The 2019 Appropriation Bill is replete with clusters of unattainable targets ranging from revenue projections to inflation and gross domestic product (GDP) growth targets.
Architects of the Appropriation Bill believe that the economy would grow in 2019 at the rate of 3.01 per cent. That projection could only be attained with shrewd economic management. Unfortunately, no one in the federal government has that acumen.
The revenue projection of the Appropriation Bill is already in deep trouble and no one knows how to replace what would be lost to low oil production and tumbling prices. Unemployment is surging at an official rate of 23 per cent and could climb perilously close to 30 per cent with the dwindling revenue projected for 2019. All that would inhibit GDP growth rate making the 3.01 per cent target unattainable.
While the Central Bank of Nigeria (CBN) projects that inflation rate would rise to 11.5 per cent by the middle of 2019, architects of the Appropriation Bill believe they could drive inflation rate down to 9.9 per cent.
Revenue projection for the budget is already being undermined by unattainable oil production target and plummeting price. Keeping GDP growth at last year’s level of about 1.7 per cent might be a Herculean task.
Since the budget planners built their optimism for higher oil price on the basis of market developments in October 2018 when the price of Brent crude surged to $86 per barrel, they could be excused for setting an ambitious oil reference price of $60 per barrel.
However, with developments in the nation’s oil fields in 2018 where average production hovered around 1.9 million barrels per day, there is no economic sense in predicating the 2019 production target at 2.3 million barrels per day when the dynamics in the nation’s oil fields have not changed.
Now the Organisation of Petroleum Exporting Countries (OPEC) has added its own peril to Nigeria’s inefficient oil production dynamics. OPEC wants Nigeria to peg its production at 1.6 million barrels per day, though the figures exclude condensates.
That directive from OPEC would cut Nigeria’s oil revenue drastically in a year that no one expects oil prices to cross the $65 range. That probably would be the first reason why the projected 3.01 per cent GDP growth rate in 2019 might be a mirage.
Besides dwindling oil income, other external factors would militate against the attainment of the ambitious GDP growth rate. Developed economies in Europe and North America have recovered fully from the financial meltdown of 2008.
America’s economy now surges along at 3.5 per cent while leading economies in the European Union (EU) after overcoming the debt contagion, are growing at close to 3 per cent. Central banks in the developed economies are drawing the breaks on growth to pre-empt possible over-heating.
Many have hiked interest rates in a desperate bid to tame liquidity. The measure makes risk-free debt instruments in the developed economies more attractive and would lure more foreign investors away from Nigeria’s high interest and high risk debt instruments.
The higher yield in developed economies would worsen the capital flight from Nigeria and put pressure on the nation’s lean foreign reserves as the CBN responds to pressure on the naira by drawing down on foreign reserves.
Besides the external factors, some domestic factors would worsen the capital flight.
The first factor is the endemic uncertainty of an election year in Nigeria. In an election year, foreign investors normally keep their money out of harm’s way until a new president is elected. Even after the election, foreign investors would wait for the new government to form a cabinet and articulate its economic policies before they make investment decisions.
Consequently, if the incumbent president is returned to power and it takes him some months to form a cabinet, there are fears that worsening capital flight would drastically inhibit GDP growth rate.
If someone else becomes president, foreign investors might probably be more reluctant to invest because of the massive policy somersault that would follow. Either way, the GDP growth of 3.01 per cent for 2019 is rather too ambitious.
The other domestic factors that would inhibit the attainment of a GDP growth of 3.01 per cent are alarmingly high unemployment rate and the worsening insecurity in the land. Unemployment rate currently stands at 23 per cent. It could climb higher during the year and drag down GDP growth.
Besides, marauding Fulani herdsmen have driven hundreds of thousands of farmers into internally displaced persons (IDP) camps in Benue, Plateau and parts of Nasarawa states. The farmers could not cultivate the land last year and the situation is even worsening this year.
Government had expected thousands in IDP camps in Borno State to return home and cultivate the land this year. That hope has been thwarted by the insurgent invasion of some communities in the agricultural belt of the state. Even if the insurgents are eventually pushed back by the military, no one would feel safe enough to return to the farm.
The bandits in Zamfara State have equally succeeded in worsening Nigeria’s fragile food security. With the mounting hostility from external and domestic factors, it is obvious that architects of the 2019 Appropriation Bill might have to return to the drawing board to review the ambitious GDP growth rate.
