By Emma Ujah, Abuja Bureau Chief & Emmanuel Elebeke
The federal government plans to spend the sum of N8.6 trillion in 2018, going by the details of the Medium Term Expenditure Framework, MTEF, submitted to the National Assembly in the week. This indicates about 15.5 percent increase over 2017 figure of N7.44 trillion.
The expenditure would be financed through an estimated federal government’s revenue estimated at N5.65 trillion, about 11 percent or N562.50 billion increase over the 2017 estimate of N5.08 trillion, in addition to a borrowing plan that is expected to fund a budget deficit put at N3.52 trillion in 2018.
According to the MTEF, 43.2 per cent of this is projected to come from oil sources, while the balance is to be earned from non-oil sources.
As contained in the MTEF, “Fiscal deficit will be maintained within the 3% level stipulated by the Fiscal Responsibility Act 2007 but at an average of about 1.93% of GDP, but declining to less than 1% by 2020.
“Debt financing will be restructured gradually in favour of foreign financing, while domestic financing is deemphasized. Thus, while the proportionate share of foreign financing will increase from the current level of about 28% to almost 72% in 2020, domestic financing will decrease gradually from about 54% in 2016 to about 26% in 2020. This will prevent the crowding out of the private sector, and accord private capital a leading role in driving growth.
“This provision exceeds 2017 aggregate expenditure estimate of N7.44 trillion by 15.5% (or about N1.16 trillion). Of the total expenditure estimates, up to N2.60 trillion (inclusive of capital in transfers) is targeted at capital expenditure, representing 30.0% of the budget.
“The allocation of this resource among the various spending Ministries, Department and Agencies (MDAs) of government is driven by government’s execution priorities and strategic focus outlined in the ERGP. Over the medium term, government will continue to focus on critical sectors that quickly turn-around real sector growth.
“A provision of N1.93 trillion has been made in the medium term to address the constraints which had previously incapacitated the power sector in line with the PSRP. Other key spending includes personnel cost which is estimated at N2.12 trillion and debt service of N2.03 trillion,”
The federal government pledged to be efficient in spending, saying procurements would be approved by the Efficiency Unit, before releases would be made.
It said, “Government is committed to improving the efficiency and quality of spending. Thus, public expenditure will be properly scrutinized to ensure value for money. To achieve this, the budget formulation process will be strengthened, while overhead expenditure provisions will be guided by recommendations of the Efficiency Unit, capital projects will be evaluated for consistency with ERGP Implementation Plan (ERGP-IP) as well as set performance indicators.
“Thus, over the next three years, the legal and regulatory framework will be strengthened to improve the relationship between expenditure and outcomes.”
According to the document, “Crude oil prices rose by 8% in the first quarter of 2017, averaging almost $53/pb. Prices are projected to range from $50 to $60/bbl in 2018 as the market regains balance, with shale production limiting larger price gains.
“The price of Nigeria’s Bonny Light crude oil price rebounded from an average of $44.08 in the international oil market in 2016 to about $51.5 in the first half of 2017 (Figure 5.2). However, the market price declined by $4.21 from $54.98 in January 2017 to $50.77 in May 2017.”
The federal government admitted that the nation’s debt has risen in recent times but assured that it was still within the limits allowed by the Fiscal Responsibility Act.
“Nigeria’s public debt has increased significantly in recent years as the Federal Government has increased borrowing to finance its budget deficits. Although the country currently has low debt levels relative to total output, its low ratio to revenue poses substantial risk to the public debt portfolio. Yet the country needs additional resources (including debt resources) to fund economic recovery and diversification.
“Government is cautious of the implications of its expansive fiscal policy programme under a tight revenue profile. The fiscal deficit will be maintained within the 3% level stipulated by the Fiscal Responsibility Act 2007 but at an average of about 1.93% of GDP, but declining to less than 1% by 2020.
“Debt financing will be restructured gradually in favour of foreign financing while domestic financing is deemphasized. Thus, while the proportionate share of foreign financing will increase from the current level of about 28% to almost 72% in 2020, domestic financing will decrease gradually from about 54% in 2016 to about 26% in 2020. This will prevent the crowding out of the private sector, and accord private capital a leading role in driving growth,” it said.
Oil Benchmark for 2018 is put at $53 per barrel, up from the $44. 5 per barrel in the 2017 budget. Oil price averaged about $49. 9 in June this year.
Inflation is estimated to fall to 12.42 in 2018 ; while the Gross Domestic Product (GDP) is estimated to rise to 3.5 per cent, up from the 1.5 per cent in the current budget.