2020 Budget: Exchange rate assumption of N305 to the Dollar unrealistic – LCCI

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…Says hope for impactful investment in infrastructure dim

The Lagos Chamber of Commerce and Industry (LCCI) has said that the key assumptions underpinning the 2020 Nigerian budget are realistic except for the exchange rate assumption of N305 to the dollar.

The Director General, LCCI, Mr. Muda Yusuf who made this observation in a statement in Lagos on Wednesday said that that was one assumption that was difficult to justify, especially at a time when declining revenue had become a major issue both for the government and the citizens.

Yusuf noted that the 2020 budget numbers underscored the need to be more innovative in boosting revenue, reducing leakages and ensuring that revenue generating agencies of government remit what was due to government even as he harped on the need to do things differently if Nigeria must get a different result.

He stated that in view of the critical revenue situation reflected in the budget numbers and previous revenue performance, no effort should be spared to attract private capital for investment in key infrastructures that may be considered bankable adding that this would reduce the financing gaps that currently existed.

He said,” The private sector looks forward to the details of the finance bill proposed by the government in order to ensure appropriate engagement with the legislature before it passage into law.  We believe that there should be a window of opportunity for stakeholders to make their inputs into the into the budget consideration process.

“We note that the total budget size is N10.3trillion.  The recurrent component is N4.88 trillion, debt service is N2.45 trillion.  Together, these two budget items amount to 7.33 trillion, which is 90% total revenue estimates.  And from the track record of revenue performance, the percentage may be much higher when related to the actual numbers.  All of these indicate that the hope for an impactful investment in infrastructure is dim and would remain so for some time to come.

“This underlines the imperative of appropriate policy choices to attract domestic and foreign private sector capital for infrastructure financing.  The government needs to look beyond tax credit in its quest for more complimentary funding sources for infrastructure.  We should be looking more in the direction of equity financing.  But for this to happen, the policy and regulatory environment must be right.”

The Director General described as heartwarming President Muhammadu Buhari’s proposal to present an Executive Petroleum Industry Bill in a short while stating that “this would hopefully address the key reform expectations in the oil and gas sector.

“The truth is that the sector has not been able to attract desired level investment because of grave policy limitations and the associated uncertainty in the sector.  It is important to make the crafting of the new bill an inclusive process, taking into account the perspectives of key stakeholders.”

He however welcomed the decision of government to put in place a framework for government owned enterprises to contribute better to revenue arguing that the introduction of benchmarks within a cost to revenue ratio framework was a move in the right direction.

“We believe the many government owned enterprises can do better in their remittance of surplus to the federation account”, he added.

While positing that debt service commitment and recurrent spending were beginning to crowd out capital expenditure, he contended that this scenario was not in alignment with the aspiration to build infrastructure and a competitive economy stating that debt service of N2.46 trillion was more than the capital budget of N2.14 trillion.

He continued, “We welcome the indication given by the president to ensure the creation of a single window to strengthen trade facilitation process in the country.  The provision of the single window has been curiously elusive over the years.  We hope that this time, the necessary political will be mustered to ensure that the single window project becomes a reality.

“Related to this is the absence of scanners at the nation’s ports and border posts.  It is unfitting that with our stature as the biggest economy on the African continent; we have grossly failed in the use of technology to facilitate our international trade process.

“Meanwhile, we look forward to the details of the Finance Bill referenced by the President in the budget presentation to the National Assembly.  It is important to ensure appropriate engagement with stakeholders before the passage of the bill into law.  We believe that there should be a window of opportunity for stakeholders in the economy to make their inputs into the budget consideration process.”

Photo: LCCI Director General, Mr. Muda Yusuf.

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