Economy gets a boost with passage of N7.441trn spending plan for 2017

 

Five months into the 2017 financial year, the National Assembly has given approval to the Federal Government plans to spend N7.441 trillion in 2017. The passage of the budget is a boost to signs of economic revival already noticed in the economy.

 

The approved spending plan comes to an average of N39, 362 for every Nigerian in 2017 or an average of N108 per day, which is not enough to buy a bottle of soft drink on the streets, a reminder that the country needs a bigger boost in spending to have a significant impact on the economy.

 

At about seven percent of GDP, most financial analysts have always argued that Nigeria’s oil revenue dependent budget is not enough to catalyse economic growth, even though the government is hoping that the increased spending plan for 2017 will help lift the economy out of recession.

 

“We hope that this budget of recovery will go a long way to help Nigeria to come out of the economic recession and bring growth,” Senate President Bukola Saraki said, after the budget was passed.

 

Nigeria’s tax to GDP ratio of about 6.1 percent is also one of the lowest in Africa, and largely accounts for the country’s low impact budget, which is also significantly skewed towards recurrent expenditure at the expense of capital spending.  But this year’s budget has earmarked 30 percent of the budget as capital spending in a bid to drive growth.

 

Analysts have expressed optimism that the passage of the budget will help sustain the signs of economic revival already evident in the Nigerian economy and impact even more positively on the stock market, which moved back into positive territory on Wednesday, after more than a year in the negative. The economy contracted 1.5 percent in 2016 but most economists, including the International Monetary Fund (IMF) are optimistic that the country’s economy will return a positive growth this year.

 

Tajudeen Ibrahim, head of research, Chapel Hill Denham Securities Limited told BusinessDay that the passage of the budget is a positive development for the economy, since the Federal Government will begin to disburse funds for capital expenditure, which will further help lift growth.

 

“It is positive for the economy from a growth standpoint. We could see the financial market respond positively to the announcement”, Ibrahim told BusinessDay by phone.

 

Ayodeji  Ebo, managing director, Afrinvest Securities limited, shared a similar view, noting that though the passage of the 2017 budget unnecessarily dragged, its passage is a positive development, as it will complement “the current efforts of the fiscal and monetary managers towards lifting the economy out of recession. This should also boost economic activities on the back of improved capital expenditure.”

 

The Federal Government has earmarked N2.24 trillion as capital expenditure in 2017 with particular focus on critical infrastructure like roads, railways and housing.

A breakdown of the capital expenditure details showed that the Federal Ministry of Power, Works and Housing, got the highest capital allocation of N554 billion, followed by N242 billion for the Federal Ministry of Transportation; N139 billion for the Federal Ministry of Agriculture and Rural Development; N104 billion for the Federal Ministry of Water Resources.

 

The Federal Ministry of Industry, Trade and Investment got N82 billion; Information and Culture got N64 billion; Education got N57 billion; Health got N56 billion; National Security Adviser got N47 billion; Science and Technology got N42 billion; Niger Delta got N34 billion while FCTA got N30 billion respectively.

 

In passing the budget, the National Assembly left unchanged the crude oil price benchmark at US$44.5 and the crude oil production target of 2.2 million barrels per day.

The National Assembly also approved the federal plans to borrow N2.36 trillion in 2017 to support its spending plans. The borrowing will help the government top up its revenues of N4.94 trillion, as contained in the budget. The borrowing will come from both domestic and international sources.

 

Additional details of the 2017 budget also show allocations of N125 billion to the National Assembly, N10 billion higher than the N115 billion they got in 2016 budget, National Judicial Council gets N100 billion, followed by N95 billion for Universal Basic Education; N64 billion for Niger Delta Development Commission (NDDC); N45 billion for Independent National Electoral Commission (INEC); N4 billion for Public Complaints Commission and N1.2 billion for National Human Rights Commission, respectively.

 

The 2017 budget also provides N1.66 trillion approved for Debt service, made up of N1.49 trillion for Domestic Debts, while N176 billion is for foreign debts. Total debt service represents 37 percent of the country’s projected revenues in 2017 and about 74 percent of the projected capital spending for the year. Analysts have pointed out that the country’s rising debt service to revenue ratio risk plunging it into another debt crisis if Nigeria is unable to scale up tax collection fast enough. Nigeria plans a US$30 billion three year borrowing plan, which could put further pressure on the debt service, except revenues improve significantly.

 

Furthermore, for the first time since 2010, the National Assembly made available details of its 2017 budget, which before now had always appeared only as a line item in the federal budget. The National Assembly succumbed to pressure from Nigerians to make the details of their budget public.

 

The budget details show that the National Assembly management got N14.9 billion; Senate got N31 billion; House of Representatives got N49 billion; while the National Assembly Service Commission got N2.42 billion; Also, legislative aides got an allocation N9.6 billion; the Public Accounts Committee in the Senate got N118.9 million; House Public Accounts Committee got N143 million; General Service got N12.6 million; National Legislative Institute N4.4 million, while sum of N391 million was provided under Service Wide Vote.

 

To clarify the timeline for the implementation of the 2017 budget, the National Assembly explained that the budget  “will run for a course of 12 months, starting from the date it is assented into law,” by Mr. President, in line with the provisions of Section 318 of the 1999 Constitution as amended.

 

Looking ahead, Senate President, Bukola Saraki, also called on President Buhari to ensure that the 2018 budget is submitted in line with the Fiscal Responsibility Act.

 

Speaking after the passage of the N7.441trillion budget, Saraki lamented that if the Executive had submitted the appropriation bill on time, the National Assembly would have passed it promptly.

 

President Buhari submitted the budget to a joint session of the National Assembly on December 14, 2016.

 

“As for preparing for 2018 (budget) it is clear that the minimum of three to four months is required in order to do a good process and that is why we are appealing to the Executive to ensure that by end of September,  we can get the 2018 budget, so that we can keep to December or January passage,” Saraki stated.

 

Yakubu Dogara, Speaker of the House of Representatives, who explained to some of the lawmakers who protested against the N76 billion and N51.9 billion allocations to National Security Adviser (NSA) and Secretary to the Government of the Federation (SGF), noted that other MDAs also got huge allocations.

 

Reacting to the agitation over the passage of the budget allocations for SGF and NSA, Abdulrazak Namdas, Chairman, House Committee on Media and Public Affairs, said: “I was among those who opposed that it should be carried, but not all those that murmured are aggrieved.

 

He assured that the National Assembly’ bureaucracy will transmit the harmonised budget to Mr President for assent.

 

“For the first time, we laid the budget with details so that nobody comes out to say they are not aware, we will continue to build on these successes,” Namdas said.

 

Sequel to the passage of the budget, the National Assembly mandated the Accountant-General of the Federation (AGF) to “maintain a separate record for the documentation of Revenue accruing to the Consolidated Revenue Fund in excess of oil price benchmark adopted in this budget.

 

“Such revenues as specified in Subsection (1) of this section refers to revenues accruing from sales of government crude oil in excess of $44.5 per barrel, the Petroleum Profit Tax and Royalty on Oil and Gas.”

 

KEHINDE AKINTOLA & OWEDE AGBAJILEKE, Abuja