- Says Nigeria not in debt crisis
Deji Elumoye, Chuks Okocha and Adedayo Akinwale in Abuja
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, Wednesday assessed the 2019 federal budget, saying as at June, it had achieved 58 percent performance.
The minister, while delivering her budget address at the opening of a two-day National Assembly Public Hearing on the 2020 Budget, stated that “as at half-year, the federal government actual aggregate revenue was N2.04 trillion, which is 58 percent of the prorate target, including oil revenue of N900 billion (49 percent performance); Company Income Tax (CIT) of N349.11 billion (86 percent performance); Value-Added Tax (VAT) of N81.36 billion (71 percent performance), and Customs Collections of N184.10 billion (100.47 performance).”
According to her, the overall revenue performance is only 58 percent of the target in the 2019 budget largely because some one-off items such as the N710 billion from oil joint venture asset restructuring and N320 billion from revision of the oil production sharing contract legislation/terms are yet to be actualised while fiscal deductions by NNPC for federally funded projects also exceeded target.
She added that debt service and the implementation of non-debt recurrent expenditure, notably payment of workers’ salaries and pensions, are also on track.
Ahmed explained that capital releases could only commence after the signing of the 2019 budget on May 27, adding that as at September 30, a total of about N294. 63 billion had been released for capital projects.
The minister further stated that spending on capital has been prioritised in favour of critical ongoing infrastructural projects in the power, roads, rail and agriculture sectors.
On the economic and fiscal outlook for 2020, Ahmed said the global economic outlook has been revised downwards every quarter since last year due to factors, including the trade tensions between the United States and China; imposition of new rounds of sanctions on Iran with attendant implications for volatility in commodity prices; Brexit as well as the tension in the Korean Peninsula.
She explained that growth in advanced economies was expected to further decline from 2.2 percent in 2018 to 1.7 percent in 2019 and 2020 respectively while in the Euro area, growth was projected to rebound slightly from 1.2 percent projected for 2019 to 1.4 percent in 2020.
She stated that macroeconomic stability has been largely achieved as “we are still holding our 2019 growth projection at 3.01 percent till end of the year while growth is however projected to be around 2.93 percent in 2020.
“Real GDP increased from 1.89 percent in Qtr. of 2018 to 2.10 percent in the first quarter of 2019, the strongest first quarter growth since 2015, and 1.94 percent in Q2 2019 while half year of 2019 cumulative GDP growth rate is 2. 02 percent.
“Significant growth in the non-oil sector of 2.47 percent was recorded in Q1 2019 up from 0.76 percent in Q1 2018. Growth in the sector, however, moderated to 1.64 percent in Q2 2019. The contribution of the non-oil sector to GDP increased from 90. 4 percent in Q1 2018 to 90. 9 percent in Q1 2019 and 91.18 percent in Q2 2019
Commenting on the high unemployment rate in the country, she explained that “employment growth usually slows down during recession and takes some time to recover, therefore, it is not surprising that the National Bureau of Statistics (NBS) data shows that unemployment and underemployment remain high in Nigeria at 23.1 percent and 20.1 percent respectively as at Q3 2018.
“We expect more diversified and inclusive growth over the medium-term, and reduction in the rate of unemployment, as we continue to implement the priority policies and programmes that will boost inclusive growth.
“President has strongly indicated that in this second term, employment generation will remain a key focus, hence, the 2020 budget is budget of Sustained Growth and Job Creation.”
According to Ahmed, oil production volume is projected to be average 2.18mbpd for 2020 (inclusive of condensates).
“Although this is lower than the projected oil production volume of 2.3mbpd for 2019, we believe that this is a more realistic projection. For 2021 and 2022, the projections are 2.22mbpd and 2.36mbpd respectively. Actual daily crude oil production and exports have been below budget projections since 2013 despite installed capacity of up to 2.5mbpd for a number of reasons.
“The 2018 actual production was 1. 84mbpd, and for the first half of 2019, it was 1.86mbpd (base production). Q1 lower benchmark oil price of $57lbillion (against $60/barrel for 2019) is assumed, considering the expected oil glut in 2020 as well as the need to cushion against unexpected price shock.
“There are strong indications of an oversupplied market in 2020. All three of the major forecasters-Organisation of the Petroleum Exporting Countries (OPEC), International Energy Association (IEA) and the US Energy Information Administration (EIA)-generally see nonOPEC production growing by around Zmbpd this year, and by even more next year,” the minister said.
She said explained that the US shale oil accounts for most of the total supply increase, but new projects in Norway, Brazil and Australia will also contribute to the increase in non-OPEC supply.
According to her, market sentiments do not support an expansion in demand, adding: “In fact the growth in demand for OPEC oil specifically is projected to slow down next year.”
Ahmed stressed that Real GDP growth projections are rates of 2.93 percent, 3.35 percent and 3.85 percent for 2020, 2021 and 2022 respectively, and even though this falls short of the ERGP projection, the trajectory remains in the right direction, while personnel cost (inclusive of Pension Costs) at well over N3.0 trillion has continued to rise.
The federal government, she said, is however taking steps to contain the rising personnel costs, including an October 2019 deadline by President Buhari for all MDAs to implement lPPlS.
She said contrary to speculations, the country is not in debt crisis, but admitted that the country has revenue generation problem.
The minister explained that the federal government has heard repeatedly that Nigeria was heading towards debt crisis, but noted that the government had also consistently said Nigeria does not have a debt crisis as the total borrowing rate of the county was below 50 per cent of the GDP.