As Buhari Sets to Implement ‘Budget of Continuity’

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President Buhari signing the 2019 budget into law

While the 2019 ‘Budget of Continuity’ is intended to further reposition the economy on the path of higher, inclusive, diversified and sustainable growth, as well as to continue to lift significant numbers of Nigerians out of poverty, the major concern is the ability of the government to raise funds and use that to better the lives of the people, writes Bamidele Famoofo

The 2019 ‘Budget of Continuity’ has been enacted with a view to further repositioning the economy on the path of higher, inclusive, diversified and sustainable growth.

The budget, according Minister of Budget and National Planning, Senator Udoma Udo Udoma, during a public presentation of the appropriation document in December 2018, said it reflected the key execution priorities of the Economic Recovery and Growth Plan (ERGP), namely Restoring Macroeconomic Stability; Agriculture and Food Security; Energy Sufficiency (in Power and Petroleum Products); Transportation Infrastructure; and Industrialisation (focusing on SMEs).

Udoma promised that government will continue to create the enabling environment for private sector to increase their investment and contribute significantly to job creation and economic growth.

The minister said: “Already, diversification efforts are yielding positive results with significant growth in the non-oil sector (2.32 per cent growth in Q3 2018, up from 2.05 per cent in Q2 2018).”

But he was fair enough to acknowledge that the country faced significant challenges with respect to revenue generation, though he added that the challenges were being tackled vigorously.

Udoma assured Nigerians that key reforms will be implemented with increased vigour to improve revenue collection and expenditure management.

“Our aim is to take all measure necessary to ensure that we grow rapidly while maintaining fiscal sustainability,” he noted.

2018 Budget Review

As at the end of the third quarter, the federal government’s actual aggregate revenue was N2.84 trillion compared to N5.38trillion prorated revenue target for the full year to finance the budget. Year-on-year, the N2.84trillion achieved in Q3 was 40 per cent higher than the total revenue recorded in 2017. Breakdown shows that oil accounted for N1.51 trillion (101 per cent higher than 2017);Company Income Tax (CIT), N500.37 billion (23 percent higher than 2017); Value-Added Tax (VAT), N100.37 billion (5 percent higher than 2017); and Customs Collections, N229.62 billion (11 percent higher than 2017).

“The overall revenue performance was 53 per cent of the target in the 2018 budget largely because some one-off items such as the N710 billion from Oil Joint Venture Asset restructuring are yet to be actualized and have been rolled over to 2019.”

Of the total appropriation of N9.12 trillion, N4.59 trillion had been spent by 30th September, 2018 against the pro-rated expenditure target of N6.84 trillion. This represents 67 percent performance.

Debt service and the implementation of non-debt recurrent expenditure, notably payment of workers’ salaries and pensions were on track according to the Ministry of Budget and National Planning.

It would be recalled that capital releases commenced after the signing of the 2018 budget on 20th June, 2018. “As at 14th December 2018, a total of N820.57 billion had been released for capital projects.

Spending on capital has been prioritised in favour of critical ongoing infrastructural projects in the power, roads, rail and agriculture sectors.” Udoma hinted. He said the implementation of the 2018 Capital Budget will continue into 2019 until the 2019 Budget is passed into law.

2019 Budget

On May 28, 2019, less than 24 hours to the inauguration of President Muhammadu Buhari for his second term of four years in office as president of Nigeria, the appropriation document was ready for execution.

The 2019 budget is projected to be N8.83 trillion, less than the 2018 approved budget by 3.22 per cent.

Recurrent (non-debt) spending is expected to rise by 34.2 per cent, from N3.52 trillion in financial year 2018 to N4.72 trillion (reflecting increases in salaries & pensions including provisions for implementation of a new minimum wage.

Capital expenditure is 30 per cent of total government expenditure while at N2.14 trillion; debt service represents 24.24 per cent of planned spending.

Provision to retire maturing bond to local contractors decreased by 36.84 per cent from N190 billion in financial year 2018 to N120 billion.

Distribution of expected revenue shows that 52.9 per cent will be generated from oil while company income tax (CIT), will yield 11.5 percent of expected total revenue. Expected income from VAT is 3.3percent, Customs, 4.3 percent; Independent Revenue, 9.0 percent, Signature Bonus, 1.2 percent; JV Equity Restructuring, 10.2 percent; Grants & Donor Funding, 3.0 percent; Domestic, Recoveries & Fines, 2.9 percent, Others, 1.7 percent.

Overall budget deficit of N1.859 trillion in 2019 represents 1.33per cent of GDP, though government argued that projected deficit remains within threshold stipulated in the Fiscal Responsibility Act (FRA) 2007.

Udoma explained that budget deficit will be financed mainly by borrowing N1.649 trillion from both domestic and foreign sources. Domestic sources are expected to provide N824.82 billion while the same amount will come from foreign sources. Government said there is a gradual shift away from commercial to more concessionary financing. Personnel costs including overhead & pensions account for about 72 percent of recurrent non-debt expenditure.

“Allocation underscores our commitment to increase investment in national security and human capital development.” He said.

According to Udoma, expected funds to finance the 2019 budget have been earmarked to fund critical capital projects as this was not achieved in 2018.

Analysts

Though government is optimistic that the recently passed budget, which it will begin to implement from now has the potential to grow the economy and create jobs for the unemployed and at the same stem the tide of poverty in the country, some economic analysts and public commentators do not share that sentiment.

A public affairs commentator, Mr. Dipo Oyewole, said the budget as laughable and unrealistic going by the projections. “It is a typical Nigerian budget.”

He noted that expenditure exceeded revenue as usual, “signaling that we will keep borrowing till world’s end”. Oyewole frowned on the government’s huge dependent on oil to fund the budget, arguing that deployment of technology would boost revenue collection from customs/import duty.

“They never measure the impact of capital expenditure and how investment in infrastructure would attract more foreign direct investment (FDI). Serious nations that are not your typical manufacturing hubs are attracting major FDI with development in infrastructure and other factors, taxes, wages and so on. Ghana and Rwanda are excellent examples within the continent.” Oyewole said.

A manufacturing expert and former Executive Director at Nigerite Plc, Engr. Yemisi Shyllon, said the oil price and production volume benchmarks of the 2019 budget were delusional. “The exchange rate premise is self deceitful. The whole budget is a farce and dead on arrival. We are unfortunately being led into economic disaster arising from clear incompetence,” he argued.

Shyllon said growth projection as it relates to gross domestic product (GDP) was not feasible. “The projected growth of GDP by almost 100 percent of 2019 as compared to 2018, when sanely analysed macro economically, is annoyingly deceitful.”

Shyllon is of the opinion that the 2019 budget did not present any hope of survival for Nigerians much less prosperity.

A journalist and public affairs commentator, Janet Mba-Afolabi ,was of the opinion that government should spend more and work hard to check the rising security challenges if government wanted to achieve its goals with the 2019 budget. Besides security, she argued that power and roads must be given priority in the budget.

Meanwhile, some other analysts have raised concern about the transparency of the 2019 budget alleging that there were suspicious frivolities which government must take care of, if the document must help grow the economy.

“To continue our fight for budget transparency and credibility, we dug further into the proposed budget and came up with items we tagged Suspicious items or Frivolous items.

We found quite a number of line items in the budget that could not be accounted for or that needed further breakdown as the need for the line item could not be easily ascertained. We expect that the National Assembly committee will review our submissions on the budget as they have done in the past, by removing frivolous items in the budget,” BudgIt revealed.