Banking & Finance Economy

2018 budget deficit may rise to N4.4tn — Report

Buhari to CBN: Don’t give Kobo for food, fertilizer imports
Written by Maritime First

…As Buhari on AfCTA says Nigeria can no longer sign agreements without understanding***

Except the Federal Government adopts a pragmatic approach to shore up its independent revenue, the fiscal deficit in the 2018 budget may widen from the appropriated sum of N1.9tn to N4.4tn, an economic report prepared by Afrinvest West Africa has revealed.

The company in its ‘Nigerian Banking Sector Report’, which was launched on Monday in Abuja, predicted a revenue underperformance of 40 per cent in independent revenue of the government.

It said that as a result of political distractions caused by election campaigns, the fiscal deficit might widen to up to 3.5 per cent of nominal Gross Domestic Product.

This, it added, was above the three per cent threshold prescribed by the Fiscal Responsibility Act.

The 2018 budget, which was signed by President Muhammadu Buhari, had a total spending of N9.1tn made up of N2.87tn for capital expenditure; N3.51tn for recurrent (non-debt) expenditure; while N2.01tn was projected to be spent on debt servicing.

The N9.1tn budget was to be financed from N2.99tn to be generated from oil revenue; N31.25bn from Nigeria Liquefied Natural Gas dividend; while N1.17bn was expected to be realised from minerals and mining revenue.

The Federal Government also projected to generate N658.55bn from Companies Income Tax; N207.51bn from Value Added Tax; N324.86bn from the Nigeria Customs Service; while N57.87bn was expected to come from Federation Account levies.

In the same vein, the government expected N847.95bn as independent revenue from its agencies, while tax amnesty income, signature bonus and unspent balance from previous years were to provide N87.84bn, N114.3bn and N250bn, respectively.

In the report, Afrinvest expressed worry that the “Federal Government’s ambitious spending plans contrasts poorly with revenue realities.”

For instance, the report explained that while the assumption for oil revenue was achievable, that of independent revenue and recoveries remained a source for concern.

The report read in part, “The Federal Government plans to generate 41.6 per cent of its revenues from oil and the remainder from taxes, independent revenue and recoveries, which account for 40.5 per cent of total projected revenues and have historically underperformed.

“Given these considerations as well as political distractions, we estimate a significant underperformance in revenues by 40 per cent.

“Hence, we estimate the fiscal deficit to expand to N4.4tn above budget estimate of N1.9tn, representing 3.5 per cent of nominal Gross Domestic Product, well above the three per cent threshold prescribed by the Fiscal Responsibility Act.”

Speaking on the report, the Managing Director, Afrinvest West Africa, Mr Ike Chioke, said the report focussed on seven critical areas of the economy.

The areas are oil and gas sector, power sector reform, boosting competitiveness, transportation and infrastructure, human capital development, security, and building democratic institutions.

In the meantime, President Muhammadu Buhari on Monday said Nigeria could not afford to go back to the days of signing agreements without understanding and planning for the consequences of such actions.

Buhari said this while inaugurating the committee saddled with the responsibility of assessing the impact and readiness for the Africa Continental Free Trade Area Agreement.

The presidential committee has the Minister of Industry, Trade and Investment, Dr Okechukwu Enelamah, as its chairman, and the Chief of Staff to the President, Abba Kyari, as co-chairman.

The President recalled that a few months ago, he directed a nationwide stakeholders’ engagement on the AfCFTA to understand the true impact of the agreement on Nigeria and Nigerians, considering the existing domestic and regional policies relating to trade.

He listed the key issues raised by stakeholders during the consultation as abuse of rules of origin; smuggling arising from difficulties in border controls; un-quantified impact of legacy preferential trade agreements; and low capacity and capabilities of local business to conduct international trade.

Buhari listed others to include high cost of finance; insufficient energy; and inadequate transport logistics infrastructure.

The President stated, “Our ERGP is addressing these issues. Nonetheless, we are determined to break away from the past practice of committing Nigeria to treaties without a definite implementation plan to actualise the expected benefits, while mitigating the risks. “We cannot go back to the days of signing agreements without understanding and planning for the consequences of such actions, and our country being the worse off.

“Your task as members of the AfCFTA Impact and Readiness Assessment Committee is to address the issues raised during the nationwide stakeholders’ consultations on the AfCFTA.”

He added, “You are expected to develop short, medium and long-term measures that will address any challenges arising therefrom.

“I look forward to receiving from you in 12 weeks, a clear roadmap for Nigeria as it relates to the AfCFTA.”

Buhari argued that many of the challenges facing Nigeria were caused by the country’s inability to produce its most basic needs.

He attributed the recent recession experienced in the country to overdependence on external factors.

He said the recession was a clear case of why Nigerians must aspire to be self-sufficient.

The President stated, “For too long, our domestic productive capabilities were neglected in favour of imports. Nigeria was using its hard-earned oil revenues to create jobs offshore instead of developing the manufacturing potential of our very vibrant, young and dynamic population.

“Many of our challenges today, whether relating to security, unemployment or corruption, are rooted in the fact that we have not been able to domesticate the production of our basic requirements.

“The recent recession, which was as a result of our overdependence on external factors, is a clear case of why Nigerians must now aspire to self-sufficiency.”

Buhari said the present administration’s Economic Recovery and Growth Plan focused on the revival of key job creating and import substitution sectors such as agriculture, mining, manufacturing and services.

To ensure that the ERGP is seamlessly implemented, he noted that the government had commenced a number of structural reforms through the Presidential Enabling Business Environment Council; the Industrial Policy and Competitiveness Advisory Council; and the Nigerian Office for Trade Negotiations.

According to him, the benefits of these reforms are being felt as the government’s economic policies are creating meaningful jobs for the young population, assuring national food security and improving the competitiveness of the economy to position export trade as an engine for economic growth.

However, Buhari said while the government must look inwards for certain solutions, it had not lost sight of regional and international trends, especially on trade where global dynamics were shifting and changing at a rapid rate.

This, he said, meant that as the government planned for the long-term, it must also be flexible enough to respond to short-term shocks that could upset economic diversification and backward integration plans.

Earlier, Enelamah gave the terms of reference of the committee.

He said, “Following consultations, the terms of reference of the Presidential Committee on the Africa Continental Free Trade Area Impact Assessment and Readiness are: assess the potential cost and impact of the Africa Continental free Trade Area AFCTA for Nigeria in relation to the benefits; identify the short, medium and long-term measure to prepare Nigerian businesses for the take-off of the AfCTA trading group and a backup plan that covers selected scenarios; and view the trade remedy options to safeguard the Nigerian economy form predatory and failed trade practices.”

The minister added that an updated trade policy was being prepared for Nigeria and the draft would be ready for review by the end of the year.


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Maritime First