The Nigerian government has been forced to lower its budget estimates for 2019 following the less than expected revenues in the current year.
The government is now considering a 2019 spending proposal of about N8.6 trillion as against the N9.1 trillion approved by lawmakers for 2018.
business a.m. recalls that the federal government sent the same N8.6 trillion 2018 appropriation bill to the National Assembly, biut that the lawmakers raised it by N500 billion and returned a signed Act of N9.1 trillion.
Udoma Udo Udoma, the minister of Budget and National Planning, told members of the organised private sector, civil society groups and the media at the consultative forum on the medium term expenditure framework (MTEF) and fiscal strategy paper (FSP) 2019-2021, that the government was considering a reduced budget because of reduced government revenue projection for the year.
Also, government plans to cut down the level of borrowing in the budget from N1.6 trillion in 2018 to N1.5 trillion, while the deficit component would be reduced from N1.9 trillion in 2018 to N1.6 trillion, Udoma said.
Despite the reduction in budget size, the minster assured priority would still be given to human capacity development, particularly on allocations to health, education, pensions and other benefits to retirees.
Consequently, he said, allocation for pensions and gratuities would be increased from N241 billion in 2018 to N527 billion next year, to assure workers of their benefit
Udoma said one percent of consolidated revenue fund (about N51 billion) would be set aside for basic healthcare fund as well as provision of counterpart funding for immunisation of children.
This will be in line with the requirement of the National Health Act 2014.
On the basic assumptions underlining the proposed budget, the minister said government was looking at a 2.3 million barrel per day oil production capacity (including condensate), reduced from about 2.4 million bpd target proposed in the National Economic Recovery & Growth Plan (NERGP).
Despite the recent oil output drop to about 1.9 million barrels a day, the minister expressed government’s optimism that the 2.3 million barrels a day target was achievable with production now rising to about 2.15 million barrels a day and new oil productions being put into play.
Although a $50 per barrel oil price benchmark was proposed in the ERGP, he said with a significant rise in the price above $80 per barrel currently, government has proposed a $60 a barrel oil price for the budget.
He said N305 was proposed as exchange rate to the dollar, with government working to keep inflation down after slight increases in the last two months on the heels of 18 months consecutive decline.
The projected target gross domestic product (GDP) growth rate for the budget was put at 3.01 per cent, reduced from 4.5 per cent in the ERGP; 3.6 per cent in 2020 and 3.9 per cent in 2021.
“Growth is expected to increase from 0.8 per cent in 2017 to 2.1 per cent this year and 3.01 per cent in 2019 with the continued implementation of the ERGP in 2019 and improved outlook for oil prices,” he said.
On revenue, Udoma said based on the oil price and oil production assumptions, government expects to generate about N3.6 trillion from oil, up by about N500 billion from last year’s figure.
About N6.9 trillion revenue is projected to be available to the budget in 2019.
With other projections showing government expects to collect less revenue from some independent sources, he said only about N624 billion is expected to be realised, against about N847 billion in the 2018 budget.
To meet the revenue target, government plans to push revenue agencies to step up their roles, although no increases are being considered in company income tax (CIT) and value added tax (VAT) rates during the year.
“Government believes if it continues the implementation of the ERGP, the 7 per cent rate target in the short to medium term will be achieved. With our revenue-to-GDP ratio still very low at about 8 per cent, it is important our oil and non-oil revenues are increased substantially, despite being up by about 30 per cent against the previous year,” he said.
The minister said the projections presented for deliberation at the forum was a culmination of consultations on the 2019-2021 MTEF/FSP, which began immediately the 2018 was signed into law by the president.
At the end of the ongoing consultations with critical interest groups, the minister said the draft MTEF/FSP would be submitted to the National Assembly before the end of October, prior to the final budget proposal to the lawmakers before the end of November.
“Government was waiting for the National Assembly to resume from vacation before the submission is made. Now that they are back, we will present the drafts to them for consideration,” he said.
On the current state of the economy, Udoma said since emerging from recession in the second quarter of 2017, macro-economic environment has stabilized and recovering gradually in line with the ERGP.
He said the ERGP was developed to get the country out of recession before going into a sustained, diversified and inclusive growth by developing the oil and non-oil sectors.
The MTEF/FSP, he noted, outlines government’s policies, strategies and macro-economic projections built on the NERGP as well as provides the broad framework for the 2019 budget in line with the fiscal responsibility Act.
The key thrusts of the MTEF/FSP, he said, include sustaining growth, diversifying the economic base of the economy and reflecting the priorities and objectives of the ERGP.