Mixed Reactions Trail 2017 Budget

Fri, Jun 16, 2017 | By publisher


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Nigerians are happy that finally the federal government has signed Budget 2017 into law but doubt its ability to fully implement it to jump start the economy

By Anayo Ezugwu  |  Jun 26, 2017 @ 01:00 GMT  |

THE signing of 2017 budget of economic recovery and growth into law by Acting President Yemi Osinbajo raises hope of Nigerians and the business community in the country that the economy will soon pick up. But they also worry about whether it will be effectively and efficiently implemented to the letter.

The budget came more than five months late into the year, a period when ministries, departments and agencies, MDA, faced cash crunch and Nigerian businesses hedged their expenditure to see the direction of government expenditure. The thinking is that the prevailing cash crunch in the economy will ease once the budget implementation starts with the federal government, undoubtedly, the biggest spender releasing money to finance its capital projects.

Raising the hope of better days ahead, Osinbajo while signing the budget said its name reflected the commitment of the administration to ensure strong linkage between the medium-term Economic Recovery and Growth Plan, ERGP, recently launched by President Muhammadu Buhari and the annual budgets.

The budget has a revenue projection of N5.08 trillion and an aggregate expenditure of N7.44 trillion. The projected fiscal deficit of N2.36 trillion is to be financed largely by borrowing.  The approved budget is N143 billion higher than the N7.298 trillion initially presented to the National Assembly by the federal government.

The capital expenditure is N2.174 trillion while N2.64 trillion is for recurrent expenditure.  The amount slated for domestic debt servicing is N1.663 trillion while N178 billion is for foreign debt servicing. It also slated N434 billion for statutory transfers and N350 billion for special intervention funds for projects in the North East and other zones.

The $44.50 oil price bench mark approved by the National Assembly is less than the $48 a barrel of oil sold in the international market as at Wednesday, June 14.

OsinbajoThe crude oil production projection of 2.2 million barrels per day is about 200,000 barrels less than the current oil production volume of 2 million barrels per day reported by the Nigerian National Petroleum Corporation, NNPC, recently. The budget also pegged exchange rate at N305 per dollar, which is slightly below the current N305.6 official exchange rate and far lower than the N370 parallel market rate.

According to Osinbajo, the budget is designed to bring the economy out of recession unto a path of sustainable and inclusive growth. The 2017 budget will be implemented in line with the administration’s ERGP. “Over the 2017-2020 plan period, the government is focusing on five key execution priorities: stabilising the macroeconomic environment; agriculture and food security; energy sufficiency in power and petroleum products,” he said.

Other sectors the budget is targeted to improve include transportation infrastructure and industrialisation through support for micro, small and medium-scale enterprises, MSMEs. “The 2017 budget includes provisions that reflect these priorities. To demonstrate our commitment to following through our Economic Recovery and Growth Plan, the 2017 budget allocates over N2 trillion to capital expenditure, principally infrastructure. We are committing over N200 billion to improve transport infrastructure such as roads and rail; over N500 billion for investments in works, power, and housing. And N46 billion is for Special Economic Zone Projects to be set up in each geopolitical zone” he said.

Based on the budget projections, Nigerians are wondering how the federal government will generate the N5.08 trillion projected revenue. They are equally perturbed that the federal government will be doing a lot of borrowing to finance its expenditure thereby increasing the country’s debt profile. This concern is germane as the nation is to borrow N2.36 trillion to finance its projects.

Available statistics on the 2016 budget showed that the government budgeted N6.08 trillion with N4.54 trillion projected revenue, but only received aggregate revenue inflow of N2.17 trillion. Of course, the government attributed the shortfall to drop in oil prices and disruptions in crude oil production in Niger Delta due to militant activities and vandalisation of major oil pipelines.  Although there is relatively peace in Niger Delta region which has actually led to improvement in oil production but the unstable crude oil price still remains a challenge. The country makes 90 percent of its revenue from oil sales through which it generates foreign exchange which was scarce though out the 2016 budget season.

If the revenue of the country fails to increase dramatically, it could affect the available of foreign exchange and its attendant impact on the economy that is largely dependent on importation. The problem of foreign exchange scarcity frustrated many businesses in the country last year and is still affecting the way and manner businesses operate in the country despite the Central Bank of Nigeria’s interventions. So also is the fear that too much foreign exchange will be spent to service the country’s debt.

Perhaps, this is why Leo Ukpong, professor of Economics at the University of Uyo, said that the N2.35 trillion deficits in the budget may hurt the economy as the country will have to keep servicing the debt. He cautioned that signing the budget alone will not make a difference if it takes too long for the government to start injecting money into the economy.

“They need to cut down on administrative delays. They should fund whatever projects they want to do. It will help the economy move forward,” he said, adding delaying the immediate implementation of the budget would also delay the recovery of the economy from recession.

