Chinwendu Obienyi
The role of budget in an economy cannot be overemphasized given its role in the allocation of resources, economic stability and growth, reduction in inequalities in income and wealth creation among others.
This means that if a budget of a nation is not passed on time, there may be some downside effects on activities in different sectors especially the capital market which is usually the barometer of the economy.
During the presentation of the 2018 budget at the National Assembly in 2017, President Muhammadu Buhari proposed a total expenditure of N8.61 trillion for the 2018 budget, representing an increase of 16 per cent over the 2017 budget estimate.
The aggregate expenditure comprises recurrent costs of N3.49 trillion, debt service of N2.01 trillion, statutory transfers of N456 billion, sinking fund of N220 billion and capital expenditure of N2.43 trillion. If passed, the budget is expected to result in a deficit of N2 trillion, amounting to 1.77 per cent the country’s gross domestic product (GDP).
In the President’s words, “As a government, we are determined to bring succor to our people, improve their lives and deliver on our promises to them, 2018 is crucial as we strive to ensure that we consolidate our successes and institutionalise the policies and practices that drove this turnaround”
“I appeal to you to swiftly consider and pass the 2018 Appropriation Bill”
Regretably about 120 days after that presentation, the budget is still trapped at the National Assembly due to rumors flying around that the budget is missing minute details for some Ministries, Departments and Agencies.
But Director General, Budget Office, Ben Akabueze, has since debunked the claims, stressing that the media reports were inaccurate. However, there are concerns among operators of the market that should this state of affairs continue, the capital market might begin to see bearish sentiments.
Speaking to Daily Sun, Chief Executive Officer (CEO), Cowry Asset Management Limited, Johnson Chukwu, said that although the capital market has weathered the storm, Nigeria might end up with a budget that may not be implemented having lost 25 per cent of the normal budget implementation period.
“Interestingly, the capital market does not seem to be losing so much in the non passage of the budget as the market appreciated by 0.04 per cent to close at N15.408 trillion, but having said that, the economy as a whole is losing from the continued delay of the passage of the budget.
“The necessary infrastructure that the government should be developing are not being developed, the injection of funds that should go to other sectors including the capital market that should build the country’s social and physical infrastructure to international standard are not taking place. Ultimately we may end up with a budget that might not be implemented because we have lost 25per cent of the normal budget implementation period”, he said.
Chukwu further said, “They need to reach a compromise in the interest of the nation. I heard that the National Assembly made some not-too-good comments on the budget submitted to them but the three arms of government which is driven by the same political party should find channels of engagement and address the issues the National Assembly might have about the budget.
For his part, CEO, Front Vine Capital and Securities Limited, Eugene Ezenwa, said the delay could have a spiral effect on the economy and worsen the situation of stockbrokers in the capital market. He then advised the budget planning office to do its homework early and suggested that the budget should be passed every first quarter of each year.
“When budget is restricted and is delayed, it in turn has a spiral effect on the economy and also a direct impact on the capital market and stock brokers are worse off when the market is down.
Our system is such that one cannot predict the activity but we are hoping the budget planning office must do what it is supposed to do early enough to give the regulators time to work through the budget. If we can have our budget passed every first quarter, the economy will be better off”, Ezenwa explained.
Also commenting, CEO, Perfecta Investment Trust Limited, Emmanuel Eze, argued the bearish sentiments could ravage the market if enough funds are not injected in the capital market.
Eze added that about 30-40 per cent of last year’s budget has not been implemented stressing the much needed vibrance of the capital market is dependent on the state of the economy.