Budget 2019: Walking a tight rope?

In spite of the increased budgetary figures by the National Assembly, many fear that implementation might just be a herculean task, BENJAMIN UMUTEME reports.

Budget in every country is meant to carve a pathway that the
government follows in terms anticipated income generation and spending showing the respective sectors and what they get as part of the cake. It outlines every financial transaction of
government in a certain financial year depending on what it wants to achieve.  And Nigeria is not different as the federal, states and local governments have their own budget for each year.

In other climes, the budget starts in January and end in December of that particular year, but not in Nigeria as in a long while the budget has passed and signed into law by May or early June.

This in a way has become a style that successive governments have come to live with. By omission or commission, the passage of the budget by May has come to stay.

Principles guiding the budget

The federal government had planned to spend the sum of N8.83 trillion before it was jerked up by the National Assembly to NASS to N8.92 trillion, translating to an increase of N90.33 billion, however, it is still lower than the N9.1 trillion budgeted for 2018.

The 2019 budget is intended to further place the economy on the path of inclusive, diversified and sustainable growth in order to continue to lift significant numbers of Nigerians out of poverty, therefore, the government had to adjust its revenue projections to reflect current realities.

On the expenditure side, allocations to Ministries, Departments and Agencies of government were guided by the 3 objectives of the ERGP, which are restoring and sustaining growth; investing in Nigerians and building a globally competitive economy.

Key assumption and macro-economic framework of the 2019 budget has an oil production estimate of 2.3 million barrels per day, a budget benchmark of $60 per barrel and an exchange rate of N305 to a dollar, real Gross Domestic Product growth rate of 3.01 percent and inflation rate of 9.98 percent while nominal consumption and nominal GDP is put at N119.28 trillion and N139.65 trillion respectively.

Meanwhile, oil prices are projected to average at least $66 in 2019.

Also, the 2019-2021 MTEF and Medium Term Sector Strategies and the budget reflect many of the reforms and initiatives in the  Economic Recovery and Growth Plan (ERGP) which the federal government’s economic recovery and a more sustainable growth. Accordingly, projects are linked to government policies and overarching strategic priorities.

A breakdown

Of the total amount of N8.92 trillion, N4.07 trillion was set aside as
recurrent expenditure while capital expenditure was put at N2.09
trillion. Also, the sum of N2.144 trillion was earmarked for debt
servicing with N1.92 trillion as put aside to finance the budget
deficit representing 1.37 per cent of GDP. And it is to be financed by borrowing N.605 trillion split equally between domestic and foreign borrowing of N802.82 billion respectively.

The sum of N3.69 trillion is expected from oil revenue and another
N3.31 trillion expected from non-oil revenue. In addition, N502
billion and N110 billion will go to statutory transfer and sinking
fund respectively.

The total projected revenue is N6.97 trillion, three per cent lower
than the 2018 estimate of N7.17 trillion.

Summary of 2018 budget performance

There has been talks that the 2018 budget did not produce the kind of performance that is needed to propel the economy on the path of growth and sustainability that is being expected.

Of the N9.12 trillion N6.94 trillion was spent at while N3.96 trillion
came into government coffers. This was due to increase in oil price projection from $51 per barrel to $71 per barrel as revenue less than the projected figure of N7.16 trillion.

Also, GDP growth rate was projected at 3.5 per cent, however, GDP was able to grow at 1.93 per cent., this is just as oil production projection was 2.3 million but the country could only hit 1.96 million barrel. Interestingly, oil price increase made up for the less than 400,000 barrels shortfall in oil production.

Of the N3.96 aggregate revenue; N2.32 trillion was from oil revenue with N637.25 billion, N454.34 billion N303.91 billion and N1148.92 billion from company income tax, FGN Independent revenue, Customs Collection and Value Added Tax respectively.

The overall revenue performance was only 55 per cent of the total
target partly because of the sum of N710 billion from oil joint
venture assets restructuring and N320 billion from revision of oil
production sharing contract term. These have been rolled into the 2019 budget.

N102.84bn financing gap crops up


In what has been described as padding following fresh injections into the budget proposed by the National Assembly, President Muhammadu Buhari has insisted that it will be difficult to implement the budget the way it was passed by the National Assembly.

The Minister of Budget and National Planning, Senator Udoma Udo Udoma when he presented the FGN approved budget for 2019, said fresh injection by the National Assembly into the 2019 budget has left the federal government with a financing gap of N102.84 billion.

The implication, according to the Minister is that it will increase
the country’s borrowing.

The lawmakers are said to have deducted N347 billion in the allocation to 4,700 projects submitted to them for consideration and introduced 6,403 projects of their own amounting to N578 billion.

The Minister noted that executive revenue assumptions were generally approved and adopted by NASS, except for unexplained increases totaling N31.5 billion on some non-oil revenue lines.

“This has resulted in an overall increase of N58.83 billion in
deficit. Inexplicably, NASS reduced the proposed borrowing from N1.649 trillion to N1.605 trillion, thus creating an overall unfunded deficit of N102.83 billion. To fully fund the budget, the level of borrowing may therefore have to increase.

“Allocations for some executive projects based on critical appraisal and linked to the ERGP were reduced and a large number of new projects, mainly constituency type projects, were introduced,” he explained.

The Minister further explained that the country’s overall budget
deficit also increased to N1.918 trillion as against N1.859 trillion
in the executive proposal representing 1.37 per cent of GDP.

‘Its a bit odd’

Experts have expressed skepticism over the statement by the President. According to some who spoke to Blueprint, President Buhari’s statement does not inspire confidence in the economy.

According to economist, Friday Efih, rather than the President saying that it will be difficult for the executive to implement the budget due to fresh insertions by the NASS, he would have written to the leadership of the legislature expressing his reservations.

He said: “while I have never approved the action of the NASS in adding to what is submitted by the Presidency, it would have been better for the President to just talk on the ‘insertion’ than say outright that it will be difficult to implement the budget.”

But development economist, Obadiah Mailafia, was more fore right when he described the action of the legislature in increasing the budget as a bit odd. He noted that the with its job cut spelt out in the constitution which is to make laws, the NASS had no business increasing the budget.

“Generally, it is odd for parliament to adjust the budget because it is the executive that wears the shoes. The role of the parliament is to make laws. They are not the one’s mobilizing the funds, spending, its therefore, a bit odd to increase the funds,” he said.

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