Economic analysts Tuesday expressed reservations over the federal government’s projected budget of N9,789,243.466 for 2020, saying the figure ought to be more in the region of N12 trillion.
The federal government had unveiled the draft 2020-2022 medium term fiscal framework (MTEF) and Fiscal Strategy Paper (FSP) with a projected total budget of N9,789,243.466 for next year.
It also expressed concern that the country faces significant medium term fiscal challenges, especially with respect to revenue generation and rapid growth in personnel costs.
Reacting to the government’s projected target, analysts expressed divergent opinions over its viability.
While some argued that an elevated budget was necessary to enhance capital formation and productivity, others said instead of increasing the budget, the government should pay more attention to its dwindling revenue.
For instance, Mustapha Chike-Obi a former chief executive officer, Assets Management Corporation of Nigeria (AMCON), said that the projected budget was not expansionary, considering that the 2019 budget was N8.916 trillion.
“We should be looking at a budget of at least N12 trillion. So, I think this is not expansionary for me. In fact, if you look at it in real terms, inflation adjusted as well as in terms of forex, the budget has been getting smaller and smaller every year, since this government came into office,” he explained.
But, Johnson Chukwu, the chief executive officer, Cowry Assets Management Limited, said what the country needs at this moment is to review its fiscal plan.
According to Chukwu, the current fiscal structure is not sustainable.
He said a situation whereby most of the expenses in the budget are funded from borrowing is not the best for the country and is not something that is sustainable in the long-run.
According to him, “If you look at the performance of the 2018 budget, federal government’s recurrent expenditure was N5.85 trillion, while total revenue earned same year was N3.86 trillion, leaving a deficit of about N2 trillion. I believe 2019 budget would be same.
“So, increasing the budgeted figure without necessarily expanding the revenue base, for me, is not the fundamental issue for now. We are only going to end up borrowing more. If we continue this way, we are going to get to a point whereby debt service may even be as high as our revenue.
“So, I think we need to review our fiscal plan. I think the best way to go about this is for the government to step back from funding commercially viable infrastructure and develop a legal framework that would allow the private sector to fund some of those infrastructures that would enhance revenue in the country.”
In his contribution, Bismack Rewane, the chief executive officer, Financial Derivatives Company Limited, argued that the projected N9.789 trillion for 2020, was not even enough.
“It is a move in the right direction, but it is not enough. We should be talking about N12 trillion,” he said.
According to Rewane, to increase capital formation and productivity in the country, an expansionary budget would be required.
He argued: “We need a minimum of N12 trillion annual national budget. We need N1.5 trillion for works; N1.5 for transport and we need enough funding for everything to do with infrastructure. If you don’t do N1.5 trillion for transportation, you can’t complete the railways and you will not get the productivity gain, if you don’t do about N2 trillion on works and housing, you will not complete the road projects across the country.
So, we have to be bold about this.”
However, Ayodeji Ebo, the managing director/chief executive officer, Afrinvest Securities Limited, stressed that raising the budget was not going to be sustainable.
He said: “To continue to increase our expenditure on a year-on-year basis, while we continue to struggle in terms of growing our actual revenue is not the way to go. We shouldn’t be looking at our budgeted revenue, but instead we should be looking at the actual.
“So, if government needs to see how to bring down its expenditure because recurrent expenditure as a result of the new minimum wage is still high. When you look at it, capital expenditure has always been at the receiving end, while total expenditure has continued to increase.
“Our actual revenue is lagging behind and that is what I think we should focus more on. The government needs to review the Private Public Partnership law that would give more comfort to foreign investors to bring in funds and they need to come up with policies to attract foreign direct investments.”
Frontpage September 3, 2019