Recession: Hope Rises As FG Launches Recovery Plan

By on April 5, 2017

President Muhammadu Buhari will today officially launch the country’s Economic Recovery and Growth Plan (ERGP) 2017-2020.
This is even as economic experts have said today’s launch of the recovery plan is a ray of hope that efforts by the federal government to wriggle the nation’s economy out of recession is yielding results.
Analysts are also optimistic that the four-year economic plan with five main strategies, which are expected to see the country’s growth forecast rise from its present receding state to seven per cent by 2020 is achievable.
A statement by special adviser to the president on media and publicity, Mr. Femi Adesina, yesterday noted that the launch will hold at the council chambers of the presidential villa, Abuja today.
According to the statement, the launch “is to sustain and build on the successes so far recorded in tackling corruption, improving security”.
Recalling that the Medium-Term ERGP was approved by the Federal Executive Council (FEC), Adesina said, “ERGP is to restore sustainable, accelerated inclusive growth and development; investing in the people; and building a globally competitive economy”.
The federal government had on March 8 unveiled its long awaited Economic Recovery and Growth Plan (ERGP), in which it disclosed plans to privatise some public enterprises/assets.
The federal government projected the nation’s  economy to grow by 4.6 per cent on average over the plan period from an estimated contraction of 1.54 per cent recorded in 2016, reaching seven per cent by 2017.
Also, inflation rate has been projected to trend downwards to a single digit by 2020, while outlining bold initiatives such as ramping up oil production to 2.5mbpd by 2020, privatizing select public enterprises/assets and revamping local refineries to reduce petroleum product imports by 60 per cent by 2018.
The government also disclosed that it will significantly reduce its stake in joint venture oil assets and other oil and non-oil assets, with a focus to raise more funds to finance the four-year plan. It did not mention the assets to be privatised or sold.
At the last check, the federal government has about 55 per cent stake in joint ventures run by oil majors, including Royal Dutch Shell Plc, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA.
Plans to revamp local refineries to reduce petroleum product imports by 60 per cent by 2018 are also detailed in the ERGP.
The three-year plan came days after the government had promised it would be ready.
Speaking at the World Economic Forum in Davos, Switzerland, acting President Yemi Osinbajo had assured that the plan would be ready by February.
“We would formally launch the four-year economic recovery approved plan in mid-February. We’ve already written it out, many parts of it…we are discussing, but it would be formally launched as a document in the middle of February”, he said.
Tagged ‘Economic Recovery & Growth Plan 2017-2020’, the ERGP, which has three broad strategic objectives: restoring growth, investing in our people and building a globally competitive economy, which are expected to help achieve the government’s vision of inclusive growth, would also help it take the economy from the path of steady and steep decline to sustained inclusive growth.
The federal government said it would operate a consolidated budget that will incorporate all agencies that are fully funded by the federal government by 2018.
According to the government, within the period under cover, it will restore oil production to 2.2 million barrels per day (mbpd) and reach 2.5 mbpd by 2020, to increase export earnings and government revenues by an additional N800 billion annually, reduce the fiscal deficit and debt service ratios and attract new investments.
According to the plan obtained from the website of the Ministry of Budget and National Planning, part of the measures to achieve that is to pass the much talked about Petroleum Industry Reform Bill and draft new regulations consistent with the Bill, “conclude joint venture (JV) cash call arrangements and implement a new cost recovery funding mechanism for JVs”.
Beyond oil, the federal government also rolled out a plan to increase non-oil tax revenues by improving tax compliance, broadening the tax net, employing appropriate technology, and tightening the tax code, as well as introduction of tax on luxury items and other indirect taxes to capture a greater share of the non-formal economy.
It disclosed that Value Added Tax (VAT) rate for luxury items would be increased in the same period from the present 5 to 15 per cent from 2018, while improving CIT and VAT compliance to raise 350 billion annually.
To achieve that, the budget and planning office said plans were on ground to conduct a broad audit campaign to identify under-filing taxpayers; improve tax compliance by engaging non-compliant taxpayers and making them comply.
