…budget cannot make impact on economy-DG LCCI
By Olabode Jegede
Experts have continued to express diverse positions on the federal government’s N8.83 trillion 2019 Budget tagged “Budget of Continuity’’.
The budget which was presented by President Muhammadu Buhari to a joint session of the National Assembly on Dec. 19, 2018 continued to witness backlashes from key stakeholders over poor implementation rate of the previous year’s budget presented to the public by the administration of President Buhari.
President Buhari had presented a budget that is N300 billion lower than the N9.1 billion being implemented for the current fiscal year.
According to Buhari, N4.04 trillion or 50.31 per cent is earmarked for recurrent expenditure and N2.03 trillion representing 22.98 per cent earmarked for capital projects.
He said in spite of the delay in the passage of the 2018 Budget, N820.57 billion had been released for capital projects.
The 2019 budget is benchmarked with oil production volume of 2.3 million barrels per day (mbpd) at $60/barrel with an Exchange rate of N305/$.
The bench price of $60 per barrel is not only on the high side but to estimate a production of 2.3m per barrel is not realistic in view of OPEC’s decision to cut production and Nigeria is not exempted. The failure of any of the issues either less production or lower will bring failure to execute the budget as estimated.
In the public presentation of the 2019 budget proposal, Senator Udoma Udo Udoma, Minister of Budget & National Planning disclosed that the Federal Government has projected that out of the total revenue of N6.966.99 billion, the share of oil revenue stood at N3.688.28 billion and non oil stood at N1385.54 billion while other sources stood at N1.893.17 billion.
The 2019 Budget proposal 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 3 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.
Responding, the Director-General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said that the budget was too small to make an impact on the economy.
“The 2019 budget to GDP is just about 5 percent and this is economy of $450 billion or N113 trillion and we have a budget slightly above N8 trillion. Such budget is immaterial. It can’t make any difference,” he said.
He said there was a need to grow the budget and this can be done by broadening the tax base by targeting high net worth individuals and also attract more investment into the economy.
“Budget to GDP of other advanced economies like South Africa, for instance, is more than 30 percent to GDP ratio,” he said.
On the structure of expenditure, Yusuf said, “If you look at the recurrent expenditure to debt service, debt service is still very high at N2.14 trillion while recurrent expenditure is N4.04 trillion. This is N6.18 trillion, almost equal to the total revenue of N6.97 trillion the Federal Government is expecting in the year.”
The breakdown of the new borrowings, according to the budget proposal submitted by President Muhammadu Buhari on Wednesday to the National Assembly shows that domestic borrowing sources stood at N824.82 billion, while foreign sources (gradual shift away from commercial to more concessionary financing) stood at N824.82 billion.
Following Nigeria’s overall budget deficit proposal of N1.859 trillion in 2019 fiscal year, the Federal Government had disclosed that it would finance the short fall in revenue mainly by domestic and foreign borrowing, which is put at a total of N1.649 trillion.
The remaining balance of N210 billion budget deficits is expected to be financed from the privatisation proceeds of the sale of government-owned enterprises.
However, a capital market analyst and Managing Director, APT Securities & Funds Limited, Mr Garba Kurfi said, “I agreed with their forecast in view of the fact that since Q4 ended Dec., 2017 growth of 2.0 per cent declined to 1.9 percent for Q1 ended 31st March 2018 to 1.5 per cent by end June, 2018 for the three consecutive quarters is not unlikely the trend may continue that will affect the year-end 2018, coupled with the late signing of the budget and the absence of economic measure to accelerate the economy.”
“It is our view that the prepared budget is over ambitious,”