Nigerians express mixed reactions to the budget with some praising while other flay it
- Anayo Ezugwu
MIXED reactions have trailed the presentation of the 2018 budget proposal to a joint session of the National Assembly on Tuesday, November 7. Tagged the budget of consolidation, President Muhammadu Buhari while presenting it raised hopes of Nigerians and businesses operating in the country that all will be well as the federal government is ready to spend money in 2018 to rejuvenate the economy..
The key parameters for the N8.612 trillion 2018 budget with a deficit of N2.005 trillion as presented include an oil benchmark of $45 per barrel, oil production estimate of 2.3 million barrels per day, exchange rate of N305/$ for 2018, real Gross Domestic Product, GDP, growth of 3.5 percent and an inflation rate of 12.4 percent.
The budget comprises recurrent costs of N3.494 trillion; debt service of N2.014 trillion; statutory transfers of about N456 billion, sinking fund of N220 billion (to retire maturing bond to local contractors) as well as capital expenditure of N2.652 trillion which is the 30.8 percent of the entire budget.
On revenues, it showed total federally-collectible revenue estimated at N11.983 trillion in 2018. Thus, the three tiers of government shall receive about 12 percent more revenues in 2018 than the 2017 estimate. Of the amount, N6.387 trillion is expected to be realised from oil and gas sources. Total receipts from the non-oil sector are projected at N5.597 trillion.
The federal government’s estimated total revenue is N6.607 trillion in 2018, which is about 30 percent more than the 2017 target. In 2018, it expects to generate N2.442 trillion as revenue from the oil sector while it expects N4.165 from non-oil as well as other revenues.
President Buhari listed the non-oil and other revenue sources for government to include N4.165 trillion as share of companies income tax, CIT, of N794.7 billion; share of value added tax, VAT, of N207.9 billion; customs and excise receipts of N324.9 billion; independently generated revenues, IGR, of N847.9 billion; share of tax amnesty income of N87.8 billion and various recoveries of N512.4 billion, N710 billion as proceeds from the restructuring of government’s equity in joint ventures and other sundry incomes of N678.4 billion.
“It is expected that our fiscal operations will result in a deficit of N2.005 trillion or 1.77 percent of GDP. This reduction is in line with our plans under the ERGP to progressively reduce deficit and borrowings. We plan to finance the deficit partly by new borrowings estimated at N1.699 trillion. Fifty percent of this borrowing will be sourced externally, whilst the balance will be sourced domestically,” he said.
These figures notwithstanding, Nigerians are wondering how the federal government will generate the N6.61 trillion projected revenue and what will be the effect of borrowing N2.01 trillion to the rising debt profile of the nation and the economy?
According to economic and financial experts, while the budget was crafted to stimulate growth and reduce poverty, the non-oil revenue was not feasible. Taiwo Oyedele, head, tax and regulatory services, PricewaterhouseCoopers, PwC Nigeria, said the federal government was too ambitious in its non-oil revenuce projection. He said the non-oil revenue is 40 percent more than what was projected in the 2017 budget which has not been realised.
“We are not going to meet the projected revenue from non-oil for 2017 and we are still increasing it by 40 percent in 2018. This means that if you compare the increase from the 2018 budget proposal to the actual 2017 budget it will be around 50 percent. That is too ambitious because if you look at the breakdown you will see all manners of analysis from company income tax, VAT and even an estimate of VAIDS,” he said.
According to him, “we need to be more cautious about non-oil revenue because it is not something that happens overnight. Even as the economy is recovering, some companies need to recover from the losses they have made during recession. They need to recover before the money will start coming.”
But Oyedele said the revenue projection from oil sector is achievable. With the projections coming from the World Bank and OPEC that oil is expected to be at the rate of $60 per barrel, Oyedele said the proposed revenue from oil is very realistic.
He noted: “The oil revenue proposed for 2018 is 15 percent more than the one proposed for 2017. But even due the volume as of today is less than 2.2 million barrels per day and the price is more than the $45 per barrel the budget proposed. When you combine this fact it means that the oil revenue has perhaps even exceeded the target for 2018.”
