Many keen observers took special interest in this year’s budget at least for some reasons. First, they believed President Goodluck Jonathan who stated that the budget would usher in substantial growth and job creation. As the President puts it, “We need to grow even faster than seven per cent per annum and we need growth in sectors such as agriculture, housing, and services that create the most jobs. Our growth must bring shared prosperity. An economy whose growth leaves wealth in the hands of a few cannot achieve its full potential.
Second, the Federal Government also selected key sectors, including electricity, roads, aviation, agriculture, manufacturing, housing, health, education and peace and security as areas of priority. These and others attracted much support for the 2014 budget.
Specifically, the government stated that it would increase investments in transmission to ensure power generated is properly evacuated and distributed. It promised to strengthen regulation of the sector, and closely monitor electricity delivery from 18 hours per day and complete the privatisation of the NIPP projects. It promised to accelerate work on gas pipeline infrastructure, invest in hydro-electric power as well as clean energy.
In the area of roads, the Federal Government stated that it would work hard to complete some major projects including, the East-West road, dualization of the Abuja-Abaji-Lokoja road, rehabilitation of the Ayingba-Otukpo road, dualization of the Kano-Maiduguri road, Increased pace of work on important roads such as the Lagos-Ibadan expressway, the Enugu- Port Harcourt expressway and the second Niger Bridge, and the Loko-Oweto Bridge.
The Federal Government stated that it would work to accomplish the “continuation of investment in upgrading air navigational and security systems to maintain safety in our skies. Complete work on the remodeling of 11 airport terminals across the country and accelerate construction work on the five new airport terminals and 13 perishable air cargo terminals across the country.
The government which promised to reduce the cost of governance, particularly through the implementation of the Governor Uduaghan-led Committee recommendations on how to stem oil theft and pipeline vandalism stated, “To sustain Nigeria’s ongoing agricultural transformation, further investments in the sector are planned. Establish new agro-industrial clusters to complement the staple crop processing zones being developed across the country. In 2014, in partnership with the private sector, the Fund for Agricultural Finance in Nigeria (FAFIN), a private equity fund to invest in agribusinesses across the country will be launched.
The Federal Government noted that Nigeria has about 17 million registered SMEs which employ over 32 million Nigerians, “To strengthen them and improve their job creation capacity in 2014, there will be a stronger focus on implementing the Nigeria Enterprise Development Programme (NEDEP) to address the needs of small businesses. This will include helping SMEs with access to affordable finance, business development services, and youth training.
It maintained that the housing and construction industry booms, it creates additional jobs for architects and masons, for electricians and plumbers, for painters and interior decorators, and for those in the cement and furniture industries. The government promised to reinvigorate the housing and construction sector, the Nigeria Mortgage Refinance Company, NMRC will be launched in January 2014.
The government stated, “To support the film and creative arts industry, the Project Advancing Creativity and Technology (PACT) Nollywood, a ₦3 billion grant programme for Nollywood was set up in 2013. N1 billion of this Fund has gone to support capacity building and film production in the industry. In 2014 will witness accelerated implementation of this programme, with greatest focus on tackling intellectual property and distribution challenges faced in the industry.
It stated, “In the 2014 Budget, there will be continued implementation of the Saving One Million Lives initiative to strengthen primary health care services. This will involve scaled up interventions in reproductive, maternal, newborn and child health, nutrition, routine immunization, HIV/AIDS, malaria elimination, tuberculosis, neglected tropical diseases, and non-communicable diseases.
The government stated that there will be focus on revitalising tertiary institutions by increasing investments in infrastructure to upgrade hostels, laboratories, classrooms, and halls. It stated, “As the 2015 deadline for the Millennium Development Goals approaches, there will be expanded access to basic education for all Nigerian children. Working with State Governments, the Federal Government shall decisively tackle the problem of the large numbers of out-of-school children in this country. Investment in technical and vocational education to promote skills development for our youth across the country.
The Federal Government stated that the security challenges in the North East of our nation led to the introduction of a State of Emergency in Yobe, Borno and Adamawa states. Government’s strategy for a lasting solution is anchored on a firm security response, continued political dialogue, and a package of development assistance to enhance economic inclusion. It also stated, “Even prior to the recent insecurity in the region, the North Eastern part of our nation had some of the lowest human development indicators in the country. The recent Report of the Dialogue Committee recommended more investments in health and education in states in the North East. The Federal Government and development partners will work with the relevant State Governments and other stakeholders to establish a development programme for the North East starting with the three states of Yobe, Borno, and Adamawa.”
