14 February 2016, Lagos — Following the controversy over the alleged padding and errors contained in Nigeria’s 2016 budget, some companies as well as economists have raised concern regarding the implication for national economic recovery and foreign capital inflow.
It was gathered that some Nigerian companies that have been in talks with their foreign partners over counterpart funding of joint ventures have been forced to stay action since mid last year over policy uncertainties following the election of a new government.
While many of them expressed satisfaction with the process and outcome of the election, they were non-committal over prospects of funding their Nigerian investments preferring to wait for a clear policy direction from the new government.
The first shock was the long delay in announcing the new cabinet which elongated policy positions while also elongating the waiting time for foreign investors’ commitments.
Economy observers were of the view that while there is massive decline in government revenue following the oil price crash, 2016 Budget, which provided for massive economic stimulus, gave hopes of economic recovery amidst the dwindling revenue.
However, a top executive of a Nigerian company whose foreign partners have adopted ‘a wait and see’ position, disclosed at the weekend, that the companies had thought they would wait for about three months after the take-off of the new government but lamented that “we are now in the tenth month and our partners are still saying they will wait for some more time”.
According to him, the on-going controversy over the 2016 Budget has further complicated the relationship with their partners and the fate of the joint venture as they had hoped that the budget, which they saw as a good one with clear policy positions, appears to have run into a glitch.
Analysing the situation further, chief economist at FSDH Merchant Bank, Mr. Ayodele Akinwunmi, said the controversy over the budget creates more uncertainty for investors who had delayed their decision up till now.
“It may also delay the implementation of the projects in the budget which will not make an average Nigerian to feel the impact of the current government,” Akinwunmi said.
However, another notable economist, Mr. Bismarck Rewane who is the Managing Director/Chief Executive, Financial Derivatives Company, is more concerned with the assumptions of the budget which he sees some problems than the issue of errors which he believed would easily be resolved. ‘’The errors in the budget are not an issue, they can be corrected.
The real issues are the assumptions of the budget. The crude oil price, the production target, exchange rate and inflation rate, these are the real issues, that determine the effectiveness of the budget,” Rewane stated.
In the same line of argument, the Deputy President of Nigerian Labour Congress, Mr. Issa Aremu, pointed out: “The President has said they (errors) would be corrected, and those responsible would be punished. What we should be concerned about is if the budget would be used to boost the economy and then strengthen the Naira. Will the budget be used to boost local production through patronage of locally produced goods, or it would be spent on imported goods and hence weaken local production? These should be our concerns”.
*Emeka Anaeto & Babajide Komolafe – Vanguard