability, but the implementation of such a policy should be considered with key synchronization of fiscal and trade policies, especially between the CBN and the Federal Ministry of Finance, budget and national planning,” he said.

This, he said, relates in particular to the increase in the monetary policy rate which may curb inflation but affect the borrowing capacity of small businesses and which could also affect their productivity, crowding them out and increasing the unemployment rate.

Speaking further on this, the Chairman of the Daily Trust Board of Economists, Professor Binta Tijjani Jibril, said: “One of the major impediments to Nigeria’s economic growth in recent years has been the apparent disconnect between the authorities monetary and fiscal. The result of this lack of synergy manifests itself in accelerated inflation, high interest rates and enormous pressure on the exchange rate.

Professor Jibril, Director of the International Institute of Islamic Banking and Finance at Bayero University in Kano (BUK), also said there was an urgent need for the government to put in place effective coordination mechanisms that would ensure achievement of individual goals. of the two authorities while recognizing their different institutional and operational processes.

“This is what will achieve sustainable economic growth within the framework of price stability and favorable external accounts,” Professor Jibril said.

Raising concern over the proposed 2023 budget, the Council argued that with a deficit of N10.78 trillion out of a proposed budget of N20.51 trillion, this proposal is biased towards inflation and poverty. additional debt that must be incurred to finance it.

“Provisions for capital expenditures may not be met because the capital needed to fund them may not be realized. As a result, prospects for growth in the economy over the next financial year are limited,” said Dr Rislanudeen Muhammad, Board Member, former Managing Director of Unity Bank PLC and CEO of Safmur Investments Ltd.

To overcome this challenge, the Daily Trust BoE advised the federal government to take inspiration from other emerging economies that are adequately financing their infrastructure projects through PPPs, such as the new partnership-funded Lekki Deep Seaport in Lagos, while commending the government for its tax-for-infrastructure swap policy with major taxpayers such as the Dangote Obajana Road Rehabilitation. He notes, however, that this will only be effective if we put in place a coherent PPP policy.

If capital spending isn’t met, some cues that could spur economic growth won’t materialize, he said. He also urged the government to reduce our appetite for borrowing and more balanced budgets by eliminating fuel subsidies and putting in place policies and programs that protect weak and vulnerable members of society.

For the Naira recast, the Board noted that the policy is highly likely to attract remittances from the informal to the formal sector. “However, this is the subject of vigorous enlightenment campaigns by the monetary authorities, raising public awareness of online channels for funds transactions,” the statement said.

Again, Council reiterated its deep concern over the evident lack of coordination between monetary, fiscal and trade policies as well as the upward trend of dollarization in the Nigerian economy which could trigger higher inflation than curb it. .

“The government should devise more powerful ways to combat money laundering and other illicit transactions, including the full implementation of existing laws in this regard,” just as the Council pledged its full support to the government to fight it.

To cope with rising energy costs around the world, the Daily Trust BoE said that the complete deregulation of the petroleum sector in Nigeria will help save the country from the persistent financing of fuel subsidies, which is absolutely unsustainable.

He reiterated his advice to all levels of government to reduce their borrowing appetite while embracing PPP. “The government should adopt the use of the debt-to-revenue ratio as a measure of debt sustainability rather than the debt-to-GDP ratio.”

In the run-up to the general elections, the Board noted with concern expansionary fiscal spending, which could trigger high inflation. The Council requested amendments to the electoral law to introduce a certain amount to be paid to each political party by its members in order to raise funds for the parties.

“Without prejudice to the provisions of the electoral law, the Council recommended that the security agencies develop measures to enforce the provisions in terms of electoral expenses,” the statement said.

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