Sunday, 31 May 2015

Expert Puts Cost of Buhari’s Economic Blueprint at N60 Trillion

Expert Puts Cost of Buhari’s Economic Blueprint at N60 Trillion

31 May 2015

Views: 4,626

• Calls for prioritisation of policies, programmes

By Kunle Aderinokun

It has been estimated that it would cost the President Muhammadu Buhari-led administration a total of about N60 trillion ($300 billion) to implement its economic blueprint.

A former Chief Economist of African Finance Corporation and former Director of Research at the African Development Bank, Dr. Temitope Oshikoya, gave this estimate in his report (made available to THISDAY), based on the analysis of the economic blueprint by BudgiT at the recent policy dialogue on APC manifesto.

In view of the enormous cost of implementing the economic blueprint, which represents 60 per cent of the nation’s GDP, Oshikoya advised the new administration to prioritise and sequence its policies and programmes.

He noted that the economic blueprint, which he termed ‘Buharinomics’, “faces a quadrilemma in trying to achieve equity, efficiency and effectiveness in a slowing economy.”

According to him, “as the administration faces difficult short-to-medium term policy choices and opportunity costs requiring trade-offs with long-term consequences, prioritisation and sequencing of its policies and programmes are in order.”

Oshikoya, who explained that the equity portion accounts for a fifth of the total cost of the blueprint, noted that the efficiency portion represents 38 per cent while  guarantees are 42 per cent.

While also pointing out that the equity portion alone requires an annual expenditure of about N12 trillion, he said the total annual revenue for the Federation account is less than N10 trillion.

He therefore expressed belief that “from reducing the cost of governance, the effectiveness pillar could yield N1trillion.” The extra burden, according to him,  will then “fall on the economy pillar with efforts made to plug the fiscal leakages from oil revenue and more non-oil revenue will need to be raised from increasing the tax rate, broadening the tax base, and increasing collection efficiency.”

Essentially, Oshikoya, who is the chief executive officer of Nextnomics Advisory, noted that “the vision of a social-democratic welfare state with a dynamic market economy is a noble one.”

“The immediate social inclusion equity programmes for achieving it partly work through fiscal stimulus to consumption and aggregate demand, Keynesian economics style. On the other hand, the efficiency related programmes are geared towards removing long-term supply side constraints to the economy through structural reforms for competitiveness and enhancing infrastructure investment-led productive growth,” he added.

Oshikoya noted that “the envisaged social democratic welfare state aims to tackle the vicious circle of poverty and high misery index, and inequality in social mobility, income, wealth and economic opportunity.

“The new administration plans to create a social welfare programme to provide N5,000 monthly for the 25 million poorest Nigerians. It will provide unemployment allowances for unemployed Youth Corps graduates for twelve months; one meal a day for all primary school pupils; a national identity scheme--NIS and a regional growth fund—RGF.”

“According to BudgiT, the total cost of implementing these direct equity programmes is N2.15 trillion or $10.8 billion.”

“Closely related to the direct equity programmes are the education and healthcare programmes to enhance the productive capacities of citizens, costing another N662 billion or $3.31 billion. These programmes include new vocational schools; new six universities of science and technology; and world class hospitals. In addition, BudgiT estimates suggest that N8.8 trillion or $44 billion per year will be required as national health expenditure,” he added.

He reasoned that prioritisation of all the equity programmes would be necessary, giving the total costing of N11.5 trillion or $58 billion.

“While the core social welfare programme could be initially scaled down by half”,  the economist posited that “establishing six new universities or new world class hospitals cannot be of immediate main priorities.”

He added: “It is also difficult to meet over the medium term the targets of increasing by two-half times the number of physicians per 1,000 population from 19 to 50, and increasing national expenditure per person per annum five times to N50,000. The RGF may be targeted initially as a Marshall Plan for the North-east, as the NDDC is essentially a RGF for the South-South.”

Besides, Oshikoya also said: “While the NIS is crucial to the effectiveness of the social inclusion programme, it should build on the ongoing biometric programmes at the CBN, INEC, and NIMC and the e-wallet programme in the agriculture sector.”

Oshikoya advised that, “the expenditure on social inclusive equity programme should initially be targeted at N5 trillion or about 5 per cent of GDP, and half of the current projected estimated spending. This benchmark, according to him, is in line with cost of social protection programmes in Ethiopia, Kenya, and Tanzania.

“According to Cash Transfers Evidence Paper by DfID, the cost of Ethiopia’s Productive Safety Net Programme is estimated at 5.3 per cent of GDP. Large middle-income countries spend less per GDP. India’s National Rural Employment Guarantee is estimated to cost 2.2 per cent of GDP; Indonesia’s Safety Net Scheme, which covers 84 million people or a third of the population, is estimated to cost 0.7 per cent of GDP.

“Brazil’s Bolsa Familia programme created in 2003 cost 0.36 per cent of GDP and covers 46 million people or a quarter of the population and has lifted million of families from poverty. The Brasil sem Miséria established in 2011 has a fiscal cost of less than 0.6 per cent of GDP at an average of $65 per family according to the IMF,” he added.

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