Pointers from some decent proposals

The FGN submitted its 2019 budget proposals to the National Assembly in December. We cannot say with any confidence when they will be approved, bearing in mind that the passage of the budget from its initial submission to its sign-off by the president generally takes six months. Both the executive and the legislature are preoccupied with the forthcoming elections, which are followed by the three-month period of transition. Additionally, we note that the underlying assumptions, notably an average oil price of US$60/b, may have to be adjusted.

  • That said, the presentation by the federal minister for budget and national planning offers some useful pointers on both policy and fiscal performance.
  • Its interim review of outturns in 2018 tells us that the FGN’s revenue in the first nine months of the calendar year amounted to N2.84trn, representing a 40% increase on the previous year yet just 53% of the target in the 2018 budget. Similarly, total spending over the same period accounted for 67% of the budget target.
  • The response of the planners was to set a target for total FGN revenue of N6.97trn in the 2019 proposals, a decline of 3% on the 2018 budget. Drilling down into the detail, we see a projected 23% increase in oil revenue, which follows from the higher price assumption of US$60/b (vs US$51/b in 2018).
  • The FGN’s share of non-oil revenue is seen as flat at N1.39bn. The small decline in total projected revenue is explained by lower targets for independent revenue, amnesty receipts (none vs N88bn the previous year) and domestic recoveries. There is a N710bn projection for the sale of joint-venture oil assets, carried forward from the 2018 budget because the planned ‘restructuring’ did not take place. It will be another challenge this year.
  • We learn that the FGN released N820bn for capital projects between the sign-off of the 2018 budget on 20 June and 14 December.
  • The ratio for total debt service/total revenue in the proposals is 30.8%.  This is a mountain to climb when we consider that the actual figures were 44.5% in 2016 and 62.6% in 2017 according to a report from the Budget Office of the Federation (Good Morning Nigeria, 08 January 2019).
  • Among the many projects included in the presentation, we highlight an allocation of N42bn for special economic zones. This element of industrial policy has been influenced by similar experiments in Ethiopia which have successfully attracted investment and new jobs.
  • For the third successive budget there is an allocation of N65bn for the presidential amnesty programme in the Niger Delta. It might just be a coincidence but the payments would appear to have reduced the incidence of sabotage over the three years.

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