President Muhammadu Buhari has presented the 2017 – 2019 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) to the National Assembly as part of preparations for the 2017 budget.
This is preparatory to the submission of the budget estimates to a joint sitting of the Assembly.
This became apparent yesterday when a presidential communication was read on the floors of both chambers of the National Assembly.
In separate letters dated Friday, September 30, 2016, personally signed by President Buhari and addressed to the Senate President, Bukola Saraki and Speaker of the House of Representatives, Yakubu Dogara, respectively, the president said with the submission of the fiscal documents, the preparation of the next year’s budget was in progress.
According to the details of the 2017 – 2019 MTEF and FSP obtained by LEADERSHIP yesterday, out of the N6.866 trillion proposed for the 2017 Budget, the government projects N1.765 trillion for capital expenditure while N2.563 trillion is for recurrent (non-debt expenditure) and N1.639 trillion for debt servicing.
The documents also indicated that the federal government has projected budget benchmark price of $42.5 per barrel and oil production volume of 2,200,000 barrels per day and an exchange rate of N290 to $1.
“Pursuant to provisions of the Fiscal Responsibility Act of 2007, the preparation towards the submission of the 2017 Budget to the National Assembly is progressing well,” Buhari said.
The president, in the correspondences, added that the MTEF and FSP, which provide the framework for the development of the 2017 Budget, were designed against the backdrop of a “generally adverse” global economic environment as well as fiscal challenges in the domestic economy.
He noted that the 2017 – 2019 MTEF and FSP articulates the federal government’s economic, social and developmental objectives, as well as the strategies for achieving the defined objectives and priorities.
“I here forward the 2017 – 2019 MTEF and FSP to the distinguished Senate, and trust that it would be kindly considered and expeditiously approved, so as to move the 2017 Federal Budget preparation process forward,” President Buhari added.
Recall that the Fiscal Responsibility Act (FRA), 2007 makes statutory provisions requiring the federal government to prepare the MTEF and FSP – a three-year planning tool that defines government’s economic, social and development objectives and priorities, and also details the strategies to achieving them.
Meanwhile, President Buhari has expressed gratitude to the members of the National Assembly for the “enduring partnership” between the legislative and executive arms of government, particularly on the issue of the country’s annual budgets.
The president, in the correspondence to the Senate, said: “I note, with appreciation, the commitment and support that Distinguished Senators have continued to demonstrate with respect to the preparation, passage and implementation of the federal budget.”
…approves sale of 2 presidential jets
The Presidency yesterday disclosed that President Muhammadu Buhari has approved the sale of two aircrafts in the Presidential air fleet.
Senior special sssistant media to the president, Garba Shehu, in a statement, said this was in line with Buhari’s directive that aircrafts in the Presidential air fleet be reduced to cut down waste.
LEADERSHIP recalls that some prominent Nigerians have called for the sale of some aircraft in the presidential air fleet as one of the ways to raise money to reflate the economy.
The presidential spokesman recalled that during the campaign, Buhari promised to look into the issue of the air fleet and reduce the number of aircraft to cut down on waste.
“The newspaper advertisements for the sale of two presidential aircraft, a Falcon 7x executive jet and Hawker 4000 were duly authorised by the presidency.
“This is in line with the directive of President Muhammadu Buhari that aircraft in the presidential air fleet be reduced to cut down on waste.
“When he campaigned to be president, the then APC candidate Muhammadu Buhari, if you recall, promised to look at the presidential air fleet with a view to cutting down on waste.
“His directive to a government committee on this assignment is that he liked to see a compact and reliable aircraft for the safe airlift of the president, the vice president and other government officials that go on special missions.
“This exercise is by no means complete. I am sure the Commander of the Presidential air fleet will any time from now, call you to a ceremony at which he will hand over some other aircraft to the Airforce for their operations,” Shehu said.
Recession will end in 2017 – IMF
The International Monetary Fund (IMF), has projected that Nigeria’s economy will grow by 0.6 per cent in 2017, higher than the 1.7 negative growth predictions for the economy in 2016.
The international organisation also said that South Africa’s economy will barely expand, even as it said that the economy may probably grow from 0.1 per cent in 2016 to 0.8 per cent in 2017.
On a continental outlook, the IMF’s World Economic Outlook (WEO), which was released yesterday from its headquarters in Washington, USA, claimed that the Sub-Saharan Africa’s largest economies continue to struggle with lower commodity revenues, weighing on growth in the region.
