Federal Government has proposed a record N7.939 trillion spending for 2018, making it the third straight record budget of the Buhari administration. This ramps up expenditure despite recording a N2.5 trillion deficit in the first half 2017, which is already more than the N2.2 trillion deficit projected for the whole year.
With the proposed enlarged spending amid lower revenues, fiscal deficit has been forecasted to rise substantially to N2.777 trillion in 2018 from the N2.356 trillion in the 2017 budget, which government is yet to commence full implementation.
The cash-strapped Africa’s largest economy hopes that price of oil – the largest government revenue earner – would continue to rally and has therefore proposed $45/barrel oil benchmark for the 2018, as against N44.5/b for 2017.
These are some of the key assumptions proposed for 2018 budget as contained in the 2018-2020 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy, which Udoma Udo Udoma, minister of budget and national planning, presented to civil society organisations, media, organised private sector and general public on stakeholders for input on Thursday in Abuja.
The Federal Government also projects oil production at 2.30 million barrels per day for 2018, even though the Organisation for Oil Producing and Exporting Countries (OPEC) could cap output at 1.8mpb.
Exchange rate is projected at N305/$, inflation rate at 12.42 percent, GDP growth rate at 4.8 percent, Nominal GDP at N133.97 trillion, and Nominal Consumption at N87.95 trillion for 2018.
The government also projects Non-oil Gross Domestic Product (GDP) N104.652 trillion and oil GDP at N29.323 trillion But total gross domestic product is forecasted at N113.4 trillion and debt to GDP ratio of 24.5 percent.
“We are expecting slight growth in the global economic outlook from 3.5 percent in 2017 to 3.6 percent in 2018, and an increase in sub-Saharan Africa from 2.6 percent to 3.4 percent in 2018. So, we are expecting increase in growth in Africa,” Udoma said.
The consultations with key stakeholders began on Tuesday evening with leadership of National Assembly, and will continue on Friday in Lagos.
Udoma said the document would be presented to Federal Executive Council in a fortnight and submitted to the National Assembly in October.
According to Udoma, the projection consists of capital expenditure of N2.408 trillion, though exclusive of transfers. Overall, gross federation account inflows of N10.387 are being projected for 2018, which is slightly less than the N10.403 in 2017.
The minister said the key thrusts of the 2018-2020 MTEF/FSP were consistent with the goals of Economic Recovery and Growth Plan (ERGP), aimed at repositioning the economy on the path of diversified, sustainable and inclusive growth.
He explained that oil sector slowed by-11.64 percent, non-oil sector grew by 0.72 percent first quarter of 2017.
“Government measures to boost the economy are yielding results and efforts at minimising disruptions in the Niger Delta has helped oil production, currently running at 2.2 million barrels per day (inclusive of 450,000 barrels per day of concentrates),” he said.
According to Udoma, the execution priorities of the budget, which aligns with that of the nation’s Economic Recovery and Growth Plan (ERGP), includes to stabilise the macro economic environment, achieve agriculture and food security, improve transportation infrastructure, drive industrialisation with focus on SMEs, and ensure energy sufficiency in power and petroleum products.
He further said for Nigeria to improve on its GDP growth rate, there was need to get more private investments into the country by creating a more friendly business environment, get more revenue and spend more on capital expenditure and infrastructure development.
The government also intends to raise Value Added Tax (VAT) on luxury items, but he could not disclose by how much VAT would be raised, but assured that the plan was being worked on.
He also explained that the 2018 budget VAT projection was lower than 2017 due to the tax waivers instituted by FIRS, which would be realised in 2017, but not repeated in 2018.
He said, “We must get more revenue so we can spend more on infrastructure and also get private investment to invest in the country, we need to create the right business environment to attract these private investors.”
He explained that the government is on the right part in the implementation of the ERGP stating that the plan is basically to move the country from dependence on a single commodity to run on multiple engines.
“We are on the right part as we implement the ERGP. So the three strategic objective of the plans is to restore and sustain economic growth, build the capacity of the people and creating a competitive economy where we produce what we consume and have enough for export,” he said.
Ben Akabueze, director-general of the budget office, said actions to boost the nation’s revenue generation were ongoing as the various revenue generating agencies were working on activities to boost income generation.
According to Akabueze, the oil sector is working on a 50 percent reduction in operation cost so as to boost the revenue.
Speaking on government revenue strategies to fund this enlarged budget, Udoma disclosed that the FIRS is working on intensive audit program to ensure total compliance and accurate payment of tax within the country while the Nigeria Customs is working on enhancing its facilities all to ensure improved revenue generating process.
He said “actions to boost revenue generation is in progress, the oil and gas sector is working on a 50 percent reduction in operation cost as reduction in cost can lead to higher revenue. Also the FIRS is driving more audit to enhance compliance to payment of right taxes which can also lead to increase of revenue, in the area of custom, they are working to ensure accurate technology which will speed up the process and make the assessment more accurate in determining the contents of containers.”
Also speaking at the event, Zainab Ahmed, minister of state for budget and national planning, raised the concerns that Nigeria’s population growth at much more higher than economic growth was unacceptable.
Responding to concerns over the projections that the country’s population could soar to an estimated 450 million by 2050, the Minister of State said that the federal government has identified the high population growth rate as a risk factor, while preparing the Economic Recovery and Growth Plan (ERGP).
“We can see that population growth is clearly higher than economic growth. “We have a fertility rate of 5.7 – 1,000. On the average, one woman has about 5.5 children. It is not sustainable. Times are hard. Resources are limited. Families must look for ways and means on how to reduce the number of children,” she said.