By Nse Anthony-Uko
ABUJA, (Sundiata Post) – Regardless of the current exchange rate of the Naira, the federal government’s N8.612 trillion 2018 Budget Proposal is by far the highest expenditure estimate this country has ever witnessed.
With the high spate of borrowings undertaken by the government to fund previous budgets, the question bugging the minds of many Nigerians is how the federal government plans to secure the funding to execute next year’s budget which has been dubbed “Budget of Consolidation.”
The major fear right now is whether the country would not plunged deeper into the web of indebtedness with more borrowing to execute the 2018 budget.
Incidentally, this is coming on the heels of the Senate’s approval of the President Muhammadu Buhari’s foreign borrowing plan of $5.5 billion on Tuesday, $2.5 billion of which is to fund the capital component of the 2017 budget.
The approval also coincided with the latest data of the country’s total debt profile released by the Debt Management Office (DMO) also on Tuesday which showed that Nigeria’s debt stock hit N20 trillion as of September 30, 2017, with the foreign component accounting for 23.04 per cent or N4.694 trillion ($15.40 billion) of the total debt stock.
Already, the proposed 2018 budget comes with a projected deficit of N2 trillion, which of cause, would require more borrowing.
How would funding the 2018 budget proposal impact the nation’s burgeoning debt profile?
By the time the federal government borrow the approved $2.5 billion, foreign debt profile would have moved from the $15.4 billion figure released by the DMO to about $18 billion and that is for the 2017 budget.
For 2018 Budget, Minister for Budget and National Planning, Sen. Udoma Udo Udoma said the Federal Government will fund the 2018 budget using key reform initiatives contained in the Economic Recovery and Growth Plan (ERGP).
According to him, N1.7 trillion out of the N2 trillion budget deficits would be funded through borrowing while N311 billion generated from privatisation and outright sale of assets would be used to finance balance of the budget deficits.
Udoma, during the public presentation of the 2018 budget proposal Tuesday in Abuja, gave a detailed financing framework for the budget as follows:
He explained that oil revenue would account for 37 per cent of the estimated revenue, while independent revenue was put at 12.8 per cent, JV equity restricting, 10.7 per cent, Company Income Tax (CIT), 12 per cent and Value Added Tax (VAT), 3.1 per cent.
“Customs is expected to account for 4.9 per cent, recoveries, 7.8 per cent, tax amnesty 1.3 per cent, signature bonus 1.7 per cent, grants and donor funding 3 per cent and other unnamed sources to account for 5.5 per cent of the revenue.
He said just like earlier budgets by the administration, it would ensure that funds were geared toward financing various capital projects
He cited some projects the Federal Government would embark on across several sectors of transport, power, health, education, works, housing, water resources agriculture and rural development, mines and steel development and special intervention programmes among others.
The minister said though the Federal Government had earmarked N2.42 trillion for capital projects, it would attract private sector involvement in the implementation of the projects, especially roads.
“What we need to construct roads is in trillions and we do not have that money now that is why we are involving Public Private Partnerships (PPP).
Key parameters include a crude oil benchmark price of 45 dollar per barrel, oil production estimate of 2.3 million barrels per day and exchange rate of N305 per dollar.
The budget also has projected oil revenue of N2.442 trillion and non-oil projection of N4.165 trillion.
It has a capital expenditure projection of N2.428 trillion, recurrent expenditure of N3.494 trillion, N2.014 trillion for debt servicing and fiscal deficit of N2.005 trillion.
Udoma said Federal Government would deploy new technology to improve revenue collection, enhance tighter performance management framework for State Owned Enterprises (SOEs) and stronger enforcement action against tax defaulters.
He added that the 2018 revenue projections reflects new funding mechanism for Joint Venture (JV) operations, allowing for cost recovery in lieu of previous cash call arrangements.
He noted that “there will be restructuring of government’s equity in JV oil assets, reduction in equity holding with proceeds to be reinvested in other assets.
