Capital spending and capital releases

In our review of the latest personal statements from members of the monetary policy committee (MPC), we noted a pattern of warnings about the impact of pre-election government spending on inflation (Good Morning Nigeria, 09 May 2018). If we relate these warnings to members’ urging the FGN and National Assembly to pass the 2018 budget promptly, we arrive at a fear of the impact of capital releases on the money supply and price levels. The later the eventual passage of the 2018 budget, the more rapid its capital releases ahead of the election.                                                                                                                

  • Kemi Adeosun, the federal finance minister, has been quoted this week as saying that capital spending will exceed N1.5trn in the continuing 2017 budget year. This represents a decent increase on the figure of N1.25trn cited by Ben Akabueze, the director general of the Budget Office, in an interview in late March. He provided some colour on what is a confusing area at times by adding that ministries, departments and agencies (MDAs) had then accessed about 70% of the amount.
  • This upward trend can also be seen in the CBN’s Quarterly Statistical Bulletin for Q4 2017. This source shows capital expenditure (capital releases in its parentheses) at N2.87trn in 2017 calendar year including almost N1trn provisionally in Q4 alone.
  • Before any reader shows incredulity at this figure for the 12 months, we recall that the almost half the 2017 calendar year fell into the 2016 budget year.


Sources: CBN; FBNQuest Capital Research
  •  This confusion of course runs into the 2018 budget, for which the FGN has proposed capital spending (releases?) of N2.4trn. Come February 2019, the critical issue at the ballot box will not be aggregate data and definitions but rather the new bridges, repaired roads and improvements in power supply that Nigerians can or cannot see in their locality.

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