BY OLUSHOLA BELLO, Lagos
Operators in the real sector have said achieving real sector and Small and Medium Enterprises (SMEs) growth, creating jobs for the growing youthful population, and attracting private investments will depend on the effective implementation of the N3.85trillion capital allocation in the 2021 budget.
The 2021 budget tagged, ‘Budget of Economic Recovery and Resilience’, is designed against the backdrop of a global economic crisis and domestic impact of COVID -19 pandemic.
The budget is expected to accelerate the pace of Nigeria’s economic recovery, promote economic diversification, enhance competitiveness and ensure social inclusion.
The experts called for an effective implementation of the 2021 budget and the creation of a favourable environment for the private sector players to thrive.
They also noted that government capital expenditure has positive impact on manufacturing sector output, suggesting that larger percentage of government expenditure in the annual budget should be on capital component coupled with improved implementation of expenditure policies rather than recurrent expenditure which does not really have a significant impact on the manufacturing sector.
The director-general of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), Ayo Olukanni, said the timely signing of the N13.5 trillion 2021 budget by President Muhammedu Buhari was a reflection and signal from the president that things would be done as and when due and at the right moment in year 2021.
He said, “We hope the budget will be applicable in all other areas as we contend with challenges in 2021. The real challenge however is timely implementation of the various provisions in the budget.
“NACCIMA’s hope is that the respective MDA will also rise to the occasion both in the release of funds and in the implementation of the programmes and projects under the budget. In this regard projects that relate to development of infrastructure, energy, road rail among others are of major importance. They should be given priority.”
Speaking on the budget, the director-general of Lagos Chamber of Commerce & Industry (LCCI), Dr Muda Yusuf, said the budget is essentially an instrument of appropriation of resources, and this should be done in a way that the resources allocated support the real sector.
Yusuf said, “One of the key things we need is ensuring that the budget support infrastructure building as the real sector of the country has been facing productivity challenges over time.
“One of the major factors to low productivity in the real sector is infrastructure, despite the talk on the private sector coming into providing infrastructure, the government still has to provide a lead in infrastructure investments that is the way all over the world
“Government invests more in the infrastructure than the private sector, so we want to see a budgetary appropriation that emphasis more on infrastructure spending not just capital spending.
“Looking at the structure of our budget, even the current budget is heavily skilled in favour of recurrent spending, so we need to do more in the area of infrastructure spending. This is what can make an impact on the real sector and on the SMEs; and we also need to ensure that we provide enough budget on security.
“Agriculture is a major component of the real sector in the economy and we can see that insecurity is now posing a very big risk to agriculture. We need to fix the security problem and that will require the budget to allocate more resources to security.”
On his part, president of Manufacturers Association of Nigeria (MAN), Mansur Ahmed, said, “Our economy cannot grow so long as our manufacturing sector remains small and disintegrated. So long as we cannot compete with other products coming outside of the country.
“It is absolutely important that our capacity to compete especially in terms of manufacturing must be taken to the highest level possible.”
Historically, government’s capital expenditure, especially on road infrastructure and power, always have a trickledown effect on the manufacturing sector output in the country.
The fact that Nigeria made modest achievement in the last quarter of 2020 to exit recession is the outcome of resilience of Nigeria’s private sector as the economy grew by 0.11 per cent against all projections.
In the 2021 budget, an aggregate sum of N3.85 trillion is provided for capital projects as follows: N1.80 trillion for MDAs’ capital expenditure; N745billion for Capital Supplementation; N355 billion for Grants and Aid-funded projects; N20 billion for the Family Homes Fund; N25 billion for the Nigeria Youth Investment fund; N336 billion for 60 Government Owned Enterprises; N247 billion for capital component of Statutory Transfers; and N710 billion for projects funded by Multi-lateral and Bilateral loans.
All these, if effectively implemented, will undoubtedly lift the manufacturing and real sector to a lofty height.
By contrast, this year’s capital budget allocation is N1.16 trillion higher than what was provided for in the 2020 budget.
At 29 per cent of aggregate expenditure, the provision moves closer to the current administration’s policy target of 30 per cent.
The major chunk of the budget allocation for key capital projects goes to works and housing, followed by transportation, power, water resources, health, education, defence, agriculture, among others.
Meanwhile, the year 2020 was a historic one for the country, facing buffeting headwinds, including an unprecedented pandemic, a weak economy leading to recessions, historically low crude oil prices, and social unrest, among others.
The macroeconomic environment was significantly disrupted by the COVID-19 pandemic, necessitating the President’s presentation of a revised 2020 budget on May 28, 2020 which was signed into law on July 10, 2020.