FG Records 55 per cent Half-year Revenue Shortfall

  • May set 2017 budget oil benchmark at $42.50/bl, naira at N290/$
  •  CBN asks traders to book all naira deals

Ndubuisi Francis in Abuja and Obinna Chima in Lagos

The federal government has recorded a revenue shortfall of N1.064 trillion, or 55.2 per cent of the budgeted revenue in the first six months of the year, the Minister of Budget and National Planning, Senator Udoma Udo Udoma, disclosed monday.

The government is also likely to set the oil benchmark for the 2017 budget at $42.50 per barrel, oil production of 2.2 million barrels per day, and target an exchange rate of N290 to the dollar.

Udoma opened up on the 2016 budget performance and the government’s projections yesterday in Abuja during the commencement of consultations with civil society groups on the 2017-2019 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).

The minister said the administration was considering conservative oil benchmark prices of $42.5 for a barrel per day (bpd) for 2017, $45 bpd in 2018 and $50 bpd in 2019.

The minister also disclosed that the government was expecting oil production of 2.2 million, 2.3 million and 2.4 million barrels per day, in 2017, 2018 and 2019, respectively.

He said the government was projecting a gradual recovery in the Gross Domestic Product (GDP) growth rate after the slowdown, adding that a very marginal growth rate of 0.35 per cent was expected in 2016, with growth rising to 4.4 per cent in 2019.

According to him, this averaged 3.77 per cent within the three-year period of the MTEF.

“GDP growth is expected to be largely driven by the non-oil sector with agriculture including agro-businesses, solid minerals, and construction and the housing sectors playing lead roles. Export-led growth will also be pursued,” Udoma said.

On the 2017 budget, the minister said his team was working conscientiously for an early presentation to the National Assembly.

However, he stated that nothing had been decided on the MTEF proposal, adding that his team would consult extensively with all stakeholders to produce a document that would meet the expectations of Nigerians.

Udoma also revealed that the federal government recorded a revenue shortfall of N1.064 trillion in the first six months of the year, stating that total revenue inflow was short of the 2016 budget projections by 55.2 per cent.

According to him, the shortfall was augmented by domestic borrowing amounting to N600 billion, about 33 per cent, of approved borrowing of N 1.82 trillion in the 2016 budget.

He attributed the revenue shortfall on falling oil revenue resulting from attacks on oil and gas installations in the Niger Delta.

“The 2016 budget performance is reflective of the low revenue attributable to the global and domestic developments earlier highlighted.

“Oil revenues fell significantly in the second quarter compared to the first quarter as a result of increased oil pipeline vandalism and production shut-ins.

“Non-oil revenue also declined compared with forecasts in the budget due to the slowdown in economic activities and the acute shortage of foreign exchange,” Udoma said.

Providing insight into the federal government’s expenditure for the year, he disclosed that N2.123 trillion had been spent by the government.

Total capital expenditure at the end of June, according to the minister, stood at N331.58 billion, of which personnel cost was fully met.

He put personnel cost at N891.31 billion, even as he stated that debt service gulped N598.63 billion while statutory transfers were put at N175.68 billion.

On the government’s overheads, Udoma put the figure at N125.4 billion, just as pension and gratuity got N79. 18 billion.

“Government’s focus is to ensure quality of expenditure. Capital releases are based on priorities. MDAs’ performance as well as value-addition to the immediate needs of the economy,” the minister said about the administration’s policy on capital expenditure.

In achieving the objectives, Udoma said the federal and state governments alone would be unable to bring about the desired results.

He called on the private sector to play a pivotal role in the government’s diversification efforts at transforming the economy from the current dependence on oil.

The federal government, he added, was reviewing the tax waiver policy, adding that after the review, more tax revenues would be generated thereby increasing non-oil revenue.

Meanwhile, the Central Bank of Nigeria’s (CBN) foreign exchange trading platform – FMDQ OTC Securities Exchange – has asked banks to disclose all their naira transactions, including those done with customers that weren’t previously booked, as the regulator eases its grip on the currency and tries to attract inflows.

“Banks should update all trades irrespective of the exchange rate,” the Chief Executive Officer of Lagos-based FMDQ OTC Securities Exchange, Mr. Bola Onadele, said in an e-mail sent to dealers, according to Bloomberg.

It added: “The CBN is very interested in credible price formation for the spot foreign-exchange market. It is also imperative for price discovery and liquidity assessment of our market, which are key to activate foreign portfolio investment flows.”

Banks should publish all their so-called “off-line trades” on its trading system “within 30 minutes of execution of such transactions,” FMDQ said in a separate e-mail to dealers.

During trading yesterday, the naira shed N2.41 on the interbank market, closing at N309.84 to a dollar, compared with the N307.43 to a dollar last Friday.

But the naira remained unchanged on the parallel market where it closed at N378 to a dollar.

Nigeria has struggled to attract investors to its bond and equities markets since devaluing the naira by 30 per cent on June 20, ending a 16-month peg of N197-N199 per dollar.

Investors were concerned the central bank was still controlling the exchange rate.

However, the Special Adviser on Financial Markets to the CBN Governor, Mr. Emmanuel Ukeje, in an interview at the weekend assured investors that the worst was over for the naira.