Economy holds promise as FG spends big on infrastructure in 2018

The federal government has proposed to spend N8.61 trillion in 2018 with N295 billion going into construction and repair of roads nationwide. BENJAMIN UMUTEME examines the implication this spending will have on the economy
The Minister of Budget and National Planning, Senator Udoma Udo Udoma, had in the course of giving the breakdown of the 2018 budget said that an understanding of the Economic Growth and Recovery Plan (ERGP) would help Nigerians have a better grasp of the workings of the budget.
According to the minister, “when you look at the ERGP you have seen the 2018 budget.”
Nigeria has the potential to become a major player in the global economy by virtue of its human and natural resources endowments. However, this potential has remained untapped over the years.
After a shift from agriculture to crude oil in the late 1960s, Nigeria’s growth has largely been driven by consumption and high oil prices.
The Economic Recovery and Growth Plan (ERGP)
With the sharp and continuous decline in the global prices of crude oil prices since mid-2014, coupled with the inability of the government to diversify the economy Nigeria entered a recession. This affected the government’s spending ability due to lack of fiscal buffers to absorb the shock, as well as leakages of public resources resulting from corruption and inefficiency in government’s spending in the past.
In order to address the apparent decline, the government came up with the Strategic Implementation Plan (SIP) for the 2016 Budget of Change as a short term intervention to address the challenges and change the economic trajectory in a fundamental way.
While visible successes have been recorded, there was need to propel the country towards sustainable accelerated development. On that premise was the ERGP, a medium term plan for 2017-2020 developed.
The Plan is expected to build on the SIP. It articulates that government would move from being an omnibus provider of citizens’ needs into a force for eliminating the bottlenecks that impede innovation and market based solutions.
The ERGP which the government claim is different from previous plans focuses on implementation, and the government’s ability to deliver on its strategy over the next four years.
With the broad objectives of restoring growth, investing in Nigerians, and building a globally competitive economy, the Plan seeks to achieve its key priorities of stabilizing the economy; achieving agriculture and food security; ensuring energy efficiency; improve transportation and driving industrialization focusing on Small and Medium Scale Enterprises.

2018 budget projections
In presenting the proposals to the public, Sen. Udoma affirmed that the 2018 budget would consolidate the gains of 2016 and 2017 budget. While Customs and FGN revenues met expected target due to increase in oil prices, independent revenue continues to underperform. “Many MDAs are simply not remitting their operating surpluses as they should do,” the minister lamented.
The budget is premised on the following parameter: Benchmark crude oil price at $45 per barrel; Oil production estimates of 2.3 million barrels per day; Exchange rate of $305/USD; Real GDP growth of 3.5 per cent; and Inflation rate of 12.4 per cent.
But with improved revenue especially from upward movement of global oil prices, monies to fund the budget are expected to come from: share of oil revenue N2.44 trillion, share end from NLNG N29.92 billion, share of mining N1.17 billion, share of non-oil revenue N1.38 trillion, share of Company Income Tax N794.69 billion, share of Value added Tax N207.66 billion and share of customs N324.86 billion.
From budget estimates of N8.61 trillion, recurrent expenditure is expected to gulp N3.494 trillion; statutory transfers N456 billion; sinking funds N220 billion (to retire maturing bonds to local contractors); capital expenditure of N2.428 trillion (excluding the capital component of the statutory transfers; and debt servicing N2.014 trillion. A total of N11.983 trillion is estimated to be collectible revenues for the federation in the fiscal year out of which the sum of N6.387 trillion is expected to be realized from oil and gas sources while total receipt from non oil sector is projected at N5.597 trillion.
Meanwhile, with the federal government proposing N2.43 billion for capital projects in the 2018 budget, road construction and rehabilitation is projected to gulp about N295 billion.
According to him, “the 2018 budget proposal seeks to continue the reflationary policies of the 2016 and 2017 budget which helped put the economy back on the path of growth.
The roads to be constructed includes; Lagos-Shagamu-Ibadan dual carriage way; Ilorin-Jebba-Mokwa-Bokani road, Abuja-Abaji road, Kano-Maiduguri road, Enugu-Port Harcourt dual carriage way, Odukpani-Itu-Ikot Ekpene road, dualisation of Obajana junction to Benin amongst others. Also, another N10 billion has been proposed for 2nd Niger bridge.
In the same vein, N162.28 billion is being proposed as counterpart funding for railway projects such as Lagos-Kano (ongoing), Calabar-Lagos (ongoing), Ajaokuta-Itakpe-Aladja (ongoing), Port Harcourt-Maiduguri (New), Abuja-Itakpe and Aladja (Warri)-Warri Port and Refinery including Warri New Harbour (new). In addition to that, N2.03 billion is also being proposed for the construction of terminal building at Enugu Airport and N8.32 billion for construction of second run-way of Nnamdi Azikiwe International Airport, Abuja.

Doubts still persists
In spite of the lofty projection of the government, analysts still double implementation especially as the country goes into an election year.
For Director at the Nigeria Development and Finance Forum, Mr. Jide Akintunde, the budget is outsized. Mr. Akintunde noted that rolling over implementation of 60 per cent of the budget into 2018 will make implementation almost impossible. While policy analyst Jaye Gaskia believes the government should reduced the number of projects it intends to execute. “Why budget for projects you know you can’t execute,’ he asked rhetorically.
But the Director-General, Budget Office of the Federation, Mr. Ben Akabueze, calmed the fear of those skeptical about government’s inability to implement the budget saying that the government would not only implement it would ensure that projects can be tracked and carefully monitored to ensure they are properly implemented.
He noted that as a signatory to the Open Government Partnership Initiative, the government is left with no other option than to transparent in its dealings. As he noted “accountability remains the strongest weapon against corruption.”
However, Prof. Ken Ife has hailed the government for its boldness in crafting the 2018 budget. According to the micro economics analyst, it shows the present government’s willing to change the narrative of budget implementation.
Despite the fears, the government insists it will work to improve on the gains already made since 2016.

 

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