By Babajide Komolafe
Financial Derivative Company has called for tight fiscal and monetary policy regime in 2014.
In its Bi-Monthly Economic Bulletin for December, the company said, “In line with our expectations, the Nigerian economy ends 2013 with a tight monetary policy stance and somewhat manageable fiscal spending. These policies aided a benign inflation rate, stable exchange rate, and moderate GDP growth rate.
With the election year close at hand, we believe monetary and fiscal policy will be more difficult to manage in 2014.
However, the possibility of a downturn in oil prices and the commencement of the US tapering, begs for a tight fiscal and monetary policy stance; fiscal spending is bound to increase astronomically in preparation for the elections. The change in central bank governor and some MPC members is also expected to change the dynamics of monetary policy”.
The company however took a swipe at the federal government’s budget for 2014, saying, contradicts the fiscal strategy adopted in the last two years.
The company said, “Aggregate expenditure is estimated at N4.64 trillion, a decrease of 5.69 per cent from the budget expenditure of N4.92 trillion in 2013. Projected total revenue is N3.73 trillion, 4.11 per cent less than the 2013’s revenue estimates of N3.89 trillion.
The decline in aggregate expenditure was attributed to -losses in cleared oil revenue particularly due to oil theft according to the Minister.
“However, and quite surprisingly, the percentage of aggregate expenditure to be spent on capital expenditures decreased from 31.34 per cent in 2013 to 27 per cent in the 2014 budget, while recurrent expenditures increased from 68.66 per cent in 2013 to 73 per cent.
This is contrary to the fiscal strategy adopted over the past 2 years, geared to- wards correcting the lopsided imbalance between recurrent and capital spending.
The strategy has succeeded in lowering recur- rent spending from 74.4 per cent in 2011 to 68 per cent in 2013 while raising capital from 25.6 per cent to 32 per cent within the same time span.
Capital spending is set to bear the brunt, albeit temporarily, of the projected significant reduction in revenues in 2014 as it is essentially being crowded out by personnel cost which is projected to in- crease from 1.718 trillion in 2013 to 1.723 trillion in 2014.
“In conclusion, we think it is ironic that a budget themed -Budget for job creation and inclusive growth? proposes a lower capital expenditure in both real terms and as a percentage of the entire budget knowing that growth would be difficult to come by with less funds channelled to capital expenditure.
Revenue shortfalls have been blamed for this and given the gloomy outlook for oil revenues, expenditure plans anchored on just this source of revenue are clearly unsustainable and efforts to boost non-oil revenue need to be intensified.
It is also our opinion that the increasing cost of governance should be critically examined as a matter of expedience and ways to at least put a ceiling on it, fashioned out. Furthermore, the poor budget performance of previous years makes the -job creation? boast of 2014 a hard-sell.”