2018 Budget proposals renew old anxieties

FELIX OLOYEDE

Mixed reactions trailed the presentation of the 2018 federal government budget by President Muhammadu Buhari to the National Assembly (NASS) last week. Public policy analysts have expressed moods from the congenially positive to the outright incredulous. The staggering N8.6 trillion expenditure plan is one of the most audacious in recent history beating even the vaulting aspirations of the 2017 budget which has been castrated by inadequate funding. Of the N2.2 trillion appropriated for 2017 capital budget in the year, only N450 billion had been released.

President Buhari presented a N8.612 trillion budget for 2018 to the joint session of the National Assembly with recurrent expenditure projected to gulp N3.49 trillion while N2.43 trillion would be spent on capital projects. The budget which the President christened Budget of consolidation would see the government spend N2.01 trillion on debt servicing, while statutory transfers and a bond sinking fund are expected to swallow N456 billion and N22 billion respectively.

The 2018 budget was 16 per cent higher than the N7.44 trillion budgeted for this year, but only N450 billion has been released out of N2.36 trillion voted for capital projects as s at the end of October 2017, President promised that 50 per cent capital vote would be released by end of December. He argued that late passage of this year’s budget has hampered its implementation.

BudgIT, a civic organization that applies technology to divide information on national and sub national budgets, stated that the proposed 2018 budget of N8.6trillion and its guiding framework meet analysts’ expectations and threw its weight behind the government’s resolve to run a hefty deficit in response to the slow moving economy.

The Budget presented on Tuesday last week is of significance to the administration, because it is the last full budget it would implement before the 2019 general election, says Seun Onigbinde, Chief Executive Officer of BudgIT.

The government has been struggling to meet its revenue target as “collections were 14 percent below target as of September 2017, mainly due to the shortfall in non-oil revenues. A key revenue shortfall was from Independent Revenues; only 155.14 billion Naira was remitted by September 2017 as against the projected pro-rated sum of 605.87 billion Naira. This represents a 74 percent shortfall, which is very disappointing,” the president stated during his presentation at the National Assembly on Tuesday.

“Since this is the last budget in the last lapse of the administration before the election, there would be haste to ensure passage. The budget may be quickly passed by the Assembly because they have a short period for governance next year,” Onigbinde noted. He added the government needs to think on how to properly fund the budget to avoid the challenges of revenue shortfalls it has been battling with this year.

Mr Bismarck Rewane, Managing Director, Financial Derivatives Limited told Channels TV that when inflation is factored in, there was no real increase in total expenditure in the 2018 budget.

“The figure of N8.6 trillion is 15.7 percent higher than the budgeted figure for last year. The rate of inflation this year is 15.9 percent. So, in real terms, there has been zero growth in expenditure,” he said during an appearance on Channels Television’s Politics Today. “Because a thousand naira that you had in January will be equal to a thousand naira less 15.5 percent in December. So, if you have increased your budget expenditure from N7.4 trillion to N8.6 trillion which is 15.7 percent, effectively, you have actually increased your budget by zero in real terms.”

He noted that if the parameters of the budget and the realities of the Nigerian economy are considered, it is clear that this is a time for economic stimulus, a time to increase spending and to be audacious.

“Not just for the sake of spending, but for impactful spending,” he said. “What the President has done today is an impactful spending programme, but my fear is that it is not audacious enough; it is not bold enough.”

For Mr Andrew Esene, Research analyst, Futureview Financial Services Limited, “The government had signaled before that it would need to continue to borrow (especially externally) in order to fund its planned programs over the medium term so the deficit of N2.01trillion does not come as a surprise. Other measures the state is looking at to beef revenue include a more inclusive tax net, reduced domestic cost of borrowing and increased PPP models for infrastructure projects.”

“I am cautiously optimistic about the implementation of the 2018 budget, and we would likely see improved performance as the government will be returning to electorates for a possible extension of its current mandate for another four years and would therefore work to have results to show.”

The 2018 budget was based on US$45 per barrel benchmark and estimate of 2.3 million barrels per day crude oil production. The government projected a N305/US$ exchange rate for 2018, expects the economy to grow at 3.5 per cent, while inflation rate would slow to 12.4 per cent next year.

Expectedly, ministry of power, works and housing got the largest chunk of the budget with N555.88 billion allocated to it, followed by transportation and Special intervention progammes which got N263.10 billion and N150 billion respectively. Niger Delta Ministry, North East Intervention Fund and Federal Capital Territory got the lowest slice of the budget, which were proposed to receive N53.89 billion, N45.00 billion and N40.30 billion respectively.

Meanwhile, Senators from the ruling All Progressive Party (APC) lauded the budget proposal, saying it has something every part of the country. But members of the opposition, Peoples Democratic Party (PDP) argued that the 2018 budget may suffer the same fate as that of the current fiscal year.

Moody’s Investors Service last week downgraded Nigeria’s long-term issuer and senior unsecured debt rating to B2 from B1, citing government’s unsuccessful efforts to address the key structural weakness occasioned by the oil price shock.  But the government has faulted the agency’s action, saying the country has made significant improvement in several economic frontiers since it was last rated in 2016.