Business
- By Anayo Ezugwu
Out of the N1.58 trillion projected for capital expenditure in the 2016 budget, the federal government only spent N173 billion. But some of the capital expenses were carried into the new fiscal year 2017 in line with the clause attached to the appropriation act. In all, a total of N4.39 trillion was spent in 2016 despite the federal government’s budgeting of N6.06 trillion for the fiscal year.
A new report on the 2016 budget published by BudgIT, a civic organisation, showed that the federal government’s actual revenue in the fiscal year 2016 performed significantly lower than expectations. The report made available to Realnews stated that total revenue amounted to only N1.75 trillion, 54.66 percent below the 2016 budget projections of N3.86 trillion.
Interestingly, it noted that receipts from oil, which many believe constitute the bulk of Nigeria’s funding and drive the activities of the government, made up less than 50 percent of actual revenue at a sum of N697.8 billion. With the cost of debt servicing now hitting a historical high of N1.313 trillion per annum, Nigeria may be entering into a debt trap as revenue from the oil sector cannot service the Nigeria’s debt of N19 trillion as of March 2017.
Although personnel cost was down from N1.87 trillion in 2015 toN1.69 trillion in 2016, the total recurrent expenditure, however, increased to N3.88 trillion from N3.83 trillion; partly as a result of the transfer of 2015 outstanding recurrent expenditure liabilities of N82 billion. The federal government’s recurrent expenditure was estimated at N4.12 trillion for 2016.
With revenue falling behind target and expenditures significantly flat, the deficit for the year stands at N2.19 trillion which is very close to the N2.2 trillion projected for the entire fiscal year -meaning deficit numbers may be substantially wider if capital spending of 2017 is considered.
“For oil revenue, the federal government revenue projection for 2016 was N717.55 billion. However, we noticed they were only able to collect a total of N697.8bn which is 2.5 percent lower than the budget projected amount. This has been linked to oil production shortfalls due to the escalation of pipeline destruction, vandalism. While for non-oil revenue, federal government actual collection of non-oil revenue for 2016 was N818.51 billion. We observed actual collections were 47.87 percent below the budget projection of N1.57 trillion. Here, it is also evident that the decline in earnings from the non-oil products is a reflection of the significant drop in economic activities as a result of the recession.”
The report stated that a close look at the non-oil revenue components, however, shows some positives. Although it noted that receipt classified as Value Added Tax, VAT, for 2016 at N109 billion was N89.24 billion below revenue projections, there is a slight increase in actual collections for 2016 when compared to 2015 collections of N104.66 billion despite the economic recession and depressed consumer spending.
“We notice a slight difference between Federal government’s actual collections for 2015 and 2016. While actual receipt in 2015 was N232bn, 2016 collection was N228.61 billion. Interestingly, revenue collected fell short of budget estimates of N326.44 billion for 2016 by N97.83 billion. There is a slight decrease in revenue receipt for Company Income Tax, CIT, in 2016. In 2015, N473.32billion was realised while only N457.91 billion was recorded in 2016 despite a budget projection of N867.5 billion. The N15.41 billion falls in revenue in 2016 can be linked to the slowdown in economic activities in Nigeria,” it stated.
According to the report, a total of N237.75 billion was realised from independent revenue in 2016. The projection of income was hinged on the administrative and operational advantage that the Treasury Single Account will bring regarding the revenue administration. Sadly, actual revenue collected was 84.21 percent below the projected N1.5 trillion for 2016. It noted that the cost of servicing federal government workers decrease slightly in 2016. Actual expenditure numbers show that the federal government spent approximately N1.69 trillion on the emoluments, allowance, and salaries of its workforce. In 2015, a total of N1.87 trillion was spent on the same item- reflecting the gains associated with the adoption of the Integrated Payroll and Personnel Information, IPPIS.
“Overhead cost projection for 2016 was N163.4 billion. However, actual spending on the cost of running the government was N149.28 billion in the fiscal year under review. The reduction may be reflective of government’s decision to set up the efficiency unit, but more work is needed. We notice a continuous increase in the cost of servicing debt for 2016. A total of N1.31tn was spent in 2016 against the N1.06tn in 2015. Given that oil revenue for 2016 was only N697.8bn which could only cover a portion- 53.26% of the overall cost of debts, severe moderation in debt accumulation is required if Nigeria is to avoid a debt trap.”
The stated that government revenue projection consistently remains overly optimistic and will need to realign itself with fiscal reality. Policies to drive revenue collection efficiency are necessary while the federal government needs to ramp up efforts to rein in on recurrent expenditure. The report showed that the cost of servicing debt is also entering unmapped territory as government revenue is barely keeping up. The government needs to moderate debt uptake and focus more on expanding the economic variables to achieve an all-round economic development.
Also, a budget calendar and the budget process need to be structured to avoid the recurring issues associated with the passage of the budget which significantly affects and impact on capital expenditure spending. In all, the federal government needs to adhere strictly to the provision of the fiscal responsibility act, particularly as it relates to the deficit to GDP ratio.
– Sept 22, 2017 @ 12:51 GMT /
Tags: Only N173bn Capital Expenditure was spent in 2016 Budget – BudgIT revenue Value Added Tax VAT
