2019 Budget Proposals: Matters Arising

The first issue is that the deficit is in the sum of N1.895tn and it is to be financed mainly by borrowing the sum of N1.649tn – N824.82bn from domestic sources and N824.82bn from external sources. This will further add to our already high debt profile. The deficit is 21.05% of the overall expenditure of N8.83tn. Also, the deficit is 26.68% of the projected revenue of N6.97tn.

The second issue is a challenge of the revenue framework. It is on the expected revenue from oil. The $60 benchmark seems unrealistic considering the actual price of crude oil in the last couple of months. The postulation that “the considered view of most reputable analysts is that the downward trend of oil prices in recent months is not necessarily reflective of the outlook for 2019” is overly optimistic and fails to be guided by the cautionary approach to plan on the conservative side and if the price is exceeded, to fall back on withdrawals from the Excess Crude Account. The fact that the ECA has been drawn down by $1.6bn in three weeks and the balance is now $631m shows that the country has no buffer to fall back upon.

The third issue is that it is surprising that non-oil revenue (CIT, VAT, C&E and Federation Account levies) is expected to be much lower than oil revenue at a period the Federal Government is keen and states that it has taken steps to diversify the economy. At 53.36% of projected revenue, oil revenue is dominant. The percentage may increase as most of the non-oil components, going by previous experience, may likely underperform. For instance, in 2017, independent revenue was projected at N807.57bn but only the sum of N295.29bn came in at the end of the year. As of half year of 2018, independent revenue had underperformed by 48.2%. Although the economy has recorded six straight quarters of growth, the fiscal boosts and so many quasi-fiscal measures undertaken by the fiscal and monetary authorities are expected to have started yielding dividends to increase non-oil revenue.

The fourth issue is that it is not clear whether the N203.38bn 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 as there is no certainty that it will be realised. It should only be appropriated when it has already been realised through a supplementary appropriation.

The fifth issue is that from the actual revenue inflow of 2018, the President indicated that as of September 2018, the overall revenue performance was only 53% of the target in the 2018 budget. Although he attributed this to the poor performance of one-off items, the revenue projections of 2019 should have been greatly influenced by the actuals of 2018 and previous years, except there has been a dramatic change in economic circumstances warranting the new projection.

The sixth issue is that the Federal Government has been silent on the trillions of naira accruing to it as stamp duties over the years. Nigerians suffer deductions from their bank accounts and the money seems to have been lost in a black hole as no one accounts for it. At a time of poor revenues, the country can ill-afford this humungous waste.

The seventh issue is the silence of the proposals on the higher education sector – the refusal to take fiscal steps to revitalise the higher education sector which has been crippled by strikes from university and polytechnic teachers. If fiscal policy and its associated frameworks and projections are silent about a major national issue bordering on our present and future development, it means that the executive has failed to read the handwriting on the wall.

The exchange rate of N305 to 1USD seems contentious due to the fact that there are other rates that economic agents use in exchanging the dollar. It would have made eminent sense for the Central Bank of Nigeria to work for a harmonised rate that merges both the official and parallel rates. Hardly and stricto sensu, very few economic agents get the dollar at the proposed rate. Changing the rate to the realistic market rate of between N360 and N365 to 1USD would have released more naira for the three tiers of government who share in the Federation Account. As such, it would reduce the deficit.

The budget proposes the sum of N305bn for under-recovery by the NNPC on PMS in 2019. The first issue is that the deliberate obfuscation of subsidy by renaming it “under-recovery” is unacceptable. It is a subsidy and no attempt should be made to further cause confusion. The second is that subsidising PMS at a time the consensus seems to favour its removal is abnormal. The third is that if publicly available figure of over N2bn subsidy every day is true, then the proposal of $1bn will not cover the subsidy to be paid in 2019. The fourth issue is the statement that falsification of claims is no longer possible is not in tandem with facts available to all Nigerians. During the years preceding 2015 and at a time of about six per cent economic growth, the NNPC reported that Nigeria was consuming about 30 million litres of PMS every day. During the recession and post the recession when many companies had closed down, jobs lost and the economy greatly slowed down, the NNPC claims that Nigeria is now consuming between 60 million and 65 million litres per day. Such a wild claim cannot be supported by empirical evidence. It is most likely to be false. The NNPC should come forward with the evidence in support of such a claim beyond its mere declaration.

Merry Christmas to my readers.

To be continued