The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) has identified economic implications of the Federal Government’s decision to extend the implementation of the capital component of the 2023 budget to December, especially amid the Central Bank of Nigeria (CBN)’s current monetary policies aimed at reducing the amount of naira in circulation.
In a statement, the President of NACCIMA, Dele Oye Esq., who commended the decision which demonstrates a commitment to completing vital projects that are crucial for national development, said it must be carefully managed to avoid adverse effects such as inflation and currency devaluation.
According to him, “The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) commends the Federal Government’s decision to extend the implementation of the capital component of the 2023 budget to December.
“This move demonstrates a commitment to completing vital projects that are crucial for national development. It is essential to acknowledge that timely completion of infrastructure and other capital projects can catalyze economic growth, enhance productivity, and improve the overall quality of life for Nigerians.
“However, while the intention behind this extension is commendable, it is imperative to consider the broader economic implications, especially in light of the Central Bank of Nigeria (CBN)’s current monetary policies aimed at reducing the amount of naira in circulation. The decision to inject substantial funds into the economy through capital expenditures must be carefully managed to avoid adverse effects such as inflation and currency devaluation.”
Identifying the economic implications of the decision, Oye stated, “Pumping too much money into circulation can lead to inflationary pressures. Inflation erodes the purchasing power of consumers, leading to higher costs of goods and services, which can adversely affect both businesses and households. In an economy where the private sector is the primary driver of growth, uncontrolled inflation can disrupt business planning, reduce consumer spending, and ultimately slow down economic progress.
“Moreover, the Central Bank of Nigeria has been implementing stringent monetary policies to curtail the amount of naira in circulation. These measures are designed to stabilize the currency and control inflation. An influx of funds from the extended budget implementation could counteract these efforts, creating a challenging economic environment where the CBN’s policies may lose their effectiveness.
“This could result in a scenario where inflation remains high despite aggressive monetary tightening, leading to stagflation—a situation characterized by stagnant economic growth and high inflation.”
On the risk of duplication and the need for vigilance, the NACCIMA President stated, “Another critical aspect to consider is the transparency and efficiency in the utilization of the extended budget funds. While the details of the projects involved in this extension have not been provided, there is an inherent risk of duplication in the current budget. Duplication not only wastes valuable resources but also undermines the effectiveness of public spending. It is crucial for the government to ensure that the projects funded under the extended budget are unique, necessary, and contribute positively to the country’s development goals.
“To mitigate these risks, rigorous monitoring and evaluation mechanisms should be put in place. The government must adopt a meticulous approach in project selection and execution, ensuring that each naira spent delivers maximum value to the economy. This approach will help in maintaining fiscal discipline, preventing wastage, and ensuring that the extended budget serves its intended purpose of fostering sustainable development.”
Oye added, “While extending the implementation of the capital component of the 2023 budget holds significant promise for completing critical projects and stimulating economic growth, it is essential to proceed with caution. The potential adverse effects of injecting too much money into circulation, especially in the context of the CBN’s current monetary policies, cannot be overlooked.
“NACCIMA urges the Federal Government to balance the need for infrastructure development with the imperative of maintaining economic stability. Transparency, efficiency, and careful planning should guide the execution of the extended budget to ensure that it delivers the desired economic benefits without triggering unintended negative consequences.”
