President Muhammadu Buhari monday in Abuja ordered the National Planning Commission (NPC) to go back to the drawing board and produce a framework for the 2016 budget that will reduce recurrent expenditure and prioritise developmental projects.
A statement issued by the Senior Special Assistant to the President, Media and Publicity, Mr. Garba Shehu, said Buhari gave the order after receiving a briefing from the Executive Secretary of the Commission, Dr. Bassey Akpanyung, at the Presidential Villa.
The statement said: “The president told Akpanyung and directors of the NPC that capital projects must now be given the fullest possible priority because Nigeria cannot achieve real development without adequate investment in capital and infrastructure projects.
“In carrying out its role in surveillance of the economy, review and appraisal of policies, the commission should devise a plan for a realignment of the budget so that capital projects can be really prioritised.”
The executive secretary of the NPC had informed the president that Nigeria’s planning system was beset by many challenges.
These challenges, he said, included the non-alignment of national plans with the annual budget and inadequate capacity in the Departments of Planning, Research and Statistics in the various government ministries.
Akpanyung had after his meeting with the president informed journalists that the president had directed the commission to identify core capital projects and concentrate on them instead of embarking on too many projects at the same time.
He said: “The president has specifically directed that we have to take a second look at the capital projects and funding for them rather than spreading capital funding widely that will not impact on anything.
“We should look at the core priority areas, select those and fund them effectively to the end and take on second priority areas and do likewise.”
He said the NPC team came to brief the president on the activities of the commission, which he explained covered mainly the preparation of long term and medium-term plans for the economy.
“We used the opportunity to inform him that we already have on the ground a perspective plan, that is, the national Vision 20:20:20 and we are in the process of developing a medium-term plan to cover Vision 2016 to 2019 which will address the core elements of this present administration’s priorities.
“We sought his support for the articulation and finalisation of that document because his pronouncement on it will assist us in rapidly rolling it out,” he explained.
According to him, the core areas to be addressed are security, diversification of the economy, stabilising the polity, and focus on the micro-economic situation.
He also said that the commission would work on unemployment, agriculture and the real sector.
“These are the areas that will drive and ensure that the employment situation is improved upon and that will impact the poverty level,” he added.
Despite Buhari’s directive to the NPC, Nigerian and foreign investors have become jittery over the delay in the appointment of his ministers and absence of a clear economic policy direction.
The prolonged search by the president for his cabinet and the relative silence on plans to tackle the tough economic outlook is unsettling investors and damaging business confidence in Africa’s biggest economy, reported the Financial Times (FT) monday.
According to the UK-based newspaper, the perception of a fiscal policy vacuum is growing among Nigerians and foreign investors, both eager to see results from the man elected on his promises to rebuild a state rotted by corruption.
However, the relative silence on plans to tackle the tough economic outlook has begun to hit optimism surrounding the first peaceful and constitutional transfer of power in Nigeria’s history.
“Investors are becoming more tentative and less committed and this is now affecting the level of economic activity,” said Bismarck Rewane, chief executive of Lagos-based investment consultants Financial Derivatives Company (FDC).
Buhari’s announcement that he did not intend to appoint his cabinet until September further rattled observers.
Last week, he explained the process was taking so much time because many qualified and experienced people with past government experience “have been compromised” in their past roles.
The sound logic of a careful selection process seems lost on the public and on international markets eager for a person — specifically a finance minister — to project the government’s priorities and to outline policies to reduce the pressures weighing on the fragile Nigerian economy.
A lack of clarity from the new administration on key questions such as the future exchange rate policy is discouraging direct investment and financial inflows to Nigeria at a time when more hard currency is badly needed to maintain adequate import cover and prevent the naira from weakening more on the parallel market, say analysts.
“We’ve got a bit of a vacuum. The monetary policy is being set by the central bank but that can’t really control what’s happening in the rest of the economy. The missing element is the fiscal policy. We don’t know what spending is taking place and what the plans are for the new administration,” said Angus Downie, Head of Economic Research at Ecobank.
Oil-dependent Nigeria has been suffering from rising inflation and shrinking foreign reserves since the oil price plummeted last year. Buhari has launched corruption investigations to begin cleaning up the oil sector in Nigeria and he has made clear his government will be run in a more transparent manner. But in the absence of a cabinet, he has not yet signalled plans for economic reforms.
“For the market to be a little more secure and aware of what’s going on you would expect the finance minister to coordinate business day to day and to be the mouthpiece to the market,” said Mr. Downie.
Economists say the only highly visible fiscal or monetary policy move in recent months has made matters much worse. In June, the central bank decided to defend the naira by effectively blocking the importation of 41 goods including rice and soap by not granting hard currency to import them.
Rising food prices, a growing foreign exchange shortage and the scarcity of some imported items for Nigerians already hurt by the country’s fiscal problems “are the direct consequence of the central bank’s new measures”, explained Razia Khan, Chief Africa Economist at Standard Chartered bank.
Fears are growing the exchange rate could weaken further. “Investors are confused about whether this represents the policy stance of the incoming administration. The policy vacuum needs to end to allow for more debate on the measures that have been imposed,” added Ms. Khan.
Hopes that Buhari would quickly remove fuel subsidies that cost $6bn last year have also been dashed.
Last month, the president said much of the literature he had received on the urgent need to remove subsidies had “no depth”, and said investigating corruption was a bigger priority than getting rid of the costly price caps.
But Mr. Rewane says “very further delay will make it more complicated and more expensive” to implement such reforms.
All this adds to the growing sense of delay.
Given that Buhari may prefer to have buy in from his ministers before introducing sensitive reforms, major policy decisions are unlikely before the last quarter of this year at the earliest, said Ridle Markus, Africa strategist at Absa Capital, the investment bank owned by Barclays.
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