Budget 2016 should focus on infrastructure

NIGERIA can overcome slowing growth with spending as
the government plans to create a $25 billion fund
combining public and private financing to develop
infrastructure, according to Vice President Yemi Osinbajo.
This is heartwarming at a time of great fear that the
economy might slide into recession.
The decline in oil prices since the middle of last year led
Nigeria, Africa’s largest producer of crude, to slash its
budget. The country’s credit rating has been downgraded
by Standard & Poor’s, while JPMorgan Chase removed
Nigeria from its local-currency emerging market indexes.
The nation relies on oil for about two-thirds of its revenue
and 90 percent of its exports.
The Vice President said government is thinking of dodging
the slide into recession by maintaining a healthy spending
agenda rather than cutting back. Many in government
quarters have already been calling for belt-tightening or
austerity measures that could see a deep slash in 2016
government spending.
In reality, it is in times of economic slowdowns that
governments should borrow and spend more. Economists
have long argued that massive public works in times of
recession have, most of the time, had positive effects on
economies faced with prospects of slumping. During the
2007/2008 global financial meltdown, the government of
President Barrack Obama introduced a massive stimulus
package that helped the American economy to overcome
its difficult times.
It is, therefore, imperative that President Muhammadu
Buhari’s administration takes a cue from this and borrows
even from the capital market to shore up spending in
2016. An economic stimulus package by this government
will succeed as President Buhari has a track record of
successfully guiding stimulus programmes as he did with
the Petroleum Trust Fund (PTF).
Buhari has a track record of frugal handling of public
funds and zero tolerance for corruption. He will be trusted
and supported by the people to borrow and invest heavily
in infrastructure.
Government robust spending in times of low cash flow
has the capacity to stimulate the economy by increasing
demand, production and job creation. On the other hand,
deep cuts in government spending will lead to low
production resulting from reduction in disposable income
in the hands of consumers.
Nigeria could follow the example of Asian countries that
financed their stimulus programmes through domestic
borrowing mainly by issuing government bonds. It is a
global norm that borrowing money domestically in one’s
own currency is not nearly as problematic as raising funds
from external sources.
We indeed support that Nigeria should not cut spending in
2016 but rather increase budgetary provisions for
infrastructure even if we have to borrow. It is a welcome
idea and the right way forward.