The federal government says it is caught between a rock and hard place on how to raise additional N102.84 billion to bridge the funding gap created in the 2019 budget as a result of the increase of N90.3 billion by the National Assembly.
Minister of Budget and National Planning, Senator Udoma Udo Udoma, raised this alarm at the Public presentation of the 2019 Budget in Abuja on Tuesday.
He lamented that the budget increase by the National Assembly has raised budgetary deficits by N58.83 billion thus putting the government under pressure of how to fund this deficit and would likely lead to an increase in borrowings.
According to Udoma, “NASS increased the budget size from N8.83 trillion to N8.92 trillion translating to an increase of N90.3 billion. This resulted in an overall increase of N58.83 billion in deficit.
Inexplicably, NASS reduced the proposed borrowing from N1.649 trillion to N1.605 trillion thus creating an overall unfunded deficit of N102.83 billion. To fully fund the budget, the level of borrowing may therefore have to increase.”
The federal government said it is expecting to generate total revenues of N7 trillion to fund the 2019 budget; comprising N3.69 trillion from oil revenues and N3.31 trillion from non-oil revenues, while the deficit of N1.92 trillion would be financed mainly by borrowing N1.605 trillion split equally between the domestic and foreign markets.
The 2019 budget was signed by President Muhammadu Buhari on Monday with an expenditure profile of N8.92 trillion, which is N90.3 billion higher than the proposed N8.83 trillion budget sent to the National Assembly by the Executive on December 12, 2018.
Udoma noted that allocations to some executive projects on critical appraisal and linked to the ERGP were reduced and a large number of new projects mainly constituency type projects were introduced.
The minister said the presidency would engage with the 9th National Assembly once it is constituted to address the budgetary quagmire.
Key assumptions and macroeconomic framework of the 2019 budget:
Oil production: 2.3mbpd. The government has projected an ambitious 2.3 million barrels per day crude oil production; Udoma assured that President Buhari has directed the NNPC to take all the possible measures to achieve the target.
Other key assumptions include crude oil benchmark of $60/barrel; Exchange rate of N305/$1; GDP growth of 3.01 per cent and inflation rate target of 9.98 per cent.
Where is the money going?
The 2019 spending expenditure is expected to be N8.92 trillion
Recurrent non-debt expenditure is pegged at N4.07 trillion; Ministries Department and Agencies (MDA’s) capital and capital supplementation is N2.09 trillion; while debt service at N2.14 trillion, is 31 per cent of expected revenues.
Capital expenditure, inclusive of transfers GOEs capital and project-tied loans as of percentage of total FGN expenditure is 31 per cent.
Udoma noted that “the 2019 Budget seeks to continue the reflationary and consolidation policies of the 2017 and 2018 Budgets respectively, which helped put the economy back on the path of growth. On the expenditure side, allocations to Ministries, Departments and Agencies (MDAs) of Government were guided by the three core objectives of the ERGP, which are, (i) Restoring and Sustaining Growth; (ii) Investing in our People and (iii) Building a Globally Competitive Economy. As with 2016, 2017 and 2018 Budgets, the 2019 Budget has been prepared on the Zero Based Budget (ZBB) Principles.”
The minister revealed that President Muhammadu Buhari has directed “the Ministry of Finance, working with all the relevant authorities, to take action to liquidate all recovered, unencumbered assets; given the improved oil prices and production levels, Nigerian National Petroleum Corporation (NNPC) is to immediately commence the recovery of all outstanding obligations, including those due from Nigerian Petroleum Development Company (NPDC) (a subsidiary of NNPC), which it had agreed to pay since
2017. Finally, amongst other revenue generating initiatives, Mr. President has directed that work should be concluded on the deployment of the National Trade Window and other technologies to enhance Customs collections efficiency.
With regards to the performance of the 2018 budget, Udoma stated that “the overall revenue performance is only 55 percent of the target in the 2018 Budget partly because some one-off items such as the N710 billion from Oil Joint Venture Asset restructuring and N320 billion from revision of the Oil Production Sharing Contract legislation/terms are yet to be actualized and have thus been rolled over to 2019. Of the total appropriation of N9.12 trillion, N6.938 trillion was spent. This represents 79% performance.”
Some of the projects captured in the 2019 budget are:
N78.22 billion Counterpart funding for Railway projects including: Lagos-Kano (Ongoing); Calabar-Lagos (Ongoing); Ajaokuta-Itakpe-Aladja (Warri) (Ongoing); Port Harcourt- Maiduguri (New); Kano-Katsina-Jibiya-Maradi In Niger Republic (New); Abuja-Itakpe and Aladja (Warri)-Warri Port And Refinery; Including Warri New Harbour (New); Bonny Deep Sea Port & Port Harcourt and other Rail Projects; N941.14 million for construction of Terminal Building at Enugu Airport: N12 billion for construction of Second Run-Way at Nnamdi Azikiwe International Airport Abuja.
Works: About N258.41 billion for the construction and rehabilitation of roads in every geo-political zone of the country, such as, Counterpart Funding for the Dualization of Makurdi – Enugu Road; Counterpart Funding for the Dualization of Akwanga – Jos – Bauchi – Gombe Road; Reconstruction of the Outstanding Sections of Benin – Ofosu – Ore – Ajebandele – Shagamu Expressway; Construction of Bodo – Bonny Road; Pavement Strengthening and Asphalt Overlay of Ajebandele – Ijebu Ode – Shagamu Road; Construction of Oju/Loko – Oweto Bridge to link Loko and Oweto; Dualization of Ilorin – Jebba – Mokwa/Bokani Junction Road; Kano – Maiduguri Road (Various Sections); Abuja – Lokoja Road (Various Sections); Dualization of Obajana Junction to Benin (Various Sections); Lagos – Shagamu – Ibadan Dual Carriageway; Early Works for the Construction of 2nd Niger in Anambra and Delta states.