THERE is optimism in the land over the 2018 budget.
The hope of a better time is based on the fact that economic indicators have improved.
Crude oil prices are rising and the naira exchange rate is stabilising; the future looks bright for the economy, frontline analyst Ayo Teriba said yesterday.
The Economic Associates chief said: ”I do not think there is much ground for disagreement between the Executive and Legislature. The most important thing is to find the money to implement the budget. The 2017 budget has not been fully funded. The 2017 budget faced revenue challenges because of low oil prices. We did less than $50 per barrel this year. The outlook for 2018 budget should be better. It is based on reality, not assumptions. I am more optimistic about the 2018 budget.”
President Muhammadu Buhari on Tuesday presented an N8.6 trillion “Budget of Consolidation” to the National Assembly.
“It’s realism to expect that 2018 budget will get better funding than the 2017,” Teriba said.
Teriba said whereas the experience of 2017 was better than that of 2016, 2017 saw inflation down but 2018 will be better.
“We should expect things to be better in 2018 than even 2015. We want to see how quickly the National Assembly will pass the budget for implementation. The capital budget for 2017 that remains unimplemented, should be allowed to run in 2018, provided there is adequate cash for their execution,” he said, pointing out that things are looking up for the economy as seen in the rapid appreciation in the foreign reserves and stability in the exchange rate.
To Manufacturers Association of Nigeria (MAN) President Dr. Frank Udemba Jacobs, Buhari should be praised on his promise to build the second Niger Bridge, reconstruct the East-West Road, North East Road and provide infrastructure.
“Most gratifying is the fact that more infrastructure development projects are provided for in the proposed 2018 budget. There is plethora of evidence to support the fact that quantity and quality of infrastructure would directly raise the productivity of human capital, physical capital and hence, economic growth,” Jacobs said.
He said the Price Waterhouse Cooper (PwC) 2014 report showed that road is the principal mode of transportation and accounts for 80 per cent of goods’ traffic.
“With only 20 per cent of the network tarred, providing for development of road infrastructure in 2018 budget is a welcome development. Interestingly, the renewed efforts of the government in infrastructure provision, especially road construction is impressive. I am aware of N100 billion presented to the Honorable Minister of Power, Works and Housing by the Federal Government for 25 roads across the six geo-political zones. We hope for a conscientious management of the funds so that Nigeria can have the maximum possible achievable number of roads,” he said.
In Jacobs’ view, the construction of the 2nd Niger Bridge is well overdue, considering the fact that the first bridge was built in 1965 and the residual life span appears indeterminate at the moment.
He said: “Besides avoiding the catastrophe of eventual collapse, the 2nd Niger Bridge will reduce the pressure on the first bridge and ensure a continuous movement of goods, people and capital across the region for many years to come..”
Jacobs praised the government for realising the huge cost of infrastructural gap the country is battling with and the need to give it priority in this year’s budget. He noted that the resources needed to implement the budget are huge, and advised the government to pursue a public private partnership to maximise available capital for higher impact.
To Nigerian Association of Petroleum Explorationists (NAPE) President Mr. Abiodun Adesanya, the budget benchmark for oil at $45 per barrel is right, oil price is above $64 per barrel due to the geopolitical situation in the Middle East.
According to Adesanya, two conditions will determine if the government would be able to implement the budget- Firstly, if the situation in the Middle East continues, oil price will continue to be high and that is good for Nigeria. Secondly, if the government would able to sustain peace in the Niger Delta and ensure that oil and gas infrastructure is not destroyed and production not disrupted by militants.
However, he expressed concern that if oil price continues to be high, the Organisation of Petroleum Exporting Countries (OPEC) may decide to cap Nigeria’s output. So, if these two conditions remain for a long time, government would be able to generate enough revenue to implement the budget. “The biggest threat to achieving the objectives of the budget is the resumption of vandalisation of production and export infrastructures,” he said.
The Lead Director of the Centre for Social Justice (CSJ), Mr. Eze Onyekpere, believes the early presentation of the budget estimates is a departure from previous years when it was presented very late in December. This will also restore the certainty of the financial year as anticipated in Section 318 of the Constitution as amended and the Financial Year Act, he said.
Onyekwere said: “The promise of improvement in the Ease of Doing Business Reforms and Nigeria having moved 24 places to the 145th position in 2017. The promise to improve tax administration and move our Tax-GDP-Ratio above the current 6%, which is one of the lowest in the world, is one of the steps being taken for improvement in the productivity of agriculture and reduction of the food import bill are good as well as continued implementation of the Social Investment Programme.
“But there are some key challenges and Concerns. The Medium Term Expenditure Framework 2018-2020 (MTEF) has not been approved and, as such, could not have been the basis for the preparation of the 2018 budget as required by S.18 of the Fiscal Responsibility Act (FRA).
”The poor implementation of the capital component of the 2017 federal budget which followed the trends in 2014, 2015 and 2016 financial years is a challenge. Only N450 billion has been released in a capital vote of N2.174 trillion. This amounts to a paltry 20.70% of the capital vote, just one month before the end of the financial year by December 31, 2017. The released sum of N450 billion does not necessarily mean that the full sum has been cash backed and even if cash backed, could not have been fully utilized by the appropriate MDAs.”
On the revenue framework, Onyekpere noted that the deficit was N2.005 trillion and “it is to be financed mainly by borrowing the sum of N1.699 trillion from external and domestic sources. The balance of the deficit in the sum of N306 billion will be financed from the proceeds of privatization of some non-oil assets by the Bureau of Public Enterprises. The proposed borrowing will further add to our already high debt profile. The deficit is 23.27% of the overall expenditure of N8.612 trillion. Again, the deficit is 30.35% of the retained revenue”.
On the Expenditure Framework, Onyekpere said: “The first issue is that capital expenditure is to take 28% of the budget. But when capital expenditure in statutory transfers is included, it will come up to 30.8%. While this looks good on paper, previous experience indicates that the capital vote is very poorly implemented. For instance, out of the 2017 capital vote, only N450 billion has been released in a capital vote of N2.174 trillion. This amounts to a paltry 20.70% of the capital expenditure. 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.