2017 Budget: Buhari Runs Nigeria On Deficit •Experts Call For Caution

By on April 28, 2017


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Nigerians, probably, are adjusting to the ruling All Progressives Congress (APC) ‘drama series’; the latest being the police raid on the home of the Chairman of the Appropriation Committee, Senator Danjuma Goje.

Goje accused the police of taking some of the budget documents from his home.

This raid on Goje’s residence couldn’t but be revealed to Nigerians because the Senate had intended to pass the budget in April but for the raid on Goje’s home.

Speaking to newsmen on Thursday, Senate Leader Ahmed Lawan explained that the national assembly had intended to pass the budget in March but because of some parameters that we didn’t have control over, we couldn’t pass it.

“It was our design and desire to pass it within this month, April, but somehow, something happened.

“One of our colleagues, the chairman, senate committee on appropriation, Distinguished Senator Danjuma Goje’s house was raided by the police after a whistleblower gave information and when parts of those documents were taken away, it was reported that parts of the budget papers were included.

“When we were going on Easter recess, members of the senate committee on appropriation, including that of the house, did not go on recess. They stayed back because that was the arrangement, so that by the time we returned on April 25, that was Tuesday, they should lay the report of the budget.

“Unfortunately, that wasn’t possible because of what happened. But the good news is that we are doing everything possible to ensure that we catch up with the lost time. So, by the grace of God, I’m thinking that by next week, we should be able to finish our own work and pass the budget for Mr President to sign.?”

Buhari had in December 2016, presented the 2017 Budget to the National assembly

The N7.298 trillion budget has an oil benchmark of $42.5 per barrel as against $38 in 2016 and has a naira benchmark of 305 per dollar, as against 197 in 2016.

The budget, which is 20.4 percent bigger than that of 2016, has earmarked 30.7 percent for capital expenditure “to pull the economy out of recession”.

The area of education got 50 billion naira while universal basic education got a direct allocation of 92 billion naira while 51 billion naira was also allocated to health.

But emerging facts have revealed that the budget is dead on arrival. 

Experts at the international Monetary Fund (IMF) recently noted that Nigeria’s budget gap will probably be larger than the government estimates this year because the West African nation’s revenue from taxes and state companies will be lower than forecast.

The federal government’s budget deficit, they posited, may reach 3.7 percent of gross domestic product this year, higher than its projected gap of 2.8 percent, the fund said in a so-called article IV report Wednesday that followed meetings with Nigerian officials. The gap was 2.8 percent last year, preliminary estimates show. It was 4.7 percent on a consolidated basis.

“The larger deficit would likely have to be financed domestically, further raising yields and crowding out private-sector credit,” the IMF said.

Nigeria has proposed a record 7.3 trillion-naira ($23.1 billion) budget for this year to boost infrastructure investment and help its economy recover from a contraction of 1.5 percent in 2016, the first such slump since 1991.

The economy of Africa’s most populous nation was weighed down by a drop in the price and output of oil, its biggest export, which led to a shortage of dollars.

The government has a revenue target of 2 trillion naira from oil and 1.37 trillion naira from non-crude sources including tax collections, according to information from the Ministry of Budget and National Planning.

While the state is undertaking tax reforms to increase revenue collected, the impact of those measures will be gradual, Gene Leon, the IMF’s mission chief in Nigeria explained.

Although the naira has fallen 36 percent against the dollar since the central bank removed a peg in June, investors say central bank Governor Godwin Emefiele is preventing it from dropping further through trading and import restrictions and regular sales of foreign exchange.

The currency is as much as 20 percent overvalued, Leon said. A depreciation of that size would take it to about 390 per dollar, almost matching the black-market rate of 398.

The average yield on the government’s naira-denominated debt has risen 424 basis points over the past year to 16 percent, the highest level among 31 major emerging markets tracked by Bloomberg after Egypt.

Nigeria will probably raise debt from more Eurobond sales this year, the IMF said. These, together with concessional financing from the World Bank and the African Development Bank, will make up 60 percent of external debt. The government will also issue 10-year promissory notes equivalent to 2.2 percent of GDP to settle domestic arrears, it said.

This debt is in addition to a $500 million Eurobond sold last month as part of the 2016 budget and $1 billion raised in February.

Nigeria’s cabinet, it said, recently, approved a 21-year, $1.3 billion loan with the World Bank, African Development Bank and other institutions at a rate of 2 percent, Finance Minister Kemi Adeosun told reporters in the capital, Abuja. The money will be used for the new Development Bank of Nigeria that will lend small businesses long-term funding.

Previously, the government said it expects budget-support loans of at least $1 billion from the World Bank, and a final, $400 million portion of a $1 billion credit facility from the African Development Bank.

Also, President Muhammadu Buhari, on Wednesday, requested the Senate to urgently consider and approve Federal Government’s 2016-2018 External Borrowing Rolling Plan of  $6.93 billion.

The rolling plan, according to him, is to enable the government commence the reconstruction and rehabilitation of the North-East, provide for the poor and tackle rail projects across the country.

The president made the request in a letter to the Senate dated April 21, 2017 and read by President of the Senate, Dr Bukola Saraki, at plenary.

Buhari said: “China Eximbank has approved our request for a loan to execute the Lagos-Kano railway modernisation project for a sum of $1.23 billion.

“The Chinese have also informed us that the approval of the Lagos-Kano railway modernisation project (Kano-Kaduna Segment) at $1.15 billion  and the Coastal Railway Project at $3.47 million  are imminent.”

He explained that the funds for the project were available under the China-Africa Fund but were limited, adding that loan applications from African countries were funded based on first-come-first-served basis.

“Therefore there is an urgent need for us to sign these loans as soon as they are approved or we might lose out in the event that we delay,” the president said.

“We are already in the process of completing the concession of the Port-Harcourt-Maiduguri Line to immediately link the eastern part of the nation.

“We fully intend to source further concessionary funding to ultimately upgrade this critical line to high speed standard gauge line.

“This project forms part of our overall plan to resuscitate the rail transport across the nation and thereby drive inclusive growth,” he said.

The president said that the request was based on the need to consolidate the relative peace in the North-East.
“The situation as you are aware has changed dramatically and introduces even more urgency to the situation in the zone than ever before.”

He said that the capture and destruction of the stronghold of Boko Haram in the Sambisa forest was welcomed news.

However, he added that the recent unfortunate incident of the bombing of an Internally Displaced Camp (IDP) camp by mistake, and with loss of civilian lives brought to the fore the  need to resettle the people.

Buhari said to achieve that, there was need for urgent tackling of the identified projects in the spirit of reconstruction and rehabilitation, and also to create jobs.

According to him, the World Bank has also approved a sum of $575 million to assist the Federal Government in the reconstruction and rehabilitation efforts.

“The fund is also to assist the Federal Government in the procurement of vaccines and other ancillary facilities for national routine immunisation to eradicate polio after the outbreak in the North-east in 2016.

“I am requesting your early consideration of the proposed World Bank-Assisted 500 million dollars loan to help expand the assistance and support to the poor and most vulnerable, especially in this difficult time.”

Source cattnews

Posted 28/04/2017 10:20:41 AM




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