Similarly, Olu Ajakaiye, an economist, said the government was too optimistic in its projected revenues from non-oil sources. He said the debt servicing would be consuming a lot of resources and advised that government’s shifting attention to foreign borrowing should not lead to foreign debt overhang in the future.
“On a general note, the budget is good. The only aspect that is too optimistic is the non-oil revenue projection. The increase from the figure of last year is quite large. The government needs to make sure that it has a structure in place to realise its projection on VAT and Company Income Tax.
“They may have taken into consideration that corporations that have not been making returns will start doing so. This year, for instance, JAMB suddenly made a huge return to the government. However, over the years, the targets from the non-oil revenue had not been met. The government needs to close the gaps,” he said.
Another thing is that the debt service charge is still too high. “By Shifting to low-cost borrowing, we need to ensure that the funds are applied to generate not only naira, but also foreign currencies. The future challenge and risk of external borrowing should not be ignored,” he advised.
But Pita Ochia, an economist and a journalist, said that the projected revenue of N6.61 trillion is achievable because if government can get the $5 billion loan that it’s seeking, it will go a long way in implementing the budget. In meeting the projected revenue, do you know that we now share revenue from solid minerals? And federal government is equally planning to sale some of the oil assets, with that billions of dollars will be coming into government account.
“Again Nigeria is under taxed and if we are serious about taxation we can generate these N8.612 trillion from tax alone. By the time government succeed in VAIDS implementation, a lot of people who are outside the tax net will be dragged in. Nigeria tax revenue to GDP will begin to shoot-up,” he said.
The federal government has also been commended for increasing allocation to some key sectors of the economy such as power, works and housing; industry, trade and investment; transportation, water resources, agriculture and rural development. The government in the 2018 budget proposed to spend N555.8 billion on capital projects in the ministry of power, works and housing as against N529 billion allocated in 2017.
Transportation has a proposal for N263.1 billion capital expenditure in 2018 as against N262 billion in the current year, while agriculture and water resources have N118 billion and N95 billion as against N75 billion and N95 billion, respectively in 2017.
Godwin Eohoi, economist, said the increased allocation to power, works and housing would stimulate economic activities. “The 2018 budget was properly structured to revive our economy but where the government did not get it right is in the area of the exchange rate, which was pegged at N305 to a dollar. This is not realistic and it may cause distortions.”
The Lagos Chamber of Commerce and Industry, LCCI, also commended the federal government for allocating 30.8 percent of the 2018 budget to capital projects. Muda Yusuf, director-general, LCCI, gave the commendation in a statement on Thursday, November 9.
.“We welcome the priority accorded to infrastructure in the budget proposal focusing on roads, railways, power projects, water projects and second Niger Bridge. Reference was made to the embarrassing state of the access to the ports and the public private initiative to fix it.
“We welcome the decision to connect the Lagos-Ibadan standard gauge to the Apapa and the Tin-Can Island port. But time is of the essence. There is an urgent need to save the private sector and investors from the agony of persistent gridlock at the Apapa and Tin-Can ports which accounts for over 70 per cent of import and export cargo in the country,” he said.
Nevertheless, Oyedele said there is nothing extraordinary in the budget presented to the National Assembly. “I think generally it was a good budget but nothing extraordinary in what was presented. It was whata we expected even though it was N8.612 trillion, which is the highest in our history. But if you look at it, it is 16 percent more than 2017 budget, which is about the rate of inflation. So in real terms it is about the same budget as last year.”
Also,“Some of the breakdown like the revenue from the non-oil from the 2017 budget has been disappointing and below expectation but I’m not clear whether the government is repeating the same mistake of being too realistic on non-oil revenue. Also in the 2018 proposal they have another estimate. The implication is that if you over-estimate revenue and when there is shortfall you have to increase your borrowing. And once borrowing is going up the debt servicing will equally going up.”
According to him, overall, the federal government has been able to reduce the debt deficit as a pacentage of the GDP. “The other highlight for me is that compare to last year, 2018 budget is better off in the sense that the capital expenditure amount of N2.4 trillion is more than the borrowing. At least we can say confidently that we are borrowing to do capital development. Unlike the 2017 budget where we borrow to take care of recurrent expenditure,” he said.
– Nov 10, 2017 @ 16:37 GMT |