President Muhammadu Buhari on Tuesday outlined plans to largely fund next year’s budget with revenues from non-oil sources including an ambitious plan to restructure the nation’s shareholdings in Joint Venture (JV) companies that pump most of the oil produced by Africa’s largest oil producer.
Buhari asked lawmakers on Tuesday to approve the 2018 budget with a deficit of N2.005 trillion ($5.6 billion), compared to this year’s estimated fiscal gap of N2.356 trillion.
Non-oil revenue is projected to triple to N4.2 trillion and will include funds raised from “restructuring of government’s equity in joint ventures,” he said in his budget speech in the capital, Abuja, without providing more details.
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The projected N4.2 trillion of non-oil and other revenue sources include several items including Share of Companies Income Tax (CIT) of N794.7 billion Naira, the share of Value Added Tax (VAT) of N207.9 billion, Customs & Excise Receipts of N324.9 billion, and FGN Independently Generated Revenues (IGR) of N847.9 billion.
The government also expects N87.8 billion as the federal government’s Share of Tax Amnesty Income, and various recoveries of N512.4 billion, N710 billion as proceeds from the restructuring of government’s equity in Joint Ventures and other sundry incomes of N678.4 billion.
The National Assembly comprising of the Senate and House of Representatives is required to approve the budget before spending can start.
In the last two years delays of as much as six months in signing the budget into law held back spending on projects and weighed on economic growth.
Nigeria’s economy is rebounding after contracting by 1.6 per cent in 2016, the biggest slump since 1991.
“The 2018 Budget Proposals are for a Budget of Consolidation. Our principal objective will be to reinforce and build on our recent accomplishments. Specifically, we will sustain the reflationary policies of our past two budgets,” Buhari said in his 84-point widely broadcasted speech.
The President regretted that the late passage of the 2017 Budget has significantly constrained budget implementation.
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He urged the National Assembly to approve the spending plans by Jan. 1 “in our efforts to return to a more predictable budget cycle that runs from January to December.”
The International Monetary Fund (IMF) forecast Nigeria’s economy will expand by 0.8 per cent this year as production of oil increases and foreign-currency availability improves for manufacturers to import inputs.
Olusegun Onigbinde, lead partner, BudgIT, sees the budget continuing the philosophy of this current administration, spend big, borrow big, put more money in infrastructure.
“That is the only way we can actually build our society. We can also do much more by thinking about how to stimulate the private sector how to go much into the public, private partnerships, to ensure that the private sector is involved in all our infrastructure growth,” Onigbinde said.
The deficit will be funded by N1.7 trillion of borrowing, half of which will be external, and the privatization of non-oil assets to the value of N306 billion, Buhari said.
The key parameters and assumptions for the 2018 Budget as set out in the 2018-2020 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) though yet to be debated by the National Assembly include; benchmark oil price benchmark of US$45 per barrel; Oil production estimate of 2.3 million barrels per day, including condensates; exchange rate of N305/US$ for 2018; real GDP growth of 3.5 per cent; and the inflation rate of 12.4 per cent.
The proposed N8.612 trillion of 2018 Aggregate Expenditure comprises; Recurrent Costs of N3.494 trillion; Debt Service of N2.014 trillion; Statutory Transfers of about N456 billion; Sinking Fund of N220 billion (to retire maturing bond to Local Contractors); as well as Capital Expenditure of N2.428 trillion (excluding the capital component of Statutory Transfers).
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Buhari admitted that 2017, so far, has been a year of uncertainty on many fronts across, not just for Nigeria but globally and therefore assured that the 2018 Budget will consolidate on the achievements of previous budgets and deliver on Nigeria’s Economic Recovery and Growth Plan (ERGP) 2018 – 2020. He called on the National Assembly, to continue to support economic policies to consolidate and sustain on the success achieved so far.
But the 2018 budget which government had assured would be presented in October to allow the National Assembly ample time to approve to enable implementation is coming barely two months to the end of the year, raising fears on whether it can deliver better results unlike in the past. Based on the 2018 budget fiscal assumptions and parameters, total federally-collectable revenue is estimated at N11.983 trillion in 2018. Consequently, the three tiers of Government will receive about 12 per cent more revenues in 2018 than the 2017 estimate, the president said.
However, a substantial part of the recurrent cost proposal for 2018 is for the payment of salaries and overheads in key Ministries providing critical public services, including N510.87 billion for Interior; N435.01 billion for Education; N422.43 billion for Defence; and N269.34 billion for Health. According to Buhari, the allocation to these Ministries represent significant increases over votes in previous budgets. The President also announced a ban on federal civil service recruitment to contain soaring recurring expenditure which had, over the years, consumed almost 70 per cent of annual budgets.
Buhari said although the government has made substantial savings by registering MDAs on the Integrated Personnel Payroll Information System (IPPIS) platform, the increase is mainly due to provision for staff promotion arrears, and recruitment by the Military, Police Force and para-military agencies. The president assured that the government is closely monitoring the debt service to revenue ratio and shall address this ratio through non-oil revenue-generation drive and restructuring of the existing debt portfolio. Nigeria’s domestic debt, presently, accounts for about 79 per cent of the total debt.
The president said the government medium-term strategy is to reduce the proportion of domestic debt to 60 per cent by the end of 2019 and increase external debt to 40 per cent. This strategy will free up more funds for development and began with an announcement in August that the government will issue dollar bonds to replace $3 billion of maturing domestic treasury bills.
Onyinye Nwachukwu, Tony Ailemen, Kehinde Akintola, Owede Agbajileke, Innocent Odoh & Harrison Edeh, HOPE MOSE ASHIKE, Lagos
