President Muhammadu Buhari has
proposed the sum of N8.6 trillion for the 2018 budget, according to the details
of the 2018-2020 Medium Term Expenditure Framework (MTEF) and the Fiscal
Strategy Paper (FSP) obtained by Daily Trust. The proposed amount, which is
exactly N8.595trn, represents about 15 per cent increase from this year’s
N7.44trn budget.
The proposal is, however,
subject to review by either the president or the lawmakers. The Federal
Government had said that the 2018 budget proposal would be submitted to the
National Assembly in October. The MTEF and FSP documents
were presented to the House of Representatives and read at plenary on Tuesday.
President Buhari said the
proposed budget is predicated on an oil benchmark of $45 per barrel, with daily
production output of 2.51 million barrels per day (bpd).Exchange rate stands at
N305/$1. The president said the oil
benchmark was based on moving average (MA) model, which de-links the benchmark
from short and medium-term fluctuations in the market price of oil in line with current
realities in the international oil market, including weakening outlook of
future prices occasioned by rising oil and unconventional oil supplies and slow
economic recovery, as well as other potential downside risks, a benchmark oil
of $45pb for 2018, $50pb for 2019 and $52pb in 2020 have been proposed,” he
said.
The proposal was against the
backdrop of projected oil prices ranging from $50pb to $60pb in 2018 as the
market regains balance, the document said.
The total budget proposal
includes N199.91bn grants and donor funding, the president said. Daily Trust reports that the
proposed 2018 budget is about N1.16trn above this year’s, it showed that
capital expenditure would take N2.377trn, or 30.22 percent, against this year’s
31.73 percent (N2.174trn).
Recurrent expenditure takes
over N6trn, representing 69.78 percent. The aggregate revenue to fund
the 2018 budget is projected at N5.65trn - 11.0% or N562.50bn over the 2017
estimate of N5.08trn. The MTEF document showed that
43.2 percent of the above amount is projected to come from oil sources, while
the balance is to be earned from non-oil sources. “Following from the revenue
projections and expenditure estimates, the fiscal deficit is estimated to
increase by N592.75bn (or 25.0%) from the estimate of N2.36trn in 2017,” the
document said.
Out of the total proposal of
N8.6trn, the actual expenditure showed that N3.169trn is for recurrent
(non-debt); N2.122trn for personnel costs (MDAs); N2.028trn for debt service;
N350bn for special intervention programme (recurrent); N245.2bn for overheads;
N191.631bn for CRF pensions; N194.339bn for power sector reform programme;
N198.7bn for Service Wide Votes. The breakdown indicated that
N2.122trn would be share of oil revenue; N1.373trn for non-oil; N807.8bn from
Companies Income Tax (CIT); N807.570bn from independent revenue; N277.562bn
from the Customs; N241.920bn from Value Added Tax (VAT) and N114.298bn from
Federal Government’s share of signature bonus, among others.
FG may review VAT rate
The document projects a 10
percent increase in CIT and 42 percent in VAT. “Government may, however, review
the VAT rate within the medium-term period,” the document said.
Unlike in the 2017 budget
where the sum of N97.6bn recovery fund from Swiss Banks was also used in
financing the budget, there is zero of such amount for next year’s budget.
The documents showed N8.979trn
budget proposal for 2019 and N9.081trn for 2020.
Further examination of the
document revealed that the medium term fiscal strategy of government is focused
on the recovery of the economy and promotion of sustained inclusive growth. Thus, the document said
government’s fiscal strategy would be directed at accelerating growth,
intensifying economic diversification and promoting inclusiveness; achieving
macro-economic stability; enhancing oil revenues and accelerating non-oil
revenues; addressing recurrent and capital spending imbalance, etcetera.
Another area that the proposal
focuses on is agriculture and food security, with the government targeting
self-sufficiency in rice by 2018 and wheat in 2019.
The government, however, noted
that “conflicts between farmers and herdsmen in parts of Nigeria pose a major
threat to agricultural production and food security.”
The Gross Domestic Product
(GDP) is expected to grow at 3.5% in 2018, while inflation is expected to
moderate to 12.42%, the document showed further.
Nigeria’s Debt Stock
The fiscal document indicated
that Nigeria’s public debt stock remains within acceptable thresholds despite the
recourse to debt financing to cover the significant decline in government
revenues due to lower international oil prices.
It said the country’s debt
stock at the end of the first quarter of the 2017 fiscal year was N19.16trn
($62.9bn), representing about 18 percent of nominal GDP.
The federal government’s
domestic debt stock accounts for 63 percent of the total debt stock; the
states’ domestic debt is 15%, while the external debt of both the federal and
state governments represents 22%.
“Thus, domestic debt
represents 80% of the debt stock of the federation.”
The document listed some
likely risks and enumerated their mitigation strategies.
For example, government will
maintain N20bn in the ecological funds account for immediate emergency response
in the event of natural disaster. “With renewed government
commitment to dialogue, engagements and implementing lasting solutions to the
Niger Delta agitations, it is expected that production cuts due to militancy
will significantly reduce, except in the event of technical breakdown.”
Roll over of 2017 capital
projects
About a fortnight ago, the
Minister of Budget and National Planning, Senator UdoUdoma said the Federal
Government would roll 60 percent of capital projects for this year to 2018
fiscal calendar. “In other to restore our
January to December calendar, we have decided to roll over 50 to 60 percent of
the capital projects. The MDAs have been told this. The revenues are better
than last year but not sufficient to fund the budget. We need to borrow and we
have been borrowing. We cannot spend N2.1trillion in five months,” he had said.
Based on the above submission,
two days later, Senate President BukolaSaraki said the plan would make the 2018
budget to rise to N10tr. “If you are talking about 50 per cent (capital
project), it means that you are talking about N10tr budget next year. I hope
the executive will take note of this,” he said. It is not clear if the federal
legislature would jerk up the budget to reflect Saraki’s position.
DAILYTRUST
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