Nonetheless, Osinbajo has assured those who had expressed concern about the growing public debt that the government is taking several actions to grow its revenues as well as plug revenue leakages. “Notwithstanding the fact that our borrowings are still within sustainability limits, we are determined, in the medium term, to reduce our reliance on borrowings to finance our expenditures,” he said.

kemi-adeosun-minister-of-financeApart from this, there is fear that the implementation of the budget will not fair better than that of 2016 considering the failure of the present administration to fully implement it. Implementation of annual budgets had been a long standing challenge in Nigeria with successive governments failing to fully implement their budgets. Available data showed that only about 50 percent of the 2016 budget was implemented. President Buhari during the presentation of the 2017 budget to the joint session of the National Assembly on December 14, 2016, said the federal government implemented about N3.58 trillion out of the N6.08 trillion budgeted for 2016.

However, Uche Uwaleke, professor and head of department, banking and finance, Nasarawa State University, Keffi, said the federal government should make the 2016 budget implementation report available to the public. With this, he said Nigerians could measure the previous budget and know what to expect from the 2017 budget.

“Till now, the third and fourth quarter 2016 budget implementation reports had not been uploaded on the website of the Budget Office.  In view of the fact that the 2016 financial year was extended to May 5, 2017, due to the late passage of the 2016 Appropriation Bill, the ministry of budget and national planning (which now has that responsibility) has a little more time to come up with a consolidated budget execution report in line with Section 50 of the FRA 2007 which mandates that such should be produced not later than six months after the end of the financial year. Nevertheless, the third and fourth quarter budget implementation reports ought to have been in the public domain by now going by the provisions of Section 30 of FRA 2007,” he said.

For instance, the last quarterly budget implementation report on the website of the Budget Office is that of the second quarter of 2016. This document is not dated to enable an objective assessment of compliance with the provisions of the FRA 2007. Regarding the capital expenditure performance reported in Section 3.5.4, not much information is supplied beyond references to the amount of funds released/cash-backed as well as utilisation rates of funds by six MDAs which do not enable proper interrogation of the implementation outcomes.

Buhari
Buhari

According to Uwaleke, budget debate should not end with the president’s assent. The National Assembly, Fiscal Responsibility Commission, Civil Society, the press and the general public should regularly review quarterly implementation reports to monitor if money is being spent as planned. But this is only possible if in-year budget reports are made public in time. To this end, the Budget Office, particularly the Budget Monitoring and Evaluation Division, should be strengthened to champion this task in a timely fashion, he suggested.

Similarly, Oluseun Onigbinde, lead partner, Budgit, the budget is capable of resuscitating the economy if properly implemented.  “The challenges with the implementation of budget have always been revenue performance because the revenue expectations are too wide, N5 trillion looks absolutely impossible. Last year, according to the ministry of finance, the entire revenue was N2.9 trillion. I don’t know how government wants to generate this money when the oil price is still very low, tax collection rate is still low and even the process of repatriating the stolen loots is very slow,” he told Realnews.

“The only option is that the federal government will be borrowing heavily to make sure the budget performs but we just have to be careful because there is growing concern over the level of our borrowing. But I expect to see huge expectation in terms of revenue, huge expectations in terms of robust debt plan. So we are waiting to see the details of the capital expenditure and also review if it is in line with the economic recovery and growth plan. But from what I have seen in this N7.44 trillion budget, we are going to see a lot of positive changes in it,” he said.

Also, Sarah Anyanwu, head of department, Economic, University of Abuja, said federal government can implement 70 percent of the budget with commitment and accountability. Anyanwu, in an interview with the News Agency of Nigeria, NAN, said the implementation of the budget would also be realistic with honesty. “If they work round the clock, they will achieve up to 60 to 70 percent but the budget cannot be fully implemented. It cannot be fully implemented because there are some projects that are long term and they have to follow due process which may affect the implementation.”

According to her, another factor that could affect the full implementation of the budget is the deviation between amount budgeted and the one released. She said the budgeted and the actual release were not always the same. “Again, with the short time, there will be problem with approval and releases, so many things that needed to be done will not be done.

“So, we cannot expect full implementation of the budget. It is now left for the finance minister to work round the clock for the releases because so many MDAs will be rushing to get their money out. Also, the money is not there, the country relies on oil; it sells monthly before it shares the money because the government don’t have the money on ground to give,” she said.

According to her, the time is too short for the implementation but it can get at least three quarter of the target implemented. “The timing is really wrong, we have lost almost six months already and by November, they will start asking MDAs to return money to the treasury. The government will start the process of passing 2018 budget that time is so short, the short time is a disadvantage to the achievement of the budget.”

Whatever, the federal government is to present the budget breakdown on Monday, June 19. Nigerians are waiting to see the nitty-gritty of the budget and how it will alleviate the present economic hardship and suffering in the country

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