With the Appropriation Bill for 2015 passing its second reading at the Senate, a growing consensus calling for a reduction in the N4.357 trillion budget proposed for the current fiscal year is gaining momentum.
The financial statement which details government projected spending for the year has N2.6 trillion earmarked for recurrent expenditure, N943 billion for debt servicing and the sum of N411 billion to be exhausted on statutory transfers.
The budget will largely be funded from oil and non-oil proposed revenues marked at N3.5.6 trillion and N1.918 trillion respectively.
Domestic borrowing will take a crucial cut of N1.9billion at N570 billion, down from N571.9 billion expended in 2014 while the expected growth rate of the nation’s Gross Domestic Product will slide to an average of 5.5 percent which is 1.1 percent less than last year’s forecast and 0.9 percent lower than the global growth outlook.
“The budget is predicated on initial parameters premised on a gradually recovering global economy”, says Bright Okogu, director general of the Budget Office of The Federation in a report published by the National Budget Office.
According to the report, owing to new austerity measures, contributions to the SURE-P scheme will take a hit dropping by more than 50 percent to N102.5 billion. As at December of 2014, 77 percent of the N268.37 billion allocated for this programme had been utilised leaving an outstanding sum of N60.07 billion to be brought forward as supplement to the N663.53 billion expected to be set aside as funding for capital expenditures.
Although a 40 percent drop in oil prices since its decline from a going rate of $115 per barrel in June to an OPEC basket price of $43.14 as at Thursday is wreaking havoc on the nation’s coffers, the government has insisted on setting the budget benchmark at $65 and an exchange rate assumption of N165 to the dollar as they lower oil production to 2.27 million bpd from 2.38 million bpd previously targeted.
While efforts are being made by the National Assembly to expedite the passing of the budget, analysts express gross reservations about its feasibility terming it ‘unrealistic’.
Speaking at a recent gathering, Lagos-based economist Bismarck Rewane said that “With today’s oil price (the budget) doesn’t look realistic. When your benchmark is $7 above current sale price, it’s already under water.”
At present, oil accounts for about 80 percent of government revenues and makes up over 15 percent of the country’s GDP, however, government
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revenue has taken a hammering since the global oil war between OPEC and the United States with said nation drilling for crude from shale formations and sands in North Dakota and Albata.
As the country grapples with the high degree of uncertainty characterising its economic prospectives, rancour over the Presidency’s decision to spend N1.867 trillion (an increase from N1.727 trillion in 2014) on ‘personnel cost’ while infrastructure and education both get N93.66 billion and N492.03 billion respectively has come to the fore.
Also decrying the ambiguous nature of the appropriation bill, Muda Yusuf, director general at the Lagos Chamber of Commerce and Industry (LCCI), while speaking to BD SUNDAY expressed, “The structure of the 2015 budget is clearly not consistent with the sentiments expressed by government about economic diversification, austerity measures and fiscal prudence. At time of austerity, a provision of N91 billion is made for kerosene subsidy; a provision of N943 billion is made for debt servicing and recurrent expenditure increased by 6 percent while capital budget was cut by 59percent.
“In the same vein, service wide votes was increased by 15percent to N348 billion. These are very fundamental issues to worry about in the 2015 Appropriation Bill.
“This budget is capitalist in nature. There is no provision for tangible investment in the economy because the allocation for infrastructure is too low. How do you diversify the economy on that kind of budget? There is lopsidedness reflected in it with recurrent expenditure going up while capital expenditure is coming down. How can kerosene subsidy be N91 billion at a time like this? It is not reasonable! One only hopes that the National Assembly will be sufficiently painstaking and patriotic in its consideration of the bill,” he stated.
With geo-political conflicts, low foreign direct investments and depleted fiscal reserves such as the Excess Crude Accounts taking centre-stage in public discourse as the elections draw near, pundits posit that running a deficit budget is inevitable.
Taking into account that the country had a projected shortfall of N993.68 billion for the last financial year, that of 2015, valued at N755 billion (0.79 percent of GDP), which is slightly under the 3 percent GDP ceiling required by section 12(1) of the 2007 Fiscal Responsibility Act, may be tolerable.
As a means to plugging the fiscal leakages associated with the under-remittance of internally generated revenues by multiple MDA’s, the FG is ramping up its collection of gross IGR by 25 percent with anticipated receipts of N450 billion.
For the past three years, the Federal Government has put in efforts to swell its independently generated revenues (IGR).
Based on figures recently made public, the Federal Government has sustained a rising trajectory in IGR receipts, especially, as actual receipts have continued to grow from about N274 billion in 2013 to N328 billion as at October 2014.
With McKinsey &Co. working with the Federal Inland Revenue Service (FIRS) to improve tax collection efficiency and increase tax bases, a non-oil revenue yield of N143 billion was made in 2014 after greater efforts were put into accumulating deductibles. In the short run, an additional N160 billion in tax receipts can be mocked up over the next one year.
Against oil companies receiving heavy tax waivers and exemptions, a review of the implementation of pioneer status exemptions is underway.
If properly implemented, rescinding this waivers can rake up an additional N36 billion for the economy.
According to industry professionals, more than half of the people eligible for the waivers under the pioneer status scheme abuse the system.
All things being equal, an aggregate federal revenue of N6.9 trillion will be generated over the economic year. Out of this amount, the sum of N3.6 trillion (a 3.4 percent drop from N3.7 trillion marked for 2014) is expected to fund the austerity budget, analysts say.
