There has been a general weakening of economic growth in emerging market economy, the security challenges including insurgency in part of the North East, high rate of unemployment, huge infrastructure and housing deficit among others characterized the Nigerian economic landscape. These however have imposed significant fiscal strains on Government revenues as well as other real sector and external account indicators. Hence, it is within these global and domestic economic setting that the 2016 budget was developed.
The Nigerian economy is now in a state of crisis which is severely damaging due to recent events such as floating of the currency, power cuts, Boko Haram insurgency, and the drop in oil prices have impacted Nigeria’s economy, leading to the current recession. The Central Bank of Nigeria is finding it difficult to support the economy due to issues arising from exceeding money borrowing and lending limits, and its struggle with macro-economic stability.
The country’s current negative per capita growth also sheds more light on its economic situation. If the country faces a recession, international trade, foreign investments, aid, and reserves will feel the impact, and the economy will naturally bear the brunt. Exportation will be drastically reduced and investors will withdraw, among negative outcomes.
On a ‘brighter’ note, all hope does not necessarily have to be lost in the event of a recession crisis. Following the economic ‘boom’ witnessed in 1973, Nigeria went through a period of ‘doom’ from the mid-1980s until 1997. It recovered from that event between 1997 and 2007. Countries around the world have come out of recessions before such as South Africa. The Secretary to the Government of the Federation (SGF), Mr. Babachir Lawal was reported to have said that the N6.06 trillion budgets for this year will only be partially implemented as a result of revenue shortfall. He disclosed that the Federal Government’s earning has declined by 40% as a result of the drastic fall in oil prices , as well as the series of wave attacks on oil installations in the oil-rich Niger Delta.
The reality that the oil benchmark of $38 per barrel set by the Federal Government in the 2016 budget had not been effective in view of the protracted attacks by militants on oil installations and the fact that the nation sometimes produces as low as 800,000 barrels per day. The Secretary to the Government of the Federation while addressing the senate said “we cannot guarantee the implementation of constituency projects of 2016 budget and that Lawmakers were aware that oil production has dwindled to about 800,000 per day, this has led to the inability of the government to finance the budget and hence it is the duty of government to prepare the minds of Nigerians ahead that there will be challenges in implementing the budget.
In the view of this, the Director General of West African Institute for Financial and Economic Management (WAIFEM), Professor Akpan Ekpo said the morphology of growth indicates an economy with positive growth trajectories but no development”. He however advised the Federal government to raise the value Added Tax (VAT) by just one percent saying raising it higher or imposing additional tax on Nigerians might be too hard for them to bear, and that the looted money recovered should also be used to finance the budget so as to stop recession. He believed effective polices that would prioritize massive investment in hard infrastructure, employment generation, investment in housing construction, building strong institutions and an aggressive monetary and fiscal policy.
Furthermore, the minister of Finance, Mrs. Kemi Adeosun was quoted to have said that “the full implementation of 2016 budget depends on revenue targets”. According to Adeosun, in economic terms, if you have two periods of negative growth, you are technically in a recession but I don’t think we should spend too much time on labels, we are in a tough situation, whether you call it recession or not, we are in a tough place, but the most important thing is that we are going to get out of it. Technically, we are in recession, but I don’t think we should dwell on definitions, I think we should really dwell on where we are going.
The minister spoke at the House of Representatives sectoral debate on economic diversification and said: “I cannot promise that every single agency would receive every money appropriated for them (because) the budget is an estimate and funds would be released based on revenue’’. However assuring the legislators, that government was committed to ensure that available funds were judiciously deployed, monitored and backed by result measurement and that efforts were being intensified to boost revenue generation outside the sale of crude oil
The issue of the 2016 partial implementation is as a result of low funding or reduction in revenues which also has its implications on the Nigerian Economy such as;
Slump in the market – People would find it difficult to buy goods and services as their purchasing power will be reduced due to unemployment. This will invariably lead to a slump in the market as producers will produce less, meaning less profit for producers.
Fall in Stock price – Several investments would suffer as a result of this because investors will avoid investing in companies that might be at a risk of suffering losses during this period.
Companies closing down: While bigger companies may be able to withstand the crisis, several small companies will be forced to shut down as they will be making less profit.
Increase in unemployment – During a recession, the number of unemployed people would increase as firms go bankrupt. As a result of this bankruptcy, some companies will be forced to downsize. This is already happening in Nigeria. Several companies are laying-off staff as a result of the current economic situation in the country. According to the recent report on unemployment released by the National Bureau of Statistics, the number of unemployed people in the country has increased to over 1.45 million.
Increase in national debt – During recessions the government is usually forced to divert tax payers money meant for development to bailing out companies that cannot survive on their own.
With all this hardship the Nigerian leaders should be very humble, attentive and sympathetic to the suffering of its people, and the interest of Nigerians is paramount. Nigerians can only be optimistic in the economy and pray for the hard times to come to end.