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.”
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.