“This will improve efficiencies in the operations of the JVs and position them for better revenue performance in future, increase in excise duty rates on alcohol and tobacco.
“Tax administration improvement initiatives to positively affect collection efficiencies across various tax categories such as tax amnesty programme.’’
Udoma said additional oil-related revenue including: royalty recovery, new/marginal field licences, early licencing renewals and review of the fiscal regime for oil Production Sharing Contracts (PSCs), would also be employed.
“Let us say what we have in the budget to use for roads, though would not be enough, would be Federal Government’s contribution towards construction of roads, while other support would come from the private sector.’’
The 2018 revenue projections reflected a new funding mechanism for the oil joint venture (JV) operations, allowing for cost recovery in lieu of previous cash call arrangements.
Udoma disclosed that key reform initiatives in the 2018 budget to improve revenue generation included restructuring the government’s equity in the JV oil assets (reduction in equity holding) with proceeds to be reinvested in other assets.
This, he noted, will improve efficiencies in the operations of the JVs and position them for better revenue performance in the future.
He also disclosed that there would be an upward adjustment on the excise duty imposed on alcohol and tobacco.
The minister also spoke on the tax administration improvement initiatives aimed at positively affecting collection across various tax categories, including the Voluntary Assets and Income Declaration Scheme (VAIDS).
He disclosed that about N300 billion was provided for roads across the country in the 2018 budget, adding that the federal government was desirous of attracting private sector participation in all facets of the economy.
According to him, “The 2018 budget proposal seeks to continue the reflationary policies of the 2016 and 2017 budgets which helped put the economy back on the path of growth.
“Thus, we plan to continue to spend more on ongoing infrastructure projects that have potential for job creation and inclusive growth; we will continue to leverage private capital and counterpart funding for the delivery of infrastructure projects.”
Udoma stated that as with the 2016 and 2017 budgets, the 2018 budget had been prepared on Zero Based Budget (ZBB) principles.
He stressed that the 2018-2020 Medium Term Fiscal Framework (MTFF) and the budget proposal reflected many of the reforms and initiatives in the Economic Recovery and Growth Plan (ERGP), “which is our roadmap to economic recovery and sustainable growth”.
But considering present realities, he said the growth projection for 2017 had been revised downwards from 2.9 per cent to 1.5 per cent.
Providing further insight into the performance of the capital component of the 2017 budget, Udoma said as of October 31, N450 billion had been released to the ministries, departments and agencies (MDAs) of the government.
The minister also disclosed that the government had also recorded 87 per cent performance in overall expenditure, even as he noted that under the 2017 budget, N1.6 trillion had been recorded as oil revenue.
Udoma said the government was having problems with non-oil revenue, noting that earnings from company income taxes and Value Added Tax (VAT) underperformed.
But he applauded the performance of the Nigeria Customs Service (NCS), noting that it has almost met its revenue target for the period.
Lamenting the poor performance of independent revenue sources, he regretted that the revenue generating agencies were not meeting their obligations.
On this score, he said the government was considering amending the Fiscal Responsibility Act to check the trend.
Responding to a question on the apathy of citizens to paying tax, the Minister of Finance, Mrs. Kemi Adeosun, blamed the discovery of oil for the low tax regime in the country.
She said Nigeria, with a population of 180 million people and oil production of about 2 million barrels per day cannot survive without tax.
The minister stressed that people should not compare Nigeria with Saudi Arabia, with a production of 10 million barrels of oil per day and a population of 30 million people.
“People are not paying taxes, not because of apathy, but because we have gone on for the last 35 years with a culture that when people don’t pay taxes there are no consequences.
“It is fraudulent for anyone to say he does not pay taxes because he does not see what he’s getting from government, so we are going to have to come together as nation for the future and do the right thing,” she said.
Also referring to the Dangote Group, the minister stated that the government never granted any company tax holiday or amnesty for roads construction, adding that government has an understanding with some companies on some roads.
According to her, such companies would repair certain roads while the funds expended on the roads will be recognised as taxes already paid.