Budget deficit burden to debt profile -CSO

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Ezeh Onyekpetre
Ezeh Onyekpetre on budget deficit

By Rachael Ishaya

Lead Director, Centre for Social Justice, Mr Eze Onyepere said this during interview with the News Agency of Nigeria (NAN), in Abuja on Thursday.

He added that the first challenge of the framework is on the expected revenue from oil.

“The lack of a clear path for the resolution of the insurgency in the Niger Delta will affect the realisation of the projection for oil revenue.

“The President indicated that disruptions in crude oil production partly contributed to significant shortfalls in projected revenue.

“ If the country could not meet the 2016 projection, and without resolving the challenge, it is likely that the 2017 projection will not be met.

“The second is that it is not clear whether the N565.1billion recovered loot is already in the bag or being expected.

“ This should be clarified by the fiscal authorities. If it is an expected sum, then it should not be made a revenue source and should only be appropriated when it has been realized through a supplementary appropriation”, he said.

Onyepere added that it was worrisome that the Federal Government was projecting non-oil revenue to be lower than oil revenue considering all the steps it had taken to diversify the economy.

On the capital expenditure projected to take 30.69 per cent of the budget, he said that from the performance of the 2016 budget, it seemed unlikely that government will be able to achieve this feat.

“While this looks good on paper, previous experience indicates that the capital vote is very poorly implemented

“For instance, out of the 2016 capital vote of about N1.6trillion, only N753.6billion had been released at the end of October.
“The President was however silent on how much was cash backed as at that date. It is not therefore sufficient to make proposals which may not be followed through at the end of the day.

“It is also imperative for the administration to ensure that the bulk of the capital expenditure is developmental rather than administrative. This is the only way it can have a direct impact on the majority of citizens”, he said.

Onyepere said that from the proposal, the rising debt service appeared to be crowding out expenditure in critical infrastructure and human development.

He said that at 22.75 per cent of overall expenditure, the debt service was high. He said that when the 2016 experience was used, it showed that Nigeria had spent over a trillion in debt service.

He said based on the proposal, if there was a shortfall in revenue at the end of the day, salaries and overheads would be drawn down, and debts would be serviced whilst capital projects suffered.

“There is the need to resolve the seeming contradiction between the External Borrowing Plan 2016-2018 and the proposal for capital expenditure.

“The Borrowing Plan is seeking approval of almost 30 billion dollars for 2016-2018. If the request is given approval, FGN may have to spend an average of 10billion dollars every year for the three years.

“Ten billion dollars is over N3trillion. Has the government abandoned the borrowing plan or what has happened to the projects proposed in the plan?

“Also, there seems to be a contradiction between the FGN mantra of cutting down waste, improving efficiencies and removing ghost workers from the payroll and its relationship with the rising recurrent non debt expenditure.

“Recurrent non debt expenditure got N2.59 trillion in 2015 and moved up to N2.65trillion in 2016. Now it has gone up to N2.98trillion in 2017.

“These increments cannot be the sign of a system that is taking steps to remove wastes and inefficiencies”, he said.

Onyepere highlighted some key points in the proposal which he said would impact positively on the economy.

“We welcome the decision of the government to embark on an ambitious private sector-led N600 billion programme to push Nigeria towards self-sufficiency in rice, wheat, sugar, soya, tomato and dairy products.

“Also, the revival of the Export Expansion Grant as well as the development of new Export Processing and Special Economic Zones. However, the allocation for this could be improved upon.

“The fact that the Federal Government will no longer pay for Joint Venture Cash Calls which will now be subject to a new funding mechanism that will allow for cost recovery is a welcome development”, he said.

Onyepere said Federal Government’s decision to clear outstanding electricity bills of its agencies and parastatals would provide the much needed liquidity in the sector.

NAN recalls that Buhari on Wednesday presented a N7.28 trillion Federal Government budget for 2017 to the joint session of the National Assembly for approval.

Tagged “Budget of Recovery and Growth”, it is higher than the N6.08 trillion 2016 Appropriation by about 19.95 per cent.

The budget has retained revenue of N4.94 trillion and a deficit of N2.36 trillion.

The key assumptions are the benchmark price of 42.5 dollars per barrel of crude oil; daily production of 2.2 million barrels per day and an average exchange rate N305 to a dollar.

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