How Low Capital Spending Threatens Economic Recovery



In the recent announcement by the Federal Minister of Finance that only N350 billion had so far been released to Ministries, Departments and Agencies, MDAs, for capital expenditure is a matter of great concern to all Nigerians. 

This is because it would have been figured into the projections for the nation’s year-end economic performance by global institutions like the World Bank, the International Monetary Fund, IMF, the African Development Bank and prospective lenders and economic performance monitors. 

That amount represents just about 15.5 per cent of the N2.24 trillion budgeted for capital expenditure this year. 

By contrast, at approximately the same time last year, the Federal Government had reported the release of N770 billion, which was approximately 56 per cent of the year’s appropriation. 

Gross Domestic Product, GDP, growth is a function of government spending, aggregate consumption, investments as well as import-export effects. 

But government spending is the prime mover; and that explains why the global financial community pays close attention to every country’s budget performance and employs it as the basis for forecasting the likely GDP growth – positive or negative. 

They also monitor actual expenditure and compare with the budget to determine actual performance. 

A situation in which Nigeria is just releasing 15 per cent of its capital expenditure in September already inescapably points to a low economic performance by the end of the year. 

More to the point, it means that expectations about improving infrastructure will be dashed and things are likely to get worse by December than they were in January of this year. 

The little progress recorded towards economic recovery will be reversed. We might start 2018 worse off than 2017, thus continuing an annual progressive slowdown which started in 2015. 

The Federal Government’s economic managers promised Nigerians that they intended to borrow heavily and spend massively on infrastructure and capital projects as a means of re-jigging the economy away from recession and sustaining growth. 

These low capital releases so late in the year have not reflected this intention. Nigerians would like to know when meaningful positive growth will start. 

What accounts for our dwindling capital release ability? We had hoped that with so much hoopla made about massive external borrowing and sale of bonds, the strategy of frontally attacking our infrastructure deficits as a means of rapidly expanding the economy, would be gathering storm as we go along, rather than appearing to lose steam. 

We call on the Federal Government to inject more funds into capital expenditure, expand infrastructure, create more jobs, make life easier for all operators within the economy and make sustainable growth possible.
How Low Capital Spending Threatens Economic Recovery How Low Capital Spending Threatens Economic Recovery Reviewed by Abdullahi Y.O on December 29, 2017 Rating: 5

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