.Targets N1.985 trillion from crude sales
.To spend more on recurrent than capital projects
By Sam Nwokoro
President Muhammadu Buhari on Tuesday presented a N7.298 trillion 2017 budget before a joint session of the National Assembly, stating that the budget was designed to drive infrastructure, enhance growth and investment, boost local production and consumption and create jobs.
The budget however followed the pattern of previous budgets that depended so much on crude oil sale for its funding. The budget expects N1.985 trillion from crude oil sales for its funding. It comprised N2.98 trillion non-debt recurrent expenditure, capital expenditure of N2.24 trillion (including capital of statutory transfers) and a fiscal deficit of N2.36 trillion (about 2.18 per cent of gross domestic product (GDP).
He said that the deficit would be financed mainly by projected borrowing of about N2.32 trillion, while N1.067 trillion or about 46 per cent of the borrowing would be sourced from external sources and N1.254 trillion to be borrowed from the domestic market.
Other features of the budget include: statutory transfers of N419.02 billion, allocation for debt service of N1.66 trillion and a sinking fund of N177.46 billion for the retirement of certain maturing bonds.
The president said: “Based on these assumptions, aggregate revenue available to fund the federal budget is N4.94 trillion. This is 28 per cent higher than 2016 full year projections.
“Oil is projected to contribute N1.985 trillion of this amount. Non-oil revenues, largely comprising company income tax, value added tax, Customs and Excise duties, and Federation Account levies, are estimated to contribute N1.373 trillion. He also set benchmark crude price at “realistic $42.5 even though current price as at December 15 was $52.39.
“We have set a more realistic projection of N807.57 billion for independent revenues, while we have projected receipts of N565.1 billion from various recoveries. Other revenue sources, including mining, amount to N210.9 billion.
“With regards to expenditure, we have proposed a budget size of N7.298 trillion which is a nominal 20.4 per cent increase over 2016 estimates, of which 30.7 per cent of this expenditure will be capital, in line with our determination to reflate and pull the economy out of the current recession.
Distinguished members of the National Assembly, the 2017 budget is based on a benchmark crude oil price of US$42.5 per barrel; oil production estimate of 2.2 million barrels per day; and an average exchange rate of N305 to the US dollar, the President explained
He gave the breakdown of recurrent expenditure to include N482.37 billion for the Ministry of Interior; N398.01 billion for Ministry of Education; N325.87 billion for Ministry of Defence; and N252.87 billion for Ministry of Health.
According to him, the government had decided to maintain the personnel cost of about N1.8 trillion to complete the work that had been started, which he said would include the elimination of all ghost workers from government payroll.
He pointed out that adequate provisions had been made in the budget to ensure that all civil service personnel who had not been enrolled on the Integrated Personnel Payroll Information System (IPPIS) platform were captured.
The president also informed his audience that the Efficiency Unit of the Federal Ministry of Finance had been mandated to cut certain overhead costs by 20 per cent in order to eliminate all non-essential costs and consequently free resources to fund the capital expenditure.
Breakdowns:
A breakdown of capital allocations to various sectors as presented by the president shows that the Ministry of Power, Works and Housing got the lion share of the budget with N529 billion. This was followed by the Ministry of Transportation with N262 billion.
Others are: Special Intervention Programme, N150 billion; Ministry of Defence, N140 billion; Ministry of Water Resources, N85 billion; Ministry of Industry, Trade and Investment, N81 billion; Ministry of Interior, N63 billion; Ministry of Education, N50 billion; Universal Basic Education Commission, N92 billion; Ministry of Health, N51 billion; Federal Capital Territory (FCT), N37 billion; Niger Delta Ministry, N33 billion; Niger Delta Development Commission, N61 billion; Presidential Amnesty Programme, N65 billion; and rehabilitation of the North-east, N45 billion.
The budget also includes N100 billion for Special Intervention Programme “as seed money into the N1 trillion Family Homes Fund that will underpin a new social housing programme”.
The president said: “This substantial expenditure is expected to stimulate construction activity throughout the country.”
He said higher allocations had been made for infrastructure projects because they would have multiplier effects on productivity, employment and would boost private sector investments in the country.
On Infrastructure:
The president added: “Efforts to fast-track the modernisation of our railway system will receive further boost through the allocation of N213.14 billion as counterpart funding for the Lagos-Kano, Calabar-Lagos, Ajaokuta-Itakpe-Warri rail line and the Kaduna-Abuja railway projects.
“As I mentioned earlier, in 2016, we invested a lot of time ensuring the paper work is done properly while negotiating the best deal for Nigeria. I must admit this took longer than expected, but I am optimistic that these projects will commence in 2017 for all to see.
“Given the emphasis placed on industrialisation and supporting (small and medium enterprises (SMEs), the sum of N50 billion has been set aside as federal government contribution for the expansion of existing, as well as for the development of new export processing and special economic zones.
“These will be developed in partnership with the private sector, as we continue our efforts to promote and protect Nigerian businesses.
“Furthermore, as the benefits of agriculture and mining are starting to become visible, I have instructed that the export expansion grant should be revived in the form of tax credits to companies.
“This will further enhance the development of the agriculture and mining sectors, thereby attracting more investment and creating more jobs. The sum of N20 billion has been voted for the revival of this programme.
“Our small and medium-scale businesses continue to face difficulties in accessing long-term and more affordable credits. To address this situation, the sum of N15 billion has been provided for the recapitalisation of the Bank of Industry and the Bank of Agriculture.
“In addition, the Development Bank of Nigeria will soon start operations with US$1.3 billion focused exclusively on small and medium-sized enterprises.”
Buhari further said agriculture remained the expression of the federal government’s commitment to diversify the economy with what he described as an historic allocation of N92 billion to the sector.
