The 2016 Budget and how it affects the entrepreneur (Part 3)

Posted by News Express | 7 March 2016 | 4,782 times

Gmail icon

A commendable item in the 2016 Budget is the government’s allocation of N500 billion to social intervention programmes to assist the poor and vulnerable in our midst with the purpose of developing an inclusive society. The amount will be used to execute conditional cash transfers which will be implemented in phases, school feeding programme, recruitment of 500,000 teachers, financial training and loans to market women, traders and artisans through cooperative societies – all of which will be done in partnership with state governments.

Upon weathering the storm of the 2008-2009 global economic recession, the balance sheets of several financial and corporate institutions in Nigeria had been badly affected. The government at the time set up the Asset Management Corporation of Nigeria (AMCON) to bail out a few and the corporation currently has a record debt of about N5 trillion.

In view of the above, the Muhammadu Buhari-led administration has deemed it important to set up a special intervention programme to be funded to the tune of N500bn to help the poor, the less privileged, the vulnerable and indeed the Nigerian people at large, as against bailing out the corporations and leaving out the average citizenry in times of distress.

It is important to note that the National Assembly is playing its constitutional role of oversight, supervision, and checks and balances in embarking in the budget review and passage for the fiscal year. More importantly, the budget being an act of parliament, it behooves on the National Assembly to scrutinise the bill adequately and come up with the format which when passed into law would be to the best interest of both the people and the nation.

The budget has been put together by the executive and is now with the National Assembly - an independent arm of government made up of distinguished senators and honourable members representing their various constituencies across the nation.

The 2016 appropriation bill is not cast in stone. It has been laid before both chambers for their careful consideration and I believe that in the end, when the bill becomes an Act, we would have an appropriation Act that will be acceptable to every objective Nigerian.

However, the government of the day does not have the penchant for squandermania; therefore, there will be transparency and accountability – which is the hallmark of this administration. This gives hope that the budget no doubt would be religiously and satisfactorily implemented to the letter.

For the purpose of record and information, it is pertinent to discuss the strategic intent of the budget and its implication for Nigerians in bringing about the radical and positive change that the new government promised. First, to increase the appropriation size from N4.49tr budgeted in 2015 by the last administration to N6.08tr in an economy where the price of its main product has fallen by about 80% can only be audacious. Suffice it to say that, in the face of dwindling revenue, there must be the commitment to bring to bear the ingenuity to source revenue from alternative sources outside of oil. This in itself is a radical foundational change and fundamental shift towards diversifying our revenue base to fund national spending. A feat that has only attracted lip service since the discovery of oil and which could not be achieved due to lack of willpower by successive governments. This new feat would become the trend for future budgeting and to a large extent is consistent with the developed nations’ model of budgeting. This is indeed commendable and should be well appreciated by all.

To deliver on the several development initiatives of the Buhari administration, the Capital Expenditure saw a quantum leap from a sum of N557bn in the 2015 Budget to N1.8tr in the 2016 Budget. It is also pertinent to note that this sum in itself is about 40% of the total N4.49tr total budget of 2015. As succinctly put by the President, this increased capital expenditure commits significant resources to critical sectors such as Works, Power and Housing (N433.4 billion); Transport (N202.0bn); Special Intervention Programmes (N200.0bn); Defence (N134.6bn); and Interior (N53.1bn). The investments in infrastructure and security are meant to support the reforms in Agriculture, Solid Minerals and other core job-creating sectors of the economy. It is therefore the goal of this administration to spend its way out of the economic downturn that was occasioned by the mismanagement of the past, a model that is synonymous with those adopted by the Obama team during the 2008 global financial crisis. With effective implementation of the capital allocation, one can easily conclude that 2016 shall be a year where infrastructure renewal that is essential to inclusive economic growth will commence.

For instance, with the N433bn, which represents about 7% of national spending that was allocated to Ministry of Power, Works and Housing, the benefit for the economy and Nigerians in general will be enormous. This sum represents a provision that dwarfs last year’s. The judicious utilisation of this fund which would be buoyed by the newly established Efficiency Unit in government would not only address huge infrastructural decays across the country but would be a stimulant to spur economic activities in the construction and related Industry. Imagine how many employees that have been laid off due to redundancy caused by low allocation to ongoing road works occasioned by non-inclusion in the budget of 2015. Many of these would now regain their employment and contribute their quota to the Gross Domestic Product, while paying their taxes. Their efforts and contributions would help to drive the productivity of their companies as well as provide more revenue for government to execute new projects.

