The recovery plan in outline

We have seen a version of the budget and national planning ministry’s Economic Recovery and Growth Plan. It draws on several planning documents already in circulation. The projections have GDP growth at 7.0% in 2020 at the end of the forecast period, compared with the IMF’s 3.8%. Not for the first time, the oil price benchmarks are conservative and rise to just US$52/b. Production forecasts, rising to 2.5 mbpd in 2020, are attainable with diplomatic initiatives in the delta and regulatory change.

The policies are well-documented and create no surprises. The plan concedes that, if the authorities fail to take “bold homegrown action”, they may have to turn to the IMF for assistance.

The strongest section in our view covers the fiscal challenges. Citing World Bank data on non-resource taxes as a proportion of GDP, it compares Nigeria’s 3% with India’s 16%, Kenya’s 18% and South Africa’s 19%.

The plan estimates that these taxes could generate an additional N2.3trn gross per year, of which N900bn would flow to the FGN. Improving compliance could earn N1.0trn, broadening the tax net N900bn and conducting audits N400bn. These are all works in progress. We hope that the plan, like the 2017 budget proposals, recognises that boosting the take from non-oil taxes takes time and patience.

The fiscal section notes that an increase in VAT rates is under consideration. This has been ruled out for this year by the minister (Good Morning Nigeria, 15 February 2017).

We read that the sale of selected oil and non-oil assets is among eight initiatives to increase macroeconomic stability. This includes reductions in the FGN’s stake in oil joint-ventures.

Financial market participants will have been hoping for some pointers on the exchange-rate regime. The only reference is a pledge to maintain a “stable” regime and adopt a “flexible market-determined exchange rate”. This second commitment reminds us of the language in the statement accompanying the CBN’s liberalisation in June 2016.

Finally, the plan looks to target listed core stakeholder groups, including local and international media so as to influence opinion at home and abroad. We have to say that there is considerable room for improvement. The document could have been widely circulated so that interested parties do not have to depend on fragmented versions.

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