Heeding experts’ advice to ensure coherence of fiscal and monetary policies, the federal government announced that it will ensure monetary policy is aligned with the other aspects of its macroeconomic programme, deploy liquidity management tools to reduce inflationary pressure and stimulate all-inclusive economic growth.
The government added that it would strengthen intervention in critical sectors that can promote economic growth and reduce unemployment;l, sustain a market-determined exchange rate.
The federal government also said it will issue bonds and debt certificates to address outstanding government liabilities to contractors, MDAs and state governments; rebalance the public debt portfolio with increased external borrowing (from 84:16 to 60:40, domestic-external borrowing mix), focusing on concessionary sources and extend the maturity profile of public debt portfolio and deploy long-term debt instruments, including infrastructure and retail bonds in a move to optimise debt strategy.
In a move to drastically cut cost through operating and capital expenditure optimisation initiatives, the federal government hopes to intensify the Presidential Initiative on Continuous Audit (PICA) activities and clean up the civil service payroll by linking the Integrated Payroll and Personnel Information System (IPPIS) to HR management systems and bank verification numbers (BVNs).
The government plans to reduce unemployment from 13.9 per cent (Q3 2016)to 11.23 per cent by 2020 by creating over 15 million direct jobs between 2017 and 2020 or an average of 3.75 million jobs annually.
In line with its plan to create an enabling environment to enhance private investment, targeting energy minerals, iron/steel and gold/ gemstones with a focus to speed up establishment of a Solid Minerals Development Fund with a seed fund of N200 billion, the federal government said that “By 2020, Nigeria will have made significant progress towards achieving structural economic change and having a more diversified and inclusive economy.”
Nigeria’s economy shrank 1.5 per cent in 2016, the first full-year contraction since 1991, due to a drop in oil prices and production output, which is the nation’s biggest export.
Meanwhile, economists who spoke exclusively with LEADERSHIP yesterday said the federal government needed a swift action plan that is backed with appropriate legislation.
They pointed out that it might have been better to separate the crisis response package from broader economic plans of the government so that the crisis response efforts can receive required urgency.
According to Associate Professor of Finance and Deputy Director of Research at Nasarawa State University, Prof Uche Uwaleke, disruption in the oil production pipeline vandalism and Niger Delta militancy might underline the success of ERGP.
He noted also that the biggest threat to the ERGP was political risk of government’s continuity once there is change. Uwaleke said, “Nigeria’s experience over the years has shown that implementation of Development Plans suffer neglect whenever there is a change in government.
“Against this backdrop, the ‘political will’ argument holds water only in the context of stability in government which is guaranteed where the the President is in office throughout the Plan period. This condition must be met for any National Plan to succeed.
“By releasing the timetable for the 2019 general elections two years before the conduct of the polls, the Independent National Electoral Commission seems to be telling Politicians to be on their marks and get set.
“Expectedly, the country will enter into election mode soon after this administration clocks 3 years in office on May 29 2018, barely one year from now.
“A review of key economic variables over the years indicates that penultimate and ultimate election years impact economic performance. Government spending usually goes up in an election year which tends to fuel inflation rather than spur growth, suggesting that the extra public expenditure ahead of polls was largely wasteful.
“By extension, the forthcoming election poses a threat to the ERGP goal of subduing inflation to single digit level by 2020. In fact, the economy typically slows down every time there was a general election. The ERGP acknowledges this fact by stating that the slight dip in growth in 2019 is projected to result from the general election in that year”.
He continued: “As earlier pointed out, the success of the ERGP will depend not only on how well it is implemented through the penultimate and ultimate election years (2018 and 2019), but also on the commitment of the succeeding administration to see it through to the terminal year.
“If President Buhari does not run for a second term or power slips from the ruling APC, chances are that the ERGP will go the way of the National Confab report which was jettisoned not least because the government that conceived it left office.
He also called on federal government to forward a Bill to be known as the “Economic Recovery and Growth Bill’’ to the National Assembly.
He stated that the ’Economic Recovery and Growth Bill should take care of all issues specific to the ERGP, distinct from the current Fiscal Responsibility Act of 2007 which focuses on annual budgets and the three year Medium Term Expenditure Framework.