In the same vein, spending (projected) directed at other critical sectors of the economy will not only bring great succour to already impoverished Nigerians through the provision of essential services at a cost that is affordable to the common man, it will also help in the business of economic stimulation. The N202bn budgeted spending allocated to the transport sector is a tool for economic revival through investment in modernised rail system comparable to first class standard gauge rail available in advanced countries. This will help in easing the transportation of goods and services across the country thereby reducing the cost of goods and other inputs that go into the manufacturing industry as well as those that are meant for primary consumption. Aside the direct and indirect jobs that would be provided to Nigerians during the construction of the projects as well as when the construction is completed, it remains yet to be imagined the great impact on the urbanisation of the rural areas that are under the radar of such projects. Again, the impact of the spending on job creation will affect the lives of Nigerians and stimulate consumption which in a way contributes to National productivity.

Chief of the estimates in the budget head is the determination of the Federal Government to arrest the incidence of poverty on its verse number of citizens through the implementation of Social Security intervention programs. Typical of the experience of Nigerians with past Governments, one would have expected that this administration would renege on its campaign promises of important social interventions programs ranging from one meal a day for primary school children to conditional cash transfer to the most vulnerable. Any excuse would have been tenable in the face of the cash crunch facing the administration as a result of reduction in its revenue, occasioned by significant drop in oil price. To the amazement of all, the administration has however decided to go all out for the full implementation of these promises by including it in the budget with a sum of N200bn as its contribution to the special intervention fund designed to bring Nigerians out of chronic poverty, improve school enrolment by taking out of the street over 10 million Nigerian children that are of school age but are roaming the street. The fund also would be investing in our young brains and encouraging them to study impactful disciplines in science and technology that are necessary for National development. This spending will not only directly impact on the standard of living of the most vulnerable but would also spur economic activities by stimulating consumption, particularly in the retail segment of the economy. This singular action from Buhari’s administration is quite commendable as millions of Nigerians will for the first time in their life, experience a form of social security and see their Government as partner in their wellbeing.

Also for a very long time, spending in critical sectors have not had it so good, in that the 2016 budget figures for critical sectors of the economy and nation are on the high sides for the fiscal year. With N369.6bn budgeted for Education; N294.5bn in Defence; N221.7bn in Health and N145.3bn in the Ministry of Interior, the future indeed looks very bright judging from the provisions of the appropriation. For the first time, the government is clearly displaying sincerity of purpose through its budgetary provisions. The 9% reduction in non-debt recurrent expenditure from 2.59tr in 2015 to N2.35tr in 2016 is a clear indication that it would no longer be business as usual. But for the sincere commitment to the unprecedented social security spending, which takes the non-debt recurrent expenditure to N2.65tr, the mix of capital to recurrent expenditure could have even be lower than the 70/30 ratio.

The proposed 2016 budget aims to train our youths by resuscitating several vocational and technical institutions across the country so as to position them for the coming opportunities. It is a budget that was sincerely derived from listening to the yearnings and aspirations of the Nigerian people cutting across all social strata; the poor, unemployed and the vulnerable are all considered, even the sick – therefore it also seeks to rehabilitate and build new primary heath care centers across the nations. The letters and the spirit of the 2016 budget simply epitomises a paradigm shift from the unprofitable ways of the past to provide hope for the future. It is indeed a budget of change and shall be implemented to the letter that’s when it is finally done-with as regards resolving the shortfalls, errors, discrepancies etcetera, but in all the purpose of this piece is to lay on the table both what we can take home from the already prepared document as well as what we can learn more and add as to when opportunity occurs again for appropriation preparation, even if it is on this same bill; so that we can entrench the fiscal development and capacity of the operatives amongst our economic team.

•Lawrence Nwaodu is a small business expert and enterprise consultant, trained in the United Kingdom and the Netherlands, with an MBA in Entrepreneurship from The Management School, University of Liverpool, United Kingdom, and MSc in Finance and Financial Management Services from Rotterdam School of Management, Erasmus University Netherlands. Mr. Nwaodu is the Lead Consultant at IDEAS Exchange Consulting, Lagos. He can be reached via (07066375847).

Source: News Express

Readers Comments

0 comment(s)

No comments yet. Be the first to post comment.

You may also like...