Minister of Finance, Ngozi Okonjo Iweala
Delay in the passage of 2013 budget by the National Assembly on the scale seen this year and last will upset macroeconomic stability and implementation of the capital budget, experts have warned.
While noting that the Federal Government had made a pitch more likely to be accepted by the legislature, they stressed that the assembly had to approve the document.
“The Federal Government wants early passage of the finance bill. However, its relations with the executive have deteriorated in recent weeks. Our take, therefore, is that the budget may disappoint purists but pursues the broad aims of the FGN and has been pragmatically framed, “said analysts at FBN Capital Limited.
The Federal Executive Council (FEC) had on Wednesday approved a N4.93 trillion ($30.8 billion) budget for 2013 and maintained its recent trend of boosting the share of capital items in total spending. The FGN intends to submit the budget to the National Assembly before the end of September.
Continuing the experts said: “Our initial response to the budget is positive. We could be self-righteous in criticising some of the underlying assumptions but we have instead made allowances for the political realities.
“Total expenditure of N4.93 trillion compares with N4.70 trillion in the 2012 document, or with N4.88 trillion once payments under the Subsidy Reinvestment and Empowerment Programme (SREP) are included. It is not clear if the headline figure for next year covers the programme. In either case, the increase is less than underlying inflation. The allocation for capital items is raised to N1.54trn or 31.3 per cent of expenditure from 28.5 per cent of the total.”
They noted that the projected deficit on the federal budget is set at N1.04 per cent or 2.15 per cent of GDP, compared with 2.87 per cent adding that some commentaries appears to have confused the net domestic borrowing requirement of N727 billion with the deficit and overlooked the possibility that the deficit can be financed from other sources such as external borrowing and asset sales.
The document, the experts said assumed average crude oil production of 2.53 million barrels per day (mbpd) (2.48 mbpd in the 2012 budget).
“We can say that this is unrealistic but should recognise that there is no single official data source. The petroleum minister said last week that output had reached 2.70 MBPD. Again the 2013 budget assumes an oil price threshold of $75/b, compared with $72/b this year. The market would prefer a lower threshold, and so more savings and less pressure on the exchange rate, “the experts said.