The presidential candidate of the Peoples Democratic Party for the 2019 general elections, former Vice President Atiku Abubakar, yesterday, provided some insights into reasons the 2019 N8.83trillion budget, which according to him, won’t work.
The budget, Abubakar believed, cannot bring about the desired inclusive, diversified and sustainable growth
President Muhammadu Buhari, last Wednesday, presented the budget with an oil benchmark of $60 per barrel among other templates.
Faulting the Appropriation Bill in a statement issued yesterday in Abuja, Atiku explained that “the 2019 is built on a very shaky foundation. It seeks to consolidate on the ‘achievements’ and ‘successes’ of the 2018 budget.
“However, the 2018 budget was itself poorly implemented. Actual revenue collected was only N2.84 trillion (as at September 2018) against projected revenue of N7.17 trillion.
“This implied that as at September 2018, only approximately 40% of projected revenues were realised by the federal government.
“Similarly, by December 14, 2018, only N820.57 billion was released for capital spending out of a projected expenditure of N2.652 trillion. This implied that only 31% of the capital budget was implemented.”
Similarly, the former VP, in the statement titled “My Takeaways from Budget 2019,” said “the 2019 budget is a business as usual budget. The federal government keeps repeating the same mistakes but expects different results.
“For example, although the current resource position remains precarious, government does not intend to introduce significant fiscal restructuring. Thus, in spite of dwindling revenues, subsidy on PMS will continue (US$1 billion is budgeted for that); government does not intend to introduce any reforms in the foreign exchange market as multiple exchange rates will be maintained – thus giving away between ₦300 billion and ₦800 billion to opportunists, rent-seekers, middlemen, arbitrageurs, and fraudsters; and finally, the budget is overwhelmingly recurrent, with capital spending taking the back seat.”
“Thirdly, 2019 budget is based on grossly exaggerated assumptions. They are not able to put in place any coherent and comprehensive policies to give hope that these assumptions can be met.
“For example the oil price benchmark has been pegged at $60 per barrel and domestic oil production will be maintained at 2.3 million barrels per day. Of recent, the oil market has been turbulent and Brent Crude sells at less than US$60. There are projections of over-supply resulting from US shale production and pressure on Saudi by the US not to cut production. “With regards to local production, we all know that throughout 2018, average production was 1.95 million barrels per day. Indeed, the latest report from OPEC suggests that Nigeria will be required to cut production to 1.65 million barrels per day. This implies that revenue targets to implement the budget will not be met,” he further added.
The former vice president also noted that, “most laughable assumption is that real GDP will grow at 3.01 percent, when indeed, GDP growth has been sluggish, with a projection of 1.9% in 2019. The government cannot cut spending and expect the economy to grow.”
Continuing, the PDP standard flag bearer claimed the “2019 Budget is very small. The size of the budget is not sufficient to stimulate growth of the economy, create jobs and alleviate poverty. The planned total expenditure of N8.83 trillion is lower than 2018 budget by approximately N290 billion. The federal government is contracting the economy whereas in a period of recession, governments must spend more to have meaningful impact on jobs and poverty.”
“The budget is also very low in relation to the size of the Nigerian economy, which is estimated at approximately N150 trillion. This means that the 2019 budget is barely 6% of GDP. (Compare Bangladesh 15.30%, India 12.74% and Afghanistan 11.9% in 2017). Again, this will have no meaningful impact on jobs and poverty,” he added.
“Nigeria’s fiscal crisis persists and fiscal position of the federal government, and by extension, the states and local governments, remains precarious. First, projected revenues of N6.97 trillion are 3% lower than 2018 and second; the oil sector continues its dominance as it contributes 54% of the budget revenues.
“The non-oil sector is expected to contribute only 20% of the budget revenues. There are no coherent and comprehensive plans to expand the resource horizon of the federal government.
“As a result of the brewing fiscal crisis, budget deficit remains high at N1.86 trillion. This is equivalent to 21% of the budget and 1.3% of GDP. The implication is that the Federal Government will need to borrow more in 2018 to implement the budget. Debt Service is already putting a strain on government revenues. The sum of N2.14 trillion has been provided for debt service. This means that 30% of projected revenue will be used in debt service,” the PDP standard bearer further added.
According to him, “as has been with previous budgets, recurrent costs and debt service will take a lion share of the budget as against capital expenditure. Capital expenditure will be only 23% of planned expenditure.
“On the other hand, 24% of the budget will be spent on debt service and 46% on overhead and personnel costs. Thus, over 70% of the budget will be devoted to recurrent costs and debt service. This will not grow the economy and create jobs.”
Suggesting the way forward, the former vice president prided himself as the alternative, insisting “there must be an alternative to this budget.
“Nigeria needs a government which understands how to run the economy in order to Get Nigeria Working Again. Fortunately for the country, the Atiku/Obi team has exactly that capacity and experience.”
It’s workable, FG argues
However, the Director General of the Budget Office of the Federation, Mr. Ben Akabueze, insisted the 2019 budget as proposed by the Executive is a workable document.
In a veiled reference to Abubakar and other critics of the Appropriation Bill, Mr. Akabueze said they lacked basic understanding of the budget’s underlying principles.
The DG blasted those criticising the budget, saying they failed to understand that the workings of the budget and its implementation. Mr. Akabueze pointed out that “up to the third quarter of 2018, the country was averaged 1.95 million barrels per day, and that is because in the second quarter, there was a dip due to disruptions in product pipelines.
“As at now, we are at 2.1 million bpd and by January, when the Egina platform will come on stream and deliver 200,000 bpd in the course of 2019. Do people who are commenting know about this?
“Funding constraints have been addressed; security issues have been dealt with.”