He said the sum would complement the efforts by both the Ministry of Agriculture and Central Bank of Nigeria (CBN) to boost agriculture output “through increased intervention funding at a single digit interest rate under the Anchor Borrowers’ Programme, commercial agriculture credit schemes and the Nigeria Incentive-Based Risk-Sharing System for Agricultural Lending”.
The president also said the government’s agriculture policy would “focus on integrated development of the sector by facilitating access to inputs, improving market access, providing equipment and storage, as well as supporting the development of commodity exchanges”.
He also said the government in 2017 would pursue job creation by improving the skills of the labour force, especially young people and consequently work with the private sector and state governments with a view to establishing and operating model technical and vocational education institutes.
Buhari said the government had proposed to boost healthcare through the expansion of coverage to primary healthcare centres and the National Health Insurance Scheme (NHIS).
On the Special Intervention Programme, the president added that the 2017 budget proposal had retained the allocation of N500 billion for the programme which he said would comprise the Home-grown School Feeding Programme, Government Economic Empowerment Programme, and the N-Power Job Creation Programme,
The N-Power programme, he said, would provide loans for traders and artisans; effect conditional cash transfers to the poorest families and provide funds for the Family Homes Fund (social housing scheme).
“The N-Power Programme has recently taken off with the employment of 200,000 graduates across the country, while the School Feeding Programme has commenced in a few states where the verification of caterers has been completed,” he added.
He said the government had also made significant allocations to the Ministry of Water Resources, explaining that in pursuit of economic recovery and inclusive growth and development, significant importance must be attached to integrated water resource management.
Against this background, he said many river-basin projects would be completed in 2017 while an increase of N9.52 billion, representing a 92 per cent increase, had been allocated to the Ministry of Environment as a mark of the government’s attention to environmental matters including climate change and the clean-up of the Niger Delta.
Review of 2016 Budget:
Giving account of how the administration fared in implementing budget 2016, the president informed: “On the basis of the budget’s assumptions, aggregate revenue was projected at N3.86 trillion while the expenditure outlay was estimated at N6.06 trillion.
“The deficit of N2.2 trillion, which was about 2.14 per cent of GDP was expected to be mainly financed through borrowing. “He blamed inability to achieve the target to acute oil price fall in the first quarter of 2016, stressing that the situation slowed down economic recovery and negatively affected revenue generation by the Federal Inland Revenue Service (FIRS) and the Nigerian Customs Service (NCS).
There was palpable silence on why key promises of the administration embedded in the 2016 budget such as the social welfare scheme for youths and school children. He had also promised that fuel prices would not rise beyond N87 whereas by December last year, the price had reached N145 after a wave of pump-price hikes and what the regime called “Government control of the deregulated petrol market”. His 2017 budget speech which dwelt much on figures than programs was also silent about the biting food crunch in the country, the foreign exchange problems that have seen many investors receding, and the challenges being faced by sectoral players whose businesses are crumbling and relocating because of the harsh operating business environment
The president said that as of September 30, 2016, the government only generated N2.17 trillion revenue (25 per cent less than prorated projections); spent N3.58 trillion on recurrent and capital expenditure, amounting to 79 per cent of the prorated full year expenditure estimate of N4.54 trillion at the end of September 2016.
He explained that N753.6 billion was specifically released as capital expenditure during the period, an amount he said exceeded the aggregate capital expenditure budget for 2015.
Roadblocks:
Already signs that the budget implementation may not run smoothly has started manifesting. The budgets plan to borrowN2.32trillion to bridge its deficit may not be as easy as government thought as some foreign interests monitoring Nigeria’s economic performances since the coming of this administration has not expressed much optimism about this N7 trillion package. China for instance which has been negotiating a credit facility of about N29.26 billion has just said it may not grant that facility unless Nigeria withdraws it support for the independence of Taiwan, a part of mainland China whose quasi-autonomy status from China is being hotly contested by present Taiwanese leadership.They want total separation from China in every way just as Britain recently voted to be out of European Union early in the year.
Another huddle the budget may face in implementation according to experts are the current mood of the Niger Delta indigenes , especially the militant agitators who only recently suspended their bombing of key oil installation in the Niger Delta export terminals ,flow stations , trunk lines and well heads. A peace parley being put together by elders of the oil producing communities. The militants demanded some fundamental changes in the ownership structure of existing oil blocks sold to mostly big time businessmen in the country without adequate representation of the host communities in the ownership of those oil blocks. They also want some political restructuring of the present Nigeria’s unitary ’federal system’ that gives little or no control over oil assets. Their agitations has only paused and there is fear the militants might resume sabotage of the oil installations unless most of their grievances are addressed.
Another source of worry about the smooth running of the 2017 budget according to economists is the ongoing controversy over the propriety of confirming the incumbent EFCC Chairman, Ibrahim Magu. Magu whose role is central to the recovery of looted funds from which government projected to realise over N565.1 billion Is facing Senate probe over allegations that he has been indicted by a security report which makes him unfit to be confirmed as substantive Chairman after staying in acting capacity since the inception of the Buhari administration.
According to a concerned citizen, Mr George Ngalor, a business consultant: “prolonged trial of the Magu by the senate probe could jeopardise his contribution in another crucial aspect of the budget which loot recovery. The same thing applies to the controversy surrounding allegation of abuse of office by the Secretary to the Government. Both are key figures of the administration and prolonged controversy over their credibility could affect the borrowing plan and the bond issuance because those sovereign securities require input from their offices one way or the other”.
There are quite a number hurdles before the budge and analyst say that unless he has a good working relationship with the legislature, the usual politics of attrition from NASS quarters is a very potential threat to the realisation of smooth implementation.
