President Goodluck Jonathan
Analysts at Renaissance Capital have said that the proposed reduction in spending in the 2013 appropriation bill presented to the National Assembly last week may be hamper growth of the economy.
RenCap also forecast an N11 per litre hike in fuel price, saying that the product may sell for N108/litre next year.
The financial advisory firm stated these in a report titled: ‘Nigeria: 2013 Budget proposal- Slowdown in Spending,’ made available to THISDAY on Monday.
President Goodluck Jonathan had presented an appropriation bill of N4.9 trillion for 2013, compared with N4.697 trillion in 2012. The share of the recurrent spending in aggregate expenditure in the 2013 budget estimate was reduced from 71.47 per cent in 2012 to 68.7 per cent, while capital expenditure as a share of aggregate spending was also increased from 28.53 per cent in 2012 to 31.3 per cent in 2013.
The appropriation bill also showed that the federal government plans to narrow the budget deficit of 2.17 per cent of Gross Domestic Product (GDP) in 2013, compared with 2.85 per cent in 2012
But sub-Saharan Africa Economist, RenCap, Yvonne Mhango, argued that: “The proposed slowdown in spending may be negative for growth, which we think partly explains the budget proposal’s GDP growth projection for 2013 of less than seven per cent, compared with 7.2 per cent in 2012.
“The fact that GDP growth in first half 2012 (at 6.2 per cent) came in far short of the government’s projection for 2012 may also partly explain the softening of the projection for 2013 to 6.5 per cent”, she added.
Mhango expressed surprise over the federal government’s silence on petrol subsidy and also that no provision was made for it.
“However, one comment we found interesting was that the subsidy reinvestment and empowerment programme (SURE-P), which was set up in 2012, will continue in 2013 with expected resources of N180 billion. This will be enhanced with a projected unspent balance of N93.5 billion from the 2012 allocation.
“The proposed SURE-P allocation for 2013 is one-third of the 2012 allocation of N567 billion. Could the expectation of higher SURE-P resources in 2013 (stemming from savings made in 2012 following the halving of the petrol subsidy early in the year) suggest that there are more savings to be made in 2013 from another petrol price hike?
“One could infer from the government’s “expected resources of N180 billion in 2013” that these will stem from subsidy savings made from a petrol price hike equivalent to one-third of the N32/litre increase in 2012 – to N97/litre. This would then imply a hike of N11/litre in 2013 to N108/litre, by our estimates, which would be in line with our expectation of phased price hikes over the medium term,” she predicted.
The Economist pointed out that a complete removal of the petrol subsidy would raise the price N140/litre.
“Nevertheless, there are other possible explanations. As the SURE-P programme is to be implemented over three-to-four years, it may be that over this period the government expects to annually assign funds that would otherwise have gone to the subsidy, which the government estimated at N1.134 trillion per annum before the subsidy was halved in 2012,” she argued.
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