The Washington-based lender however reaffirmed its earlier position that “Nigeria’s economy is forecast to shrink 1.7 per cent in 2016,” adding: “South Africa’s will barely expand.”
Nigeria’s economy lost the position of Africa’s largest to South Africa’s’ this year, barely two years after taking over the leadership of the continent in dollar terms. In what could be described as official confirmation, the National Bureau of Statistics (NBS) released a report in August confirming that the economy was in recession, with a 2.06 per cent negative GDP (year-on-year).
“By contrast”, the IMF said, several of “the region’s non-commodity exporters, including Côte d’Ivoire, Ethiopia, Kenya, and Senegal, are expected to continue to grow at a robust pace of more than 5 per cent this year”.
In emerging market and developing economies like Nigeria’s, growth will accelerate for the first time in six years, to 4.2 per cent, representing a bit higher than the July forecast of 4.1 per cent, the IMF said. Emerging economies are expected to grow by 4.6 per cent in 2017.
On the flip side, US growth is expected to be on positive side of about 2.2 per cent next year as the drag from lower energy prices and dollar strength fades.
The lender put global growth below average – at 3.1 percent in 2016, with an expected slight increase to 3.4 per cent in the following year.
“We have slightly marked down 2016 growth prospects for advanced economies while marking up those in the rest of the world,” said IMF chief economist and economic counsellor, Maurice Obstfeld, adding, “Taken as a whole, the world economy has moved sideways.”
Given the still weak and precarious nature of the global recovery, and the threats faced in many countries, IMF said “Countries need to rely on all policy levers—monetary, fiscal and structural—to lift growth prospect.”
The IMF therefore recommended urgent comprehensive and coordinated monetary, fiscal and structural policy approach to revive growth, ensure it is distributed more evenly, and make it durable. “By using monetary, fiscal, and structural policies in concert—within countries, consistent over time, and across countries—the whole can be greater than the sum of its parts,” Obstfeld said.
Along that same line, the World Bank in its latest Global Financial Stability Report has said emerging economies need to take action in addressing rising loan defaults that could slow down growth and make them vulnerable to external developments.
The report said emerging economies should take advantage of supportive external conditions to proactively monitor and address corporate vulnerabilities, particularly those arising from excess leverage and foreign exchange exposures.
The World Bank report specifically stated that emerging economies need to take action in managing the impact of corporate distress through swift and transparent recognition of nonperforming loans and strengthening insolvency frameworks.
According to the report, approximately 11 per cent of corporate debt, over $400 billion, is held by firms with weak repayment capacity.
In Nigeria, banking sector non-performing loans are expected to rise beyond 12 per cent which is way above the five per cent regulatory ceiling.
The report also said emerging economies should ensure continued access to international financial services, including through strengthened regulatory and supervisory regimes that help lower risk perceptions, including those supporting correspondent banking activity.
It also advised boosting oversight and response capacity through reforms to macro prudential and supervisory frameworks.
Noting that emerging markets are adapting to an environment of lower global growth, lower commodity prices, and reduced global trade, the report said the current favorable external environment, including low interest rates and the global search for investment opportunities, presents an opportunity for overly indebted firms to restructure their balance sheets.
“Corporate leverage in many of these markets may be peaking, since firms have slashed investment in the wake of commodity price declines and slowing demand. The challenge for many emerging market economies is to achieve a smooth deleveraging of weakened corporate balance sheets.
“Indebtedness declines only gradually under our baseline scenario, as high debt levels and excess capacity make it difficult to grow out of the problem, leaving them sensitive to downside external or domestic developments. A disorderly adjustment is still possible if global risk premiums rise and earnings fall. Such a scenario would exhaust bank capital buffers in some emerging markets.”
The report noted further that policies to further bolster the rights of outside investors, especially minority shareholders; bring disclosure requirements fully in line with international best practice; and promote greater board independence are likely to yield financial stability benefits.
“The analysis shows that stronger corporate governance and investor protection frameworks enhance the resilience of emerging market economies to global financial shocks—an issue of particular importance in the new phase the global financial system is entering. Corporate governance improvements enhance stock market efficiency and foster deeper and more liquid capital markets, allowing them to absorb shocks better. Emerging market economies with better corporate governance generally also have more resilient corporate balance sheets.”