Exclusive: My Analysis of 2018 Budget Estimates

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By Muyiwa Olayinka
Caution is the word.An African proverb: ‘He who has been bitten by a snake, runs when he sees an earthworm’

President Buhari presented the Budget estimate for 2018 fiscal year on Tuesday 7th November, 2017 to the joint sittings of the National Assembly. He presented a N8.613 trillion 2018 Appropriation Bill.

The budget is tagged “Budget of Consolidation”

The amount represents a 16 % increase over the N7.44 trillion for 2017.

These are the breakdown of the budget:

Capital Expenditure N2.428 trillion representing 30.8% of the total budget

Recurrent Expenditure N3.494 trillion i.e. 40% of the total budget

Debt service N2.014 trillion

Statutory transfers N456 billion

Sinking fund N220 billion to retire maturing bonds for local contractors

The assumptions of the estimates rests on:

Benchmark oil price is $45 per barrel

Estimate of 2.3 million barrels per day

Exchange rate of N305 to a $

Real GDP growth of 3.5%

Inflation rate of 12.4%

The projected revenue for 2018 is put at N6.607 leaving a deficit of N2.005

Oil revenue is put at N2.442 trillion

Non oil revenue sources is N4.165 trillion

How government intends to finance the budget deficit

Borrowings externally and locally N1.699

The balance of N306 billion to be financed from proceeds of privitization of non oil assets by the Bureau of Public Enterprises.

Some of the top earners of revenues to be received by MDA ( Ministry, Department and Agencies of Government) are listed below:

Ministry of Power, Housing and works. N555.8 billion

Ministry of Transportation N263.1billion

Ministry of Defence N145 billion

Ministry of Agriculture and Rural development N118.98 billion

Ministry of Industry, Trade and Investment N82.92 billion

It is heart warming that Mr President presented this budget on time. It shows a more radical departure from late presentations. The President acknowledged the fact that the current budget was passed in June this year, leading to low implementation of the 2017 budget. By presenting it earlier, the President hopes to maintain January – December financial calendar.

Just like 2017, the current budget still operational, the government allocated large chunk of money to the Ministry of Powers, Housing and Works. It is gratifying that 30.8 % of the budget is committed to capital expenditure.

It means that government wants to spend more on critical sectors to reduce poverty and stimulate the economy.

But sadly, most on going projects are yet to be completed, almost three years of this administration. Though tagged budget of consolidation, we are looking forward to seeing projects being consolidated and completed.

The year 2018 is very critical to the nation, because, this is the final phase of this government before the general election of 2019.

This government has recorded dismal performance in delivering critical projects like roads, railways etc. The recession is continuing to bite harder. It is germane that the performance of this budget will determine its overall success.

This is an ambitious budget, with some of the indices of 12.4% inflation rate, when the current rate is 15.3%. The government is silent on the interest rate.

But the interest and inflation rates guides investors to invest in the economy. The exchange rate of N305 is still higher in the real sense of it.

Currently, the oil spot price is $65 per barrel, benchmarking it at $45 per barrel could be dicey. Although the crises in the Middle East could push up the price higher later on.

There is relative peace in the Niger Delta, but the government has to take the recent threat by the Niger Delta Avengers seriously, and ensure practical steps are taken to stem the rising tension in the Niger Delta.

It is noteworthy that the Federal government is making efforts to diversify its portfolio form oil revenues. Thus planning to increase its tax receipts, customs duties and other non oil sources.

In the presentation of the budget, the government banned fresh recruitment by all Federal Government’s MDA except by presidential approval. According to Mr President, it is a way to curb the rising personnel cost that is expected to increase to 12% in 2018.

The danger with this budget is that critical infrastructure will be financed basically by public funding and not much more is expected from the private financing. Counter part fundings in the building of railways and Mambilla power projects is in the pipeline, but more of these should come on board. Government could encourage more through PPP (Private Public Partnership) and concessions of major critical sectors to foreign investors.

Furthermore, it listed privitization of non oil sectors, as a source of generating more revenues. It means the federal government is not yet ready to commercialize the state oil monopoly (NNPC). We were treated to the approval of contracts of $25 billion without due process at the NNPC.

If this government can muster political will to commercialize NNPC, it will make more transparent and usher more inflow of petrol dollars to the economy.

This government is not committed to privatizing many state owned agencies. By its performance, many public utilities are still being controlled and funded with public funds. It is impracticable how it will generate almost 50% of its budgets from other sources.

It is creditable this budget came with a budget deficit of N2.005 trillion, a drop from the N2.36 trillion contained in the 2017 budget.

Sadly, the government have plans to borrow from external sources to finance budget deficit. It committed N2.014 trillion i.e. 23% of its budget to servicing of debts.

Recently, the federal government wrote the National Assembly seeking approval to borrow $6.5 billion from external sources.

We must tread cautiously of not going through this dangerous path of getting the nation trapped into debt crisis.

Be that as it may, this Budget estimate has to go through the rigors of legislative works. The National Assembly promoted a bill “Organic Budget law” that is going through legislative fine tuning.

 If passed into law, it will facilitate accelerated and seamless passage of budgets with timelines and specific responsibilities to various committee.

I hope the National Assembly will give it utmost urgency it deserves.

This country should not be treated again to odious Budget padding or loss of national budgets.

The bane of our country is implementation and keeping to the intents and letters of the budget estimates. If proper implementation is not adhere to, the whole exercises will just be a mere annual ritual and pure academic exercise.

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