“The government has barely one more year to prove that the ERGP will not go the way of its forebears.   One of the key deliverables of the Plan is to reduce petroleum product imports by 60 per cent in 2018, Quickly putting in place an enabling laws as well as passing the Petroleum Industry Bill is one sure way of safeguarding the country against the major threat to the Economic Recovery and Growth Plan”,  he explained.
Also, the Chief Executive Officer, Economic Associates, Mr. Ayo Teriba, said the plan blurs the line between what the government had intended to do before the recession and devaluation blew it all out of track, and an urgent crisis response package that is required to confront the recession and devaluation and lift Nigeria out of the crisis.
He said the projections in the ERGP do not include any action steps or any likely dates that such steps will be taken.
“The plan is also not backed by any legislation. Nigeria needs a swift action plan that is backed with appropriate legislation, and it might have been better to separate the crisis response package from broader economic plans of the government, so that the crisis response efforts can receive required urgency”, he said.
Also, head of research at Afrinvest West Africa, Robert Olatunde, said the ERGP clearly captures the critical challenges currently facing the economy and proposes strategies to address them.
“We believe that the plan to carve out Delivery Unit within the Presidency as well as the Ministry of Budget & National Planning to champion the monitoring, evaluation and implementation of the plan is a step in the right direction”, he said.
Also on his part, research analyst at FXTM, Lukman Otunuga, noted that the EGRP painted an encouraging outlook for the nation.
He noted that the recovery plan may be received positively by the international investment community and as such, could translate to an increased foreign direct investment in the medium to longer term.
He said, “The four-year plan was anchored around achieving healthy economic growth and sustainable development, boosting sentiment towards Nigeria which is currently in the process of a critical structural transformation. With a strong focus on the nation augmenting both public and private sector efficiency, whilst also increasing overall productivity, a growth forecast of seven per cent by 2020 could be a possibility.
Meanwhile, the federal government has been urged to deploy machineries to recover over $21 billion unremitted funds contained in the independent reports of the extractive industry carried out by the Nigeria Extractive Industries Transparency Initiative (NEITI).
The Executive Secretary of NEITI, Waziri Adio, made this call at a media roundtable held in Abuja yesterday.
He stressed that if the said amount is recovered, it can be used to fast-track the nation’s economic recovery from the current recession.
He noted that the huge unremitted funds if recovered are more than enough to jump-start the economy instead of borrowing or selling the nation’s assets.
“Total unremitted revenues to government’s treasury amounted to $21.778 billion and N316.074 billion. At the current exchange rate, this comes to about N7.2 trillion. Achieving a recovery rate of just 20 per cent would significantly offset the projected deficit for the 2017 budget. A third of the computed unremitted revenues would completely eliminate the need to borrow to finance the budget. This has both short and long-term positive implications for the economy”, he stated.
Mr. Adio reaffirmed NEITI’s commitment to support the efforts of the government to recover diverted or unremitted funds through the provision of timely information and data.
According to him, NEITI in an effort to ensure that the government take steps to recover the unremitted funds it has presented the content of its policy brief which focused on unremitted funds, economic recovery and oil sector reform to the economic management team under the leadership of the Vice President Prof. Yemi Osinbajo.
The NEITI Policy Brief which is an audit of the oil and gas sector revealed that the Nigerian National Petroleum Corporation (NNPC) alongside its upstream subsidiary, Nigerian Petroleum Development Company Limited (NPDC) failed to remit $21.778 billion and N316.074 billion to the Federation Account.
“These are amounts due from three main sources: Federation assets divested to NPDC and NPDC’s legacy liabilities, payments for domestic crude allocation to NNPC; and dividends from investment in Nigerian Liquefied Natural Gas Company (NLNG) paid to but withheld by NNPC”, Mr. Adio stated.
Speaking on the position of NEITI as it concerns the said unremitted funds, the Executive Scribe of NEITI said, “We recommended urgent measures to recover the funds to support the on-going economic recovery plan.”
While urging the government to go beyond the recovery of the said funds, NEITI recommended that adequate measures be put in place to ensure that such diversion of national assets is averted.