Buhari presents N6.08trn budget, targets 223% CAPEX rise

President Muhammadu Buhari on Tuesday presented a record 2016 fiscal year proposed budget of N6.08 trillion with which his administration targets to revamp the ailing economy and drive growth to 4.37 percent, with massive investments in critical sectors of the economy, while controlling inflation.

For the first time in many years, government proposes to spend 30 percent of total budget on capital, representing 223% year on year growth.

The budget which the President presented before a joint session of the National Assembly also made provisions for N300 billion spending for Special Intervention Programmes, whichtakes the total amount for nondebt  recurrent expenditure to N2.65 trillion.

Also yesterday, the two chambers of the National Assembly extended the implementation of the N557 billion capital component of N4.6 trillion 2015 budget from December 31st, 2015 to March 31st, 2016.

The N6.08 trillion 2016 planned spending would be the largest in the history of the country, which spent N4.07 trillion in 2010; N4.22 trillion in 2011; N4.74 trillion in 2012, N4.92 trillion in 2013, N4.6 trillion in 2014 and N5.06 trillion in 2015.

But the crude oil benchmark put at $38 per barrel is the lowest seen in recent times due obviously to unprecedented fall in oil prices. It was $62 per barrel in 2011, $67 in 2012, $79 in 2013, $76 in 2014 and $53 in 2015.

Buhari said that the set benchmark price of $38 per barrel and a production estimate of 2.2 million barrels per day for 2016 was chosen after carefully reviewing the trends in the global oil industry.

“Based on the assumptions proposed a budget of N6.08 trillion with a revenue projection of N3.86 trillion resulting in a  deficit of N2.22 trillion,” he noted.

According to him, the deficit, which is equivalent to 2.16 percent of Nigeria’s GDP, will take overall debt profile to 14 percent of GDP, which he assured remains well within acceptable fiscal limits.

He said the deficit will be financed by a combination of domestic borrowing of N984 billion, and foreign borrowing of N900 billion, totaling N1.84 trillion, adding that over the medium term, his government expects to increase revenues and reduce overheads, to bring the fiscal deficit down to 1.3 percent of GDP by 2018.

The president also pledged massive investments in infrastructure and security and support reforms in the agriculture, solid minerals and other core job creating sectors of the economy, while reassuring that the proposed 2016 borrowings would be principally directed to fund capital expenditure.

Based on the sectoral allocations, the Federal Ministry of Works, Power and Housing gets N433.4 billion; Education received N369.6 billion; Transport, N202 billion; Special Intervention Programmes, N200 billion; Defence, N134.6 billion; and Interior got N53.1 billion.

“We will devote a significant portion of our recurrent expenditure to institutions that provide critical government services. We will spend N369.6 billion in Education; N294.5 billion in Defence; N221.7 billion in Health and N145.3 billion in the Ministry of Interior. This will ensure our teachers, armed forces personnel, doctors, nurses, police men, fire fighters, prison service officers and many more critical service providers are paid competitively and on time.

He said in fulfillment of their promise to run a lean government, his administration proposed a 9 percent reduction in non-debt recurrent expenditure, from N2.59 trillion in the 2015 Budget to N2.35 trillion in 2016.

Furthermore, he announced budgeted N300 billion for Special Intervention Programmes, which takes the total amount for non-debt recurrent expenditure to N2.65 trillion.

The president also indicated plans to set aside about N113 billion for a Sinking Fund towards the retirement of maturing loans; while N1.36 trillion has been provided for foreign and domestic debt service.

“This calls for prudent management on our part, both of the debt portfolio and the deployment of our hard earned foreign exchange earnings,” he noted in his speech with which he sought the approval of the National Assembly to allow his government spend such a huge amount in coming year.

Buhari who was accompanied by Vice President Yemi Osinbajo to a joint session of the National Assembly to present the budget, projected oil related revenues to contribute N820 billion to the federation coffers.
To shore up its revenue amidst the astronomical drop in oil prices, the present administration will also focus on non-oil revenues by broadening tax base and improving the effectiveness of revenue collecting agencies.

