The Centre for Social Justice (CSJ) has faulted the proposed 2.3 million barrels per day (mbpd) oil production benchmark for the 2018 budget, saying it is a demonstration of Nigeria’s continued fixation on oil rents.
The frontline civil society group noted that it was an increase from the 2.2 million approved in 2017.
“However, with proposed cuts by the Organisation of Petroleum Exporting Countries (OPEC), this production volume seems ambitious and may not be realistic in the circumstances.
“Even if we have the capacity to produce this volume, the dynamics of the international oil market may not likely allow us to produce this much.
“Further, fixing the oil benchmark price at $45 is overly optimistic. Developments in technology and climate change dynamics point to a progressive reduction in demand for crude oil over the next coming years. The benchmark may not be realised,” the group said in its preliminary response to last week’s unveiling of the parametres contained in the Medium Term Expenditure Framework (MTEF) 2018-2020.
The Minister of Budget and National Planning, Senator Udoma Udo Udoma had at a public dialogue on the 2018-2020 MTEF in Abuja, with various stakeholders disclosed that next year’s proposed aggregate budget of N7.9 trillion would be predicated on a $45 per barrel of oil, 2.3mbpd oil production, an exchange rate of N305/$, 12.42 inflation rate, and a 4.8 per cent GDP growth rate.
Others are a nominal GDP of N133.97 trillion, N81.60 trillion nominal consumption, and fiscal deficit of N2.77 trillion as against N2.35 trillion in 2017.
In its response to the 2018 parameters, CSJ also noted that fiscal deficit is expected to rise to N2.77 trillion in 2018 from the current N2.35 trillion in 2017.
“The statement credited to the minister that “we are maintaining our deficit and debts within sustainable limits. Debt financing will be restructured gradually in favour of foreign financing as part of a strategy to lower debt service burden and free up more fiscal space for the private sector” is a bit contradictory.”
CSJ argued that more foreign borrowing at a time of currency volatility, when exports are falling, may not be the best option in borrowing.
Citing the Monetary Policy Committee of the Central Bank of Nigeria in its July meeting, CSJ pointed out that the federal government incurred a deficit financing of N2.51trillion in the first half of the year.
“Prorating with this dynamic will create a deficit exceeding N5 trillion at the end of the year 2017. This does not appear sustainable in the short, medium to the long-term. Our debt is growing in geometric proportions without infrastructure and regenerative capital investments to show for it as demanded in the Fiscal Responsibility Act,” the group added.
On the projected 4.8 per cent growth rate in 2018, CSJ argued that for a country that is still in recession in the third quarter of 2017 to be planning to do 4.8 per cent growth in 2018 would be a dramatic and quantum leap which the economy has not been sufficiently primed to do.
“If the projection remains in the realm of being motivational, that is good enough. Again, this parameter is overly optimistic,” the civil society group added.
According to CSJ, the federal government needs to rethink its economic policies so that it can attract more foreign investors and unlock available local capital.
“The political process reflects and breathes down on the economic and social processes. Nigeria needs to unlock her potential and drive the economy away from its crude oil dependence through a process of evidence-led restructuring that allows the states or groups of states to take targeted, concrete and calculated steps to improve infrastructure, ease of doing business, access to credit, land reforms, etc,” it submitted.