As contained in the appropriation bill signed by President Buhari on Wednesday, the Federal Government will now borrow N1.643 trillion to partly finance the N1.950 trillion budget deficit in 2018, indicating some N56 billion less than what was earlier proposed by the executive.
Out of this sum, government hopes to borrow N793 billion from domestic sources and N849 billion from foreign sources.
In the budget he presented last November, the president had proposed a total deficit or N2.005 trillion, to be partly financed by new borrowings estimated at N1.699 trillion.
Giving a breakdown of the budget, which was signed by the president, Udoma Udo Udoma, minister of budget and National Planning said on Thursday in Abuja that the deficit will also be partly financed by N306 billion expected from privatisation proceeds as well as N5 billion from sale of other government property.
The 2018 budget termed that of consolidation seeks to continue the reflationary policies of the 2016 and 2017 budgets, which helped put the economy back on the path of growth.
The budget targets a total expenditure of N9.12 trillion broken down to N530 billion statutory transfer, N2,014 trillion for debt servicing, N3.51 trillion recurrent (non-debt) spending with a 17 percent increase from N2.99 trillion in 2017.
There is also an estimated 7% increase in provision to retire maturing bond to local contractors from N177 billion in Fiscal Year 2017 to N190 billion in view of the ambitious plan to liquidate all contractor arrears of the FGN going back to several years.
“We plan to continue to spend more on ongoing infrastructure projects that have potentials for job creation and inclusive growth. We will continue to leverage private capital and counterpart funding for the delivery of infrastructure projects,” Udoma stated.
But in the face of low revenues, which have been a key challenge to implementing national budgets, Udoma said government has embarked on some key reform initiatives to improve earnings.
Some of those include new funding mechanism for JV operations, allowing for Cost Recovery in lieu of previous cash call arrangement: Additional oil-related revenue including: Royalty Recovery, New/Marginal Field Licences, Early licensing, renewals; review of the fiscal regime for Oil Production Sharing Contracts (PSCs).
Government also plans to restructure its equity in JV oil assets, with proceeds to be reinvested in other assets, and has already announced increase in Excise duty rates on alcohol and tobacco.
The government hopes that looking beyond the oil sector which account for 41 percent of the total revenue projected, the budget would be funded by N31.25 billion from the Share of Dividend (NLNG); N1.17 billion Share of Minerals & Mining; N1,248.709 trillion non-oil funding; N847.95 from independent revenue; N27.22 billion FGN share of actual balance in special accounts.
The government also projects that its tax amnesty program – the Voluntary Assets and Income Declaration Scheme (VAIDS) would yield a total amount of N305 billion in 2018 out of which the federal government expects to receive about N80 billion through the scheme.
Udoma explained that the federal government’s 2017 unspent balance will account for N250 billion funding for the budget; FGN signature bonus account for N114.30 billion; Domestic recoveries, assets and fines will account for N374 billion; Earmarked funds at N710 billion; Grants and donor N199.92 billion; and other FGN recoveries N138.44 billion.
Meanwhile, key members of the Organised Private Sector foresee that the 2018 would be poorly implemented considering its late passage a few months into an election year.
Some of them who spoke to BusinessDay are particularly concerned that the implementation is going to be a lot difficult, which could prompt the Executive not to cash back many items in the appropriation Act because of poor collaboration in the budget.
Also, Eze Onyekpere, Lead Director, Centre for Social Justice, told BusinessDay that, “The President’s speech has raised a poser; did the executive and legislature not agree on the amount to be invested in constituency projects? If they did not agree; why? If they agreed, did the legislature exceed the agreement?
The institutional approach of not spending resources too thin as proposed in the Projects Implementation remain a source of worry.
”Is anyone learning from what happened in 2018 to start the 2019 process on time? Repeating the same experiment, year after year, without altering any of the conditions and variables and expecting different results is the classical definition of insanity,” Eze remarked.
Tony Ejinkonye the immediate Past President of Abuja Chamber of Commerce Mines and Industry, ABUCCI told BusinessDay that apart from fears on poor implementation of the budget, investors’ confidence islikely to drop on account of the frequent face-off between the executive and the legislature.
He said, “Investor confidence in the system is going to drop hugely, and you know it is very important and strategic for us, especially now we are seeking for investors and private sectors to play bring in about 80% into the Economic Recovery and Growth Plan, ERGP.”
Also, Celestine Okeke, Lead Partner, Small and Micro Medium Enterprise Development of Nigeria, told BusinessDay that the most painful aspect of the insertions by the National Assembly is picking up from most critical infrastructure to a far less important projects. “It does not encourage facilitation of long term project financing.
“The other side of this development is that the President could direct the Accountant General of the federation not to fund some of those inserted projects. This would also take its toll on the oversight functions and muddling things up, because of not proper bye in.”
He expressed further fears that full budgetary implementation is in doubt, since the election year is close by, adding that, “If you look at the President’s body language, he appears to be under duress, but has no option than to sign it because of the forthcoming election interests.”
HARRISON EDEH & Cynthia Egboboh, Abuja