Non-oil revenues, comprising Company Income Tax (CIT), Value Added Tax (VAT), Customs and Excise duties, and Federation Account levies, are expected to contribute N1.45 trillion.

By enforcing strict compliance with the Fiscal Responsibility Act, 2007 and public expenditure reforms in all MDAs, he said, as he projected up to N1.51 trillion from independent revenues.

The President raised the hope that with the full implementation of the Treasury Single Account, government expects significant improvements in the collection and remittance of independent revenues.

“To further support the drive for increased remittances, we will ensure that all MDAs present their budgets in advance, and remit their operating surpluses as required by Section 22 of the Fiscal Responsibility Act.”

He also pledged to ensure that the nation’s resources are managed prudently and utilised solely for the public good, through the adoption of a zero based budgeting approach, which ensures that resources are aligned with government’s priorities and allocated efficiently.

According to him, this budgeting method is expected to optimise the impact of public expenditure, adding that to the proper linkage of budgeting to strategic planning, his government is enhancing the utilisation of the Government Integrated Financial Management Information Systems (GIFMIS) to improve financial management.

Buhari explained that “the recently established Efficiency Unit is working across MDAs to identify and eliminate wasteful spending, duplication and other inefficiencies. We engaged costing experts to scrutinise the 2016 budget proposals. They have already identified certain cost areas that can be centralised for economies to be made.

“We have directed the extension of the Integrated Personnel Payroll Information System (IPPIS) to all MDAs to reap its full benefits. We will also strengthen the controls over our personnel and pension costs with the imminent introduction of the Continuous Audit Process (CAP).

“These initiatives will ensure personnel costs are reduced. Our commitment to a lean and cost effective government remains a priority, and the initiatives we are introducing will signal a fundamental change in how Government spends public revenue.”

On employment generation, he unveiled plans to grow small businesses and provide opportunities for entrepreneurs as well as partner with State and Local Governments through provision of financial training and loans to market women, traders and artisans, through their cooperative societies.

“As we focus on inclusive growth, we are conscious of the current rate of unemployment and underemployment. This is a challenge we are determined to meet; and this budget is the platform for putting more Nigerians to work.

“I can assure you that this administration will have a job creation focus in every aspect of the execution of this budget. Nigeria’s job creation drive will be private sector led.

“We will encourage this by a reduction in tax rates for smaller businesses, as well as subsidised funding for priority sectors such as agriculture and solid minerals,” he added.

In the education sector, as an emergency measure to address the chronic shortage of teachers in public schools across the country, the President pledged the Federal Government’s resolve to partner with State and Local Governments to recruit, train and deploy 500,000 unemployed graduates and NCE holders.

The President who acknowledged the sorry state of the nation’s economy, owing to the astronomical slide in the oil price from $112 per barrel as of June 2014 to $39 per barrel, explained that the prevailing socio-economic challenges have been further worsened by the unbridled corruption and security challenges experienced in the last few years.

Other challenges include decline in consumption at all levels, unpaid salaries in both public and private sectors, while small business owners and traders have been particularly hard hit by this state of affairs.
Some of the decisions taken by the new administration, he said, include: “injection of new leadership at the helm of our revenue generating agencies, including the Federal Inland Revenue Service (FIRS), Nigerian National Petroleum Corporation (NNPC), Nigerian Communications Commission (NCC), and the Nigerian Customs Service (NCS) as well as implementation of the Treasury Single Account (TSA) which, he said, has provided greater visibility of government revenues and cash flows.

The present administration, he revealed, also provided intervention funds to support states to navigate their fiscal challenges by restructuring their commercial bank loans and providing facilities to enable them to pay salary arrears.

Buhari who reiterated commitment to the ongoing fight against corruption, noted that the “sheer scale of corruption and impunity of the past, explains in part, the economic challenges we now face”.
While promising to diversify the economy, he assured of restructuring of the oil and gas sector which, he said, had been plagued with corruption and inefficiencies.