Economy to rebound in fourth quarter, NISER former DG declares

Former Director General of the Nigerian Institute of Social and Economic Research  (NISER), Professor Olu Ajakaiye, has predicted that the Nigerian economy would rebound in the fourth quarter of the year.

“The 2020 Appropriation Act was based on certain fiscal assumptions which we have been compelled to revisit given the emerging economic realities,” he said.

Minister of Finance, Budget and National Planning, Zainab Shamsuna Ahmed, had penultimate week in Abuja declared: “Specifically, projected oil revenues have been significantly affected in that: Dated Brent oil prices fell to as low as $19.125/barrel (as at Friday, April 3,2020) as compared with the 2020 budget benchmark of $57/barrel and oil production in 2020 year-to-date is 2.0mbpd as compared with the 2020 budget’s projection of 2.18mbpd.”

She had added: “We are therefore revising the benchmark oil price for 2020 to $30/barrel and oil production to 1.7mbpd. We have similarly had to adjust downwards our non-oil revenue projections including various tax and customs receipts as well as proceeds of privatisation exercises. In this regard, the Budget Office is currently working on a revised 2020– 2022 Medium-Term Expenditure Framework / Fiscal Strategy Paper (MTEF/FSP) as well as an amendment to the 2020  (budget).”

However, Ajakiye, who is currently the Executive Chairman of African Centre for Shared Development Capacity Building (ACSDCB), Ibadan said the country should not expect a quick recovery before the fourth quarter, advising the Federal Government to slash overheads of some ministries, departments and agencies  (MDAs) to engender the leeway.

The economist stated: “It is encouraging that Saudi Arabia and Russia have resolved their differences, and there will be 10mbp cut in output beginning from June or thereabout. If Europe and North America can also safely restart their economies after resolving the challenges of COVID-19 from June, the demand and supply sides of the oil market may return to some normalcy by Q3 2020.”

The NISER ex-DG added: ” By then, the fiscal authorities at the federal and state levels may have to get the monetary authorities to fund the inevitable recurrent expenditure gap. This is especially true because the ongoing lockdown affects the so-called federal non-oil revenue and internally generated revenue (IGR) of states. Overheads, excluding those related to health sector, should be severely rationalised by all arms of government, especially the legislature.

“Capital expenditure, especially outside transport and power infrastructure projects should be shut down by all arms of government until hopefully the Q4 of 2020. So renovations, vehicle replacements and similar capital projects by the executive, legislature and judiciary at the state and federal levels should be rolled over to the 2021 budget.”

He pointed out that if the Debt Management Office (DMO) could restructure and reschedule domestic and external debt service obligations, it might reduce the recurrent expenditure gap that should be funded by the Central Bank of Nigeria (CBN).