The Federal Government of Nigeria has allocated the sum of N1.66 trillion to debt servicing out of the total N7.298 trillion proposed for the 2017 budget while the overall projected fiscal deficit of the budget stood at N2.36 trillion, which is about 2.18% of GDP.
This was revealed on Monday by the Minister of Budget and National Planning, Mr Udoma Udo Udoma, during the budget presentation in Abuja.
Justifying the fiscal deficit figure, the minister said it was “within the threshold stipulated in Forward Rate Agreement (FRA). The budget deficit is to be financed mainly by borrowings which have been projected at N2.32 trillion. Of this amount, N1.067 trillion (46% of this borrowing) is intended to be sourced externally while N1.25 trillion will be sourced domestically. The debt service to revenue ratio is projected to be about 33.7% in Financial Year (FY) 2017.”
A careful study of the Recurrent (Non-Debt) Expenditure of N2.98 trillion shows Personnel costs was allocated N1.86 trillion (63%) while overhead was put at N229.81 billion (7%).
Also, the Service-Wide Vote pensions was allocated N89.98 billion (3%) while Consolidated Revenue Fund Pensions was allocated N191.63 billion (6%) and other Service-Wide Votes got N116.50 billion (5%).
The Presidential Amnesty Programme was allocated N65 billion (2%) while Refund to Special Accounts was budgeted N50 billion, and (2%) and Special Intervention Programme as part of the recurrent budget got N350 bill (12%).
The largest capital allocation goes to Federal Ministry of Power, Works and Housing which got N564 billion (7.7%) (25% increase over 2016 estimate).
Budget was predicated on certain key parameters that included a benchmark oil price of US$38/pb, Oil production 2.2mbpd, exchange rate N197/USD, deficit (Fiscal Deficit to GDP ratio) – N2.20 trillion (2.14% of GDP), inflation N9.81% as well as GDP Growth Rate of 4.3%.
“To address contractors’ liabilities, the Federal Government intends to issue over N2 trillion worth of bonds to clear outstanding contractors’ liabilities,” the minister said. “These bonds would have a 10-year maturity and the amortization is expected to begin in 2018,” he added.
He further explained that, “With regard to existing liabilities on bonds which were issued to contractors by past administration, we have set aside the sum of N177.46 billion in the 2017 budget as a sinking fund to retire the maturing bonds. The second largest capital allocation is for the Ministry of Transportation which has the sum of N277 billion.
“The 2017 Budget is an Infrastructure Budget. A total of N1.047 trillion is dedicated to key infrastructural spending.”
Specifically, the allocations showed Power, Works and Housing got N529billion, Transportation, N262 billion while Special Intervention Programmes would get N150 billion.
Also, Defence was allocated N140 billion; Water Resources, N85 billion while Industry, Trade and Investment got N81 billion.
Other allocations to ministries are: Interior N63 billion; Education N50 billion, Universal Basic Education Commission N92 billion; Health N51 billion; Federal Capital Territory N37 billion; Niger Delta Ministry N33 billion; Niger Delta Development Commission N61 billion and Agriculture N91 billion.
According to Mr Udoma, the budget was predicated on key assumptions and not actual realities, meaning there would continuous adjustment.
“Based on the key assumptions and budgetary reform initiatives, the 2017 Budget envisages total federal government revenue of N4.94 trillion, exceeding financial year (FY) 2016 projection by 28%. The Projected revenue receipt from oil is N1.985 trillion and Non-oil is N1.373 trillion. The contribution of oil revenue is 40.2% compared to 19% in FY 2016 driven mainly by JVC cost reduction, higher price, exchange rate and additional oil related revenues,” the minister pointed out.
He assured that the spending focus will be on critical economic sectors that have quick transformative potentials such as infrastructure, agriculture, manufacturing, solid minerals, services and social development.
A further study of the huge budget shows that the government introduced new initiatives introduced such as a new Social Housing Programme with a budget of N100 billion. This, the minister said was provided for a new Social Housing Programme towards a N1 trillion fund.
He, however, did not state where the fund would be sourced from.
Another new initiative is the Special Economic Zone Projects with the budget of N50 billion for Special Economic Zone Projects to be set up in each of the geo-political zones to drive manufacturing/exports
Also, Export-Expansion Grant (EEG) was allocated N20 billion, voted for the revival of EEG in the form of tax credit while Recapitalization of Bank of Industry (BOI) and Bank of Agriculture (BOA) were allocated N15 billion. The two institutions the minister said would support Micro, Small and Medium Scale Enterprises (MSMEs) with the allocated funds.
He pointed out that a strategic focus of the 2017 budget “is to partner with private and development capital to leverage and catalyse resources for growth. Much of the capital provision is directed at those projects which will facilitate: economic growth, diversification, competitiveness, ease of doing business; jobs and social inclusion, as well as improved governance and security.”
According to the overall proposal, the 2017 Budget has an outlay of N7.298 trillion, in which the minister said represents an increase of 20.4% over the 2017 budget provision of N6.06 trillion. The details show statutory transfers of N419.02 billion, debt service of N1.66 trillion (22%) and sinking fund of N177.46 billion (2.4%) to retire certain maturing bonds.
The largest recurrent allocations are for four MDA’s comprising the ministries of Interior, Education, Defence and Health respectively. The four ministries got N482.37 billion, N398.01 billion, N325.87 billion and N252.86 billion.
According to Mr Udoma“These four MDAs collectively take up about N1.46 trillion (about 70% of the combined provision for personnel and overhead). They have the largest share because of the size of their personnel. Some of the agencies and parastatals under these MDAs are yet to be captured on the Integrated Personnel Payroll Information System (IPPIS) platform. The sum of N2 billion has been provided in the 2017 Budget for the capturing to ensure all personnel that are not enrolled on the platform are captured.”
On the Capital Expenditure in the Proposed 2017 Budget, he assured that “the Administration has committed to allocating at least 30% of the Budget to Capital from 16% allocation in 2015. In dollar terms, the 2017 budget proposal at ($23.80bn) is lower than 2016 estimates ($30.76bn).
“As a % of GDP, we have grown the size of the Budget from 4.7% in 2015 to 5.9% in 2016 and to 6.7% in 2017. Compared with South Africa (20.7%) and Ghana (19.2%) as at 2015, this is very low. The ratio of capital spending in total increased from 16% in 2015 to 30% in 2016 and 30.7% in 2017. The increase in infrastructure spending is expected to enhance revenue generation opportunities and over time significantly reduce deficit,” the minister stated.
The spending focus will be on critical economic sectors that have quick transformative potentials such as infrastructure, agriculture, manufacturing, solid minerals, services and social development, Mr Udoma said.