Business Feature

Why 2022 budget won’t improve economy –Utomi, Aseda, others

• Insecurity, poor allocations to real and agric sectors obstacles to growth


• Say unemployment, high cost of living to continue

 

Against the backdrop of the allocation of about N1.93 trillion to the security sector (Defence, National Security Adviser, Interior and Police Affairs) in the 2022 budget, economic experts have said that unemployment and economic hardship would continue in the coming year. They believed that allocations to the Real sector and Agriculture cannot stimulate serious economic activities that will bring growth. PAUL OGBUOKIRI reports

 

2022 Appropriation Bill

 

President Muhammadu Buhari recently unveiled a record N16.39 trillion ($39.8 billion) budget for 2022, with a projected 25 per cent year-on-year rise in government spending. That is even as the economy struggles with the impact of the pandemic.

 

The deficit will rise to N6.26 trillion, or 3.39 per cent of GDP to be funded by new borrowing, proceeds from privatisations and drawdowns on loans secured for specific projects, Buhari told a joint sitting of the Senate and the House of Representatives.

 

The planned budget is based on the assumptions of 1.88 million barrels crude oil output a day and an oil price of $57 per barrel, according to him. “Some have expressed concerns over our resort to borrowing to finance our fiscal gaps. They are right to be concerned. However, we believe that the debt level of the Federal Government is still within sustainable limits,” he said.

 

Economic analysts said Nigeria’s budget signaled the government was not about to make any major policy shift as spending would remain elevated to deal with a deteriorating security situation in many parts of the country but very little done to stimulate real economic growth.

 

The theme, priorities of the 2022 budget

 

According to Buhari, the allocations to MDAs were guided by the strategic objectives of the National Development Plan of 2021 to 2025, which are: Diversifying the economy, with robust MSME growth; Investing in critical infrastructure; strengthening security and ensuring good governance; enabling a vibrant, educated and healthy populace; Reducing poverty; and minimizing regional, economic and social disparities.

 

The combined budget allocation of the Office of National Security Adviser, Federal Ministry of Police Affairs, Ministry of Interior and the Ministry of Defence was N1.93trillion, while the Federal Ministry of Industry, Trade and Investment got N17, 966,745,435 and the Ministry of Agriculture and Rural Development N75 44,228,662.

The Chief Operating Officer, InvestData Ltd., Ambrose Omordion, said the early presentation of the 2022 budget to the National Assembly was a welcome development, which would give the lawmakers enough time to examine it and keep to the January to December budget period. He however expressed worry over the huge disparity in the allocation to security and the Real sector, saying it was only the activities in the sector that would engender investment in manufacturing, industrial agriculture, reduce cost of living and create employment.

 

According to him, if there is a time the country needed huge investments in the productive sectors of the economy to boost manufacturing and create jobs, it is now. Reacting to enquiry by Sunday Telegraph on low allocation to the Ministries of Industry, Trade and Investment, and Ministry of Agriculture, political economist and former presidential candidate, Prof. Pat Utomi, explained that the implication of the development was that the economy will continue to struggle, saying there is urgent need to stimulate economic growth by deliberately investing heavily in the real sector.

 

Utomi however said that the huge allocations to the security sector were not misplaced as the country is facing serious security challenges, which needed to be tackled.

 

“Investors need to be attracted to invest in the economy. It is not an issue of allocations alone but policy issues that will reassure investors. The system needs to be stable and investment-friendly,” Utomi added. A public Affairs analyst, Dr Uche Ugonna, insisted that the huge allocation of N1.93 trillion to security and allocation of less than N80 billion to the Ministry of Industry, Trade and Investment, and Ministry of Agriculture does not show that the government is in a hurry to tackle the root cause of the security challenges in the country. “When you have an army of unemployed youths, you have a very serious security issue in your hands.”

 

“Solution to unemployment and reduction in the rising cost of living is not in N-power or similar policies. Rather, it is by creating enabling environment for manufacturing and industrial agriculture to thrive and investors to come in and invest in the economy.” Ugonna further explained that, “any economy that is not productive will definitely have this kind of issue where cost of living is very high. Nigeria is a monoeconomy that depends on oil.

 

There is no value addition to the oil. We just dig out crude oil and sell it at the international market.

 

“So, in this kind of economy, when you are not producing, products will not be available for people to buy at cheaper rates and that’s why you have a high cost of living and that also affects our exchange rate because the exchange rate depends on what you can produce and sell to the rest of the world. When you are not producing and not selling to the rest of the world, we are buying from them and whatever that they have in terms of inflation in those countries will be imported into our country,” he said.

 

Meanwhile, a management expert and business analyst, Joseph Aseda, said the economic situation in the country is dire and really a result of poor judgment and decisions by the Federal Government. He said that government’s allocation to the real sector does not show that it is determined to get the country out of its present economic predicament.

 

Aseda said: “The economy managers distracted and constrained their solution options with other factors other than economic and social factors. Any administration would have struggled with economic problems arising from both external and internal issues but the current administration looks as if the well-being of the people is of little or no concern at all. This problem with the management of this economy is misplaced priority and objectives rather than technical know-how.”

 

According to Aseda, inflation data from National Bureau of Statistics (NBS) and the realities on the streets showed one of the worst situations anywhere in the world. “But it’s expected given the way the economy is being managed. “Poor management of the economy coupled with seemingly misplaced Federal Government’s priorities and objectives are the problem”, he said, while advising that: “The Federal Government must put the well-being of the people first. This should get them to start thinking of ways to sort the economy out.

 

“That said, technically, Federal Government in collaboration with the state governments should focus on the simple  hings first. For example, ensuring local sufficiency in food production. This is double edged as it makes food available and boosts the local economy around farmers.

 

To do this, we must look towards a different model of farming operations and value appropriation and capturing. “Secondly, do everything possible to have maximum local petroleum refining. This should strengthen the naira and arrest inflation resulting from weakening the Naira.

 

The Federal Government must ensure that every refinery in the works is completed no matter what it will take. Federal Government must demystify exporting, such that SMEs in the country could export like moving goods from one town to another. Lastly, power supply must be improved and should be predictable if not 24hour a day.

 

These are not new suggestions; the Federal Government only needed single-minded determination to deliver them.” An Ibadan-based financial analyst and lecturer at Babcock University, Ilisan- Remo, Ogun State, Dr. Yinka Akintunde, said: “The economic situation of Nigeria is in chaos. The prices are highly exorbitant and beyond the affordability limits of an average Nigerian. The major cause is inflation. The price of oil in the market is low and that’s the mainstay of the economy. Small and medium scale enterprises are struggling to survive while some have gone underneath.

 

Major focus should be on the development of small and medium scale enterprises, microcredit, major focus on agriculture, urgent attention on power and security.”

 

Way forward

 

Other economists called for thorough scrutiny of growth drivers and national policies to get the economy working again and save the country from total collapse.

 

They called on the government to consider economic development as a national security issue that deserves the allocations being given to the security sector. The call came as there was no improvement to the nosedived capital inflows and the stagnant local investments, worsening employment crisis, which was estimated at 33.3 per cent as at third quarter.

 

Reading the positive correlation between foreign investment and the capacity of the economy to create jobs, experts said the declining capital importation does not bode well for an effort to grow an inclusive economy.

 

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