But it may not be possible for the Federal Government to execute all its projects and programmes in the N4.695trn 2014 budget because of some factors. First, Nigeria and other members of the Organisation of Petroleum Exporting Countries, OPEC have started to lost their market share to the United States, Canada and Brazil. Members of OPEC, including Nigeria have expressed worry as it becomes apparent that the United States, Canada and Brazil have started to pump more crude oil to the global market, thus taking part of their market share this year.
The April report of the cartel stated that the Non-OPEC oil supply would rise from 1.34 million barrels per day to 1.37 million barrels per day. It stated, “The report Growth this year is seen coming mainly from the US, Canada, and Brazil, while Norway, UK and Mexico are expected to decline. OPEC NGL production is forecast to average 5.95 mb/d in 2014. In March, OPEC crude oil production as estimated by secondary sources averaged 29.61 mb/d, down by 0.63 mb/d from a month ago.
The continued increase of oil supplies from United States and other nations posed a serious threat on the implementation of the budget. The Chairman, appropriation committee, Senator Ahmad Maccido while presenting the report of the committee to Senate noted that the 2014-2016 Medium Term Expenditure Framework and Fiscal Strategy Paper maintained that there has been a significant drop in oil production in the past few years because of oil vandalism and oil theft.
Also, OPEC also stated in its recent report that the price of cartel’s basket fell $1.23 in March to average $104.15/b because of the slowing pace of economic growth in China, lower refinery demand, and ample supply, which outweighed supply disruptions and geopolitical tensions. The report stated the Nymex WTI frontmonth slipped by a marginal 17¢ to average $100.51/b, while ICE Brent dropped $1.09 to average $107.75/b. This caused the Brent-WTI spread to narrow further, averaging $7.25/b in March.
It stated that the world economic growth for 2014 has been revised down to 3.4per cent, while the 2013 growth estimate remains at 2.9per cent. The report stated the OECD is forecast to grow by 2.0per cent in 2014, compared to 1.3per cent in the previous year. China’s growth for 2014 has been revised down to 7.5per cent, following growth of 7.7per cent in 2013. India’s 2014 forecast remains at 5.6per cent and the estimate for 2013 at 4.7per cent.
It stated, “World oil demand is forecast to grow by 1.14 mb/d in 2014, broadly unchanged from the previous report, to average 91.2 mb/d. In 2013, world oil demand grew by 1.05 mb/d to average 90.01 mb/d, also in line with the prior assessment. The bulk of growth came from non-OECD, as most of the OECD is still showing a contraction.
The report stated that product markets in the Atlantic Basin have begun to weaken since mid-March on diminished support from heating fuel demand in the US. It stated that the product markets in Europe have also weakened due to a decline in export opportunities. In Asia, the negative performance at the middle and bottom of the barrel outweighed the continued recovery in light distillates.
The report stated that dirty tanker spot freight rates declined in March, mainly on the back of lower tonnage demand and refinery maintenance in the east. It stated that tonnage availability on many key routes continued to pressure tanker spot freight rates, which declined 5per cent. Clean tanker spot freight rates improved, with east and west of Suez rates up by seven per cent and 10per cent respectively.
The report stated, “Demand for OPEC crude in 2014 saw a downward revision of 0.1 mb/d to average 29.6 mb/d, representing a decline of 0.4 mb/d compared to last year. Demand for OPEC crude in 2013 remains unchanged from the last MOMR at 30.0 mb/d, which is 0.5 mb/d lower than the previous year.”
However, experts in the oil and gas industry have called on the government to address these and other issues, especially vandalism and oil theft because of their negative impact. For instance, the National President of Oil and Gas Service Providers Association of Nigeria, OGSPAN, Mr. Colman Obasi stated that the nation’s oil production has already suffered a major setback as a result of continued vandalism of assets, especially pipelines. He stated that oil theft has also grossly reduced the nation’s export to the global market.
Obasi tasked the Federal Government and other stakeholders to put in place adequate measures, capable of tackling vandalism and oil theft in the nation. He stated, “There is a great need for the Federal Government and other stakeholders to tackle these and other issues in order to ensure that adequate oil and gas are produced and exported to the global market.
This wise council should not be dismissed with the wave of the hand, particularly as the nation still depend on oil and gas proceeds for the execution of its budget. The National President and others also made a strong case for the diversification of the nation’s economy still based the fortune and misfortune of petroleum.
( Courtesy National Mirror, Agencies & Federal Government of Nigeria …… Source …..Our Freelance Economic Contributor in Lagos )