FG links 2018 Budget underperformance to late passage

…Says it released N1.2trn for capital projects in power, roads, others

Motolani Oseni

The Federal Government has admitted significant underperformance of its 2018 budget of N9.12 trillion but blamed it on the late passage of the bill in June which left it with only six months for its implementation. However, the government scored itself high on the disbursement of the budgetary allocations, saying its recurrent expenditure, particularly, payment of workers’ salaries and backlog of pensions were adequately covered. The government said that as at January 11, 2019, the sum of N1.226 trillion had been released for execution of critical ongoing capital projects in the power, roads, rail and agriculture sectors which were provided for in the 2018 budget. Speaking at “Deloitte Nigeria Dialogue on Economic Outlook 2019” in Lagos, the Minister of Budget and National Planning, Senator Udoma Udo Udoma, said that the growth rate of the country’s gross domestic product (GDP) targeted at 3.5 percent fell at 1.81 percent as at third quarter (Q3) ended September 30, 2018. Reviewing performance of 2018 budget, the minister said that revenue projection also tumbled significantly below N7.16 trillion target to N3.91 trillion just as actual implementation targeted at N9.12 trillion missed the mark at N7.54 trillion disbursement end of 2018. At 1.95 million barrels per day (mb/d), oil production target also fell short of 2.3mbd projection for 2018. However, oil price projected at $51 per barrel on which revenue estimate was based exceeded budget benchmark at $74 per barrel as at October 2018 before weakening. However, Udoma said the implementation of the 2018 budget would continue until the 2019 budget is passed into law by the National Assembly, saying the legislators may not pass the budget proposal into law until after the general election. In his presentation titled, “Federal Government Budget 2019: What’s in it for business?” the minister said FGN 2019 budget proposals were aimed at quickening the pace of growth which he said had been sluggish after the country emerged from recession in second quarter of 2017. He said “the 2019 budget of continuity builds on the 2018 budget of consolidation. It aims to enhance the delivery of the ERGP objectives which are to restore growth, invest in our people and build a globally competition economy.” On the outlook of the economy in 2019, he said that with sustained implementation of the Economic Recovery and Growth Plan (ERGP), government expects the economy to maintain steady recovery with the GDP growth increasing from 0.8 in 2017 to 2.1 percent in 2018 and 3.01 percent in 2019. He projected inflation rate to drop to single digit of 9.98 percent in 2019 from 11.44 percent as at December 2018, on expectation of improved coordination of fiscal and monetary policies, improved oil earnings and capital flows into the economy. Overall, he said, government expects more diversified and inclusive growth in 2019 and over the medium term, stressing that government was committed to growing the economy which he said is the basis of the 2019 budget designed to support and partner with the private sector. Speaking on “Global and Nigeria Economic Outlook for 2019, the guest speaker, Dr. Doyin Salami, lamented that Nigeria had significantly performed below African average, wondering what government’s excuse could be for gross underperformance. The Adjunct Lecturer, Lagos Business School, said “Nigeria cannot afford a situation where industrial capacity is as low as it is. Our industry must contribute a quarter or three quarters of GDP for us to grow.” He also warned government against continued borrowing under the guise that its debt ratio to GDP was lowest among peers even when government’s revenue was quite low in relation to increasing debt burden. “Nobody pays for debt from GDP. Debt is repaid from revenue”, he said, adding that if government is going to create jobs in the way to address critical unemployment and underemployment rate, then the country’s industry (excluding oil) must contribute around a quarter or a third of GDP.” He also warned against unrealistic budget expectations as regards oil production and prices in 2019, insisting that the figures were unrealistic. “OPEC’s quota for Nigeria’s oil in 2019 is 1.6m bpd but the 2019 proposed budget states 2.3m bpd. Who will fund the deficit?” the university don wondered. However, Minister of Finance, Mrs. Zainab Ahmed, defended government’s projections, insisting that government had the capacity to service its huge debt. Speaking on Revenue Growth and Economic Development: Expectations for 2019, Mrs. Ahmed said: “Our debt level is sustainable but debt service is high compared to revenue collections, indicating the need to prioritise revenue generation.” She said that by prioritising revenue generation, the Federal Government of Nigeria (FGN) intends to continue significant investments in human capital & critical infrastructure to sustain the growth trajectory. On the unrealistic oil price projections, the Finance Minister said “Nigerian authorities are constantly monitoring external headwinds against the local economy and will adjust accordingly.” Commenting on drastic fall in foreign direct investments in the country in recent time, the President of the Institute of Chartered Accountants of Nigeria (ICAN), Rasak Jaiyeola, said “Foreign Direct Investment in the country fell by 48 percent, the worst level ever, to the extent that Nigeria slid below Ghana in FDI, asking What’s the government doing on this?”