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How different is 2018 budget from Buhari’s last two?

 

By Jerry Uwah

Glad tidings, danger signs
The 2018 Appropriation Bill submitted to the National Assembly this week by the federal government is a combination of glad tidings and warning signs on the economy.

The federal government plans to spend a record N8.6 trillion on its services during the year. As usual, recurrent expenditures which cover the nation’s wage bill for its 1.2 million civil servants and hundreds of billions in overhead cost, takes the lion share. The budget is a bumper harvest when compared with the N7.4 trillion budgeted for 2017.

Ironically, recurrent expenditure has been growing at geometric progression while capital expenditure which determines economic growth, only manages to inch up. The sum of N3.494 trillion is earmarked for recurrent expenditure while capital expenditure inches up to N2.28billion from N2.17 billion in 2017. The allocation of N9.8 billion for the commencement of work on the Mambila Hydro Power plant and the setting aside of N300 billion for construction and rehabilitation of strategic roads is encouraging.

The architects of the budget also set aside N10 billion for the Second Niger Bridge. That probably is below the expectation of users of the deteriorating Niger Bridge in view of the perennial traffic bottleneck between Asaba in Delta state and Onitsha, Anambra state. Besides, the N550 billion allocated to the Ministry of Power, Works and Housing appears big on the surface. However, when Nigeria’s housing deficit of 16 million units is factored into the allocation, it simply pales into insignificance. The whole sum cannot even tackle the housing problem alone.

Modest bench mark, ambitious target
The budget is predicated on an oil reference price of $45 per barrel and a production target of 2.3million barrels per day (mbd). At a time when oil price is expected to hit a three-year high of $70 per barrel, a budget oil reference price of $45 per barrel is quite modest, if not pessimistic. If the National Assembly fails to hike the budget reference price as usual, it would certainly boost the nation’s sagging excess crude account substantially. Oil price hit the $64 mark at the weekend and is expected to surge further.

However, an oil production target of 2.3mbd is quite ambitious at a time when the Organisation of Petroleum Exporting Countries (OPEC) in collaboration with Russia and other non-OPEC exporters are expected to roll over the production cuts that is partially responsible for the current northward journey of oil prices.

Nigeria had all along been exempted from the production cuts because the gunmen in Niger Delta had inflicted severe damages on the country’s oil production and export facilities thus crippling production to an average of 1.5mbd in 2016.

With production now surging in Nigerian oil fields, OPEC would almost certainly compel Nigeria to contribute to the production cuts. Consequently, the budget production target of 2.3mbd sounds rather ambitious. Equally ambitious is the budget inflation rate target of 12.4 per cent. In the last 15 months since inflation rate started climbing down, it has only managed to drop by two per cent from 18.6 to 16.04 per cent. Those who expect to crash it by four per cent in 12 months to 12.4 per cent must be incurable optimists. The economic indices on ground do not support that optimism.

Projection on non oil revenue
The budget projection of higher non-oil revenue is predicated on the huge investment in agriculture and the concerted efforts at diversifying the economy. It would be good news if the federal government could make more money from non-oil exports than depending on oil revenue, according to analysts. Experts equally say that the bad news in the budget is in the cost of debt servicing. At a record N2.02 trillion, Nigeria is obviously working for its creditors, they argued. In the 2017 budget, debt servicing gulped down N1.3 trillion. That amounted to 38 per cent of the nation’s annual revenue. At that point, 38 kobo out of every naira earned by Nigeria went to creditors, according to statistics. The situation would worsen in 2018, experts projected. The debt crisis worsened in the last two years as a result of dwindling oil revenue. That resulted in tardy implementation of the 2016 and 2017 budgets.

2016, 2017 budgets in retrospect
The 2016 budget suffered revenue losses that sailed perilously close to 70 per cent. Militancy in the Niger Delta plunged oil production to an average of 1.5 mbd as against the budget target of 2.2mbd.

As usual, capital budget was the major casualty of the drop in revenue and crippling delays in project formulation. By the end of October 2016, only N753.6 billion had been implemented in a capital budget of N1.5 billion.

Significantly, Nigeria has a long history of abandoning capital budgets in times of dwindling revenue. The federal government borrowed extensively to fund its bulging wage bill in recurrent expenditures while capital projects suffered from the dwindling revenue. The same development bedeviled the 2017 budget. Oil revenue tumbled precipitously even as production inched up when the federal government struck a deal with the gunmen in Niger Delta for a truce.

The implementation of the 2017 budget was however further crippled by delays in its passage. The National Assembly and the federal government were locked in internecine squabble over budget padding. When the budget was eventually passed in May, there were fears from the Central Bank of Nigeria (CBN) that pumping N6 trillion in seven months into an economy the size of Nigeria’s could get inflation surging at unprecedented rates. That development partially delayed implementation of the 2016 and 2017 capital budgets. By May 5, 2017, the 2016 budget was still being implemented. That slowed the release of funds for the implementation of the 2017 capital projects.

