Revenue slump, militancy raise doubts over 2016 budget


Failure to meet revenue targets for the first and second quarters, persistent oil production shut-in from militancy and foreign exchange supply challenges have renewed concerns on the feasibility of the 2016 budget.

The problems have also cast a shadow over the newly inaugurated flexible rate policy.

According to experts who spoke to The Guardian at the weekend, it is going to be tough for the country implementing its fiscal plan without a corresponding revenue and unresponsive foreign exchange environment.
In another development, more than two months after President Muhammadu Buhari signed the N6. 06 trillion Appropriation Act into law, it appears members of the House of Representatives are still in the dark as to the level of implementation of the budget.
Meanwhile, the Federal Government has released N127.99 billion for the execution of projects in the 2016 fiscal plan at the end of June, representing about 2.1 per cent of N6.06 trillion total budget.

Besides, the new foreign exchange policy would be put to test by investors and stakeholders (local and international) next Wednesday as the Central Bank of Nigeria (CBN) is expected to honour its contract deal forex Forwards market.

CBN, at the launch of the market in June, sold $3.5 billion in its Forwards segment, as part of efforts to clear the backlog of demand put at $4 billion.

The amount was split in three-one-month contract due Wednesday, worth $697 million; $1.22 billion worth for two months; and $1.57 billion in three months.

Already, analysts hope the fulfillment of the $697 million commitment by CBN will reduce the fears and uncertainties about the policy and stoke investors’ confidence in the operations of the interbank market going forward.

The development, which signaled a snag in the process of revenue generation and disbursement, has been read as the beginning of this year’s budget implementation, notwithstanding its late approval.

The all-time high budget package has been a subject of controversy starting from its crafting, presentation, consideration and final approval, as well as the feasibility of its projections.

Besides, the disbursement, which is unclear as to whether it is for the second quarter or for the month of June specifically or for the third quarter, has less than eight ministries covered.

According to a source in the Ministry of Finance, the Interior Ministry got N9.47 billion for projects that would include rebuilding of prisons and Fire Service; Transportation, N22 billion for railway projects, while Aviation got N5 billion with respect to Lagos, Enugu and Port Harcourt airports’ upgrade.

Defence had N32.7 billion; Agriculture, N21.62 billion; Water Resources, N5.9 billion; Education, Trade and Investment, and Science and Technology shared N16.3 billion; while Social Safety Net got N15 billion from the total N127.99 billion disbursed.

But fears are rife that the viability of the fiscal plan will be a mirage, as statistics in the first quarter, even till April, showed that revenues recorded only 55 per cent of government’s target, leaving a 45 per cent deficit.

Already, attacks on oil facilities in the Niger Delta region are being blamed for the shortfall .

But the president, Chartered Institute of Bankers of Nigeria, Prof. Segun Afolabi, said unless the country cuts its appetite for foreign products, the demand pressure would not allow the policy to work well.