Underwhelming and under performing revenue sources have been identified as the challenges to successfully implement the 2019 federal budget. Financial analysts said the task of raising new revenue sources may also be difficult.
The proposed budget is projecting that revenue generation will hit N6.97 trillion, with earnings from the economy’s major revenue source -Oil, pegged at $60 per barrel.
The 2019 budget also anticipates an average daily production of 2.3 million barrels of oil per day.
These projections are however in contrast to current prices of crude oil last traded at $54/$56 per barrel, and an average daily production of 1.9 million barrels.
This has prompted analysts and tax experts at Deloitte to call for a prioritised improvement in the country’s revenue sources particularly the non-oil sources and contributions from State-owned enterprises.
“The 2019 Budget showed oil revenue accounting for 54 percent while non-oil revenue sources including independent account for 46 percent. With the downward trend in oil prices and the general volatility associated with commodity prices, the outlook for 2019 portends great concerns,” the analysts said in a report released Thursday.
As at the third quarter of 2018, Buhari had said in his presentation that actual aggregate revenue was N2.84 trillion, representing 40 percent of the planned annual revenue of N7.17 trillion for 2018 and that the total performance at the end of the year will improve as other outstanding revenue items from one-off sources are realised.
However, one-third of the estimated revenue or 26 percent of total expenditure for 2019 will be applied to debt servicing, including sinking fund, with non-recurrent expenditure taking the lion share, just as salaries, overheads and other recurrent items account for 46 percent of total expenditure.
Further breakdown of the 2019 budget indicates statutory transfer accounts for 6 percent of total outlay while capital expenditure, excluding items captured under statutory transfers, account for 23 percent.
“The pain of disproportionate allocation for capital projects remains, the facts that capital plans are rarely fully implemented compounds the woes, the analysts pointed out.
For example, out of the total capital expenditure of N2.87 trillion planned for 2018, total releases as at mid-December 2018 stood at N820 billion. Unfunded projects at the end of the year are also expected to be rolled into 2019 plans.
Overall, the greatest concern remains the level of implementation that will be achieved. It is expected that the budget will be given accelerated consideration by the National Assembly and that both the Executive and Legislature will continue to collaborate in the overall national interest.
Meanwhile the 2018 budget performance has been rated 67 percent on implementation.
The rating was made by Muhammadu Buhari during the 2019 budget presentation.
He said “of the total appropriation of N9.12 trillion, N4.59 trillion had been spent by 30th September, 2018 against the prorated expenditure target of N6.84 trillion. This represents 67 percent performance.
The debt service and the implementation of non-debt recurrent expenditure, including payment of workers’ salaries and pensions are on track, Buhari also said.
The 2018 Budget was based on a benchmark oil price of $51/b, oil production of 2.3 million barrels per day and an exchange rate of N305 to the dollar.
Based on these, the Federal Government’s aggregate revenue of N7.17 trillion was projected to contribute to the 2018 Budget of N9.12 trillion. The projected deficit of N1.95 trillion (or 1.73 percent of GDP) was to be financed mainly by borrowing.
However, in the course of 2018, average oil production up to end of the third quarter was 1.95 mbpd, as against the estimated 2.3 mbpd for the entire year, but average market price of Bonny Light crude oil was higher (an average of $74 per barrel as at October than the benchmark price of $51.
By the end of the third quarter, Federal Government’s actual aggregate revenue was N2.84 trillion, which is 40 percent higher than 2017 revenue but 63 percent lower than projected.
The overall revenue performance is only 53 percent of the target in the 2018 Budget and this is largely due to some one-off items yet to be actualized, the President said. He also noted that the revenue item has been rolled over to 2019.