National Assembly’s proviso
The National Assembly responded to the strange development by inserting a proviso in the 2017 Appropriation Act that the budget would be implemented till May 2018. That again might inhibit the speedy implementation of the liquidity rain projected in the 2018 Appropriation Bill.

Besides, the National Assembly warned during the presentation of the budget that its committees were not duly consulted by the executive during the formulation of the 2018 Appropriation Bill. That sounds like green light for crippling delays in the passage of the bill.

At the end of the day, Nigeria might have to plan its budget from May to May of the next year to avoid a clash of projects.

A surge of good news
Feelers from the oil industry suggest that oil revenue might surge in 2018 thus easing the revenue constraint that crippled the implementation of the last two budgets. That probably explains the marginal drop in fiscal deficit in the 2018 Appropriation Bill from N2.36 trillion in 2017 to N2.005 trillion. The drop in deficit does not emanate from prudence on the part of government.

Recurrent expenditure climbed despite the removal of thousands of ghost workers from federal pay list. That is dangerous for a one-handed economy like our own.
Mixed reactions trail 2018 budget
After the budget presentation, some senators commended the President Muhammadu Buhai while others expressed worry that the appropriation bill fell short of the expectations of the people.

Senator Foster Ogola, a member of the senate Public Accounts committee said the non-challant attitude of the federal government is fuelling activities of militants in the Niger Delta. According to the PDP senator from Bayelsa state, ‘the (2018) budget will not bring about emancipation to our people, we pray that God will intervene to enable us have a government that will take care of our needs.’’

In his budget presentation, the president had budgeted the sum of N53.89 billion for the Ministry of Niger Delta as well as N65billion for Amnesty programme. However, the lawmaker wondered why the clean up of Ogoni land is yet to commence, 18 months after the federal government formally launched the clean-up of oil spills in Ogoni land.

However, another lawmaker Ovie Omo-Agege (APC, Delta State), commended the President for increasing allocation to the Ministry of Niger Delta from N34.20 billion in 2017 to N53.89 billion in 2018.

“The President has demonstrated that he is up to the task for the remaining term, he also demonstrated that he is capable of running another campaign and govern this country for another four years. We believe in his vision for this country. We are his foot soldiers,’’ he said.

Senator Omo-Agege is also happy with the increase funding for NDDC and that ‘’there is adequate funding for the Itakpe-Alaja rail line, the N150 billion set aside for the social intervention for direct cash transfer, I am excited about that” However, he expressed dissatisfaction with the implementation of the 2017 budget. The lawmaker also commended the President for increasing the Sovereign Wealth Fund from $1 million to $500 million.

On his part, Deputy Chief Whip, Francis Alimikhena (APC, Edo State) said the Senate would approve the 2018 to 2020 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) before considering the 2018 budget.
Similarly, Oil workers under the auspices of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) urged the National Assembly to reject a plan to sell profitable oil and gas assets in the industry as scraps to fund the 2018 budget.

The workers, who said there are other models to fund the budget, advised government to endeavour to repair assets that are in bad state rather than sell them as scraps to some businessmen and politicians. The association’s National Public Relations Officer, Comrade Fortune Obi asked the government ‘’to critically evaluate the assets to look at their viability and profitability. Assets such as Nigeria Liquefy Natural Gas (NLNG) and shares in the upstream oil and gas JV operations that have become a huge revenue earner for the country should be kept by the government to the benefit of the Nigerian majority.”

On its part, the National Association of Polytechnics Students (NAPS) rejected the seven per cent allocated to education, saying it is irrelevant compared to the 26 per cent national minimum budget recommended by the United Nations. A statement jointly signed by NAPS National President, Mohammed Eneji and National Public Relations Officer, Ijaduoye Olasunkanmi, said the Buhari-led administration has no regard for education in the country, as it continues to pay less attention to the sector which should be given priority. According to NAPS, the UN has ‘’recommended the budgetary benchmark to enable nations to adequately cater for rising education demands. But in the proposal presented to the National Assembly, President Buhari allocated only 7.04 per cent of the N8.6 trillion 2018 budget to the education. The total sum allocated to the sector is N605.8 billion with N435.1 billion for recurrent expenditure, N61.73 billion for capital expenditure.”

However, the Director-General of Lagos Chamber of Commerce and Industry (LCCI), Chief Muda Yusuf, and others commended the budget, saying the presentation would bring better alignment between the private and public sector budgets. They expressed optimism about the returning of the budget cycle from January to December and urged the government to be more realistic in its exchange rate.

According to Yusuf, ‘’this is good for planning purposes both in the public and the private sectors because many of the private investors also run January to December budgeting cycle and quite a number of them also have one or two things to do with the government, which will bring a better alignment between the private sector budget cycle and the public budget cycle.”
After all said and done, the devil of every budget in Nigeria is in the implementation.

About Jerry Uwah

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