NIGERIA: STATE OF AFFAIRS II BY KOREDE OLOGUN

Nigeria; State of Affairs II Keen observers will admit that Nigeria’s economy entered into its expected second phase after the swearing-in of trusted Ministers of the Federal Republic of Nigeria on the back of the game changing general elections earlier in the year where power changed hands smoothly. The economy has continued to slow down into what many has labelled a recession that could last for a couple of years pending when the country rids its system of core corrupt practices to build a solid foundation for policies and institutions. 

The potential growth and opportunity priced into the President Buhari led Nigerian economy is one of the reasons the country experienced a sharp uptrend of 8.30% in the stock market after winning the elections in March 2015. With inflation figure for October down by 10 basis points to 9.3% in October and the economy growing at 2.84% in the third quarter (2.35% in Q2), expectations are fast shaping into tangible reality although this could be another ephemeral moment. However, this is a sign that the economy is responding to the strategies of the new administration. Year to date loss on the stock market stood at 18.83% as financial markets continue to grapple with capital flight. 

The direction of the economy is still being questioned and intentions to investment more than N2 trillion in infrastructure by 2016 is although laudable but questionable by the budgeting system approach. Currently, the National Assembly is yet to receive a Medium Term Expenditure Framework (MTEF) for the 2016 budget which is by law expected to be with the National Assembly in about 90 days before the end of the fiscal year. The 2016 budget will welcome new developments in budgeting approach as part of the new administration’s drive to resuscitate a sinking economy. The budget is the key instrument for the expression and execution of government economic policy. Nigeria as a developing country still battles with high unemployment and high inflation (CBN inflation target 6% - 9%). 

The management of public finances has been a major challenge for Nigeria - a country with vast resources and uncertain economic environment. The Treasury Single Account (TSA) policy was one of many tools to tackle the issues of squandering public monies and has evidently been accepted and adopted to the maximum in achieving its targets. Considering the effect of budgeting system on the economy, the advocacy for a zero-based budgeting system has its pros and cons. The approach is time consuming and may lead to delay in developmental projects. The democracy structure of Nigeria which is multi-ethnic and divided on the basis of regions and religions is prone to excessive spending of public money on policies which are not beneficial to the society as a whole. 

The bottom-up system is also time-consuming and essentially a game between the finance ministry and other line ministries, therefore, there is no system for reallocation of resources within line ministries. All focus will now be on the last Monetary Policy Committee (MPC) meeting for the year scheduled for 23rd-24th November, 2015. There is no clear indication for changes in monetary tools considering that the outcome of the meeting is capable of setting the pace for economic direction in 2016 as an attempt to further stimulate the economy.