Although President Muhammadu Buhari on Monday, May 27, 2019, signed the N8.91 trillion 2019 Appropriation bill into law, his greatest regret was that over N9 billion was added to the original budget by the National Assembly, thus balooning the budget deficit by another N900 billion.
Earlier, the president had submitted the 2019 Budget of N8.83 trillion to the Senate but the upper chamber unilaterally increased the amount to N8.92 trillion, against the president wish.
Notwithstanding, after a back-and-forth movement of the budget from the legislative arm to the executive arm, Buhari reluctantly signed the budget.
The signing has however raised a number questions among economy experts who queried not only the implementability but the source of revenue to support the budget. They also considered the debt service of over N2.04 trillion to revenue ratio which is enough constraint on the budget.
Their fear was accentuated by the Minister of Budget and National Planning, Senator Udoma Udo Udoma, who, during the budget breakdown on May 28, 2019, expressed fear that Nigeria faces significant challenges with respect to revenue generation.
To this effect, the president has directed Nigerian National Petroleum Corporation (NNPC) to take all possible measures to achieve the targeted oil production of 2.3 million barrels per day.
The president also ordered the Ministry of Finance, working with all the relevant agencies to take action to liquidate all recovered, unencumbered assets.
For its part, the NNPC is also to immediately commence the recovery of all outstanding obligations, including those due from Nigerian Petroleum Development Company (NPDC) (a subsidiary of NNPC), which it had agreed to pay since 2017.
It is also expected to restructure the Joint Venture Oil Assets so as to reduce government shareholding to 40 per cent.
Buhari, he said, has equally ordered that work should be concluded on the deployment of the National Trade Window and other technologies to enhance customs collections efficiency.
In addition to this, he said, the government will sustain efforts to improve public financial management through the comprehensive implementation of Treasury Single Account (TSA), Government Integrated Financial Management Information System (GIFMIS) and Integrated Payroll and Personnel Information System (IPPIS).
One of the experts who spoke to Daily Sun was the Lead Director of Centre for Social Justice (CSJ) and an economy analyst, Mr. Eze Onyekpere.
While noting the lateness in the signing of the budget, he was also apprehensive as to where the revenue to back up the budget would come from.
As a way out of this fiscal logjam, he suggested a reduction in the of governance which was not taken into cognisance in the budget.
Onyepkere had earlier advocated an increase in Value Added Tax (VAT) from 5 per cent to 7 per cent and then 10 per cent for luxury items. This, he reasoned, would shore up the revenue side of the budget and ensure the funding gap is closed.
“CSJ welcomes the signing of the 2019 federal budget by President Muhammadu Buhari. We note the late approval and signing, coming in the last days of the fifth month of the year for a budget which should have started running in January. This definitely has implications for the economy considering that the budget plays a signaling role in identifying the priorities and policy direction of a government and the private sector.
For a country going through a period of economic stagnation marked by growth figures which are outpaced by population growth figures, a little more sense of timeliness and urgency on the path of the executive and legislature would have done the country a lot of good.
“We see a central challenge in the realisation of the revenue and funding needed to implement the 2019 budget against the background of the revelation by the Minister of Finance that only 55 per cent of the 2018 projections were realised. This follows the trajectory in previous years where the Federal Government consistently failed to realise budgeted revenue. We are worried that despite the price of crude oil selling above the benchmark price in the last couple of years, we have hardly met the production target of 2.3 million barrels a day. The recent disclosure that the country produces less than 2mbpd falls in line with the trajectory of this challenge. The dominance of oil in the revenue profile as well as the relatively meager revenue expected from the non-oil sector compounds the revenue challenge.
“The proceeds from minerals and mining being the solid sector minerals is still very low despite overwhelming evidence of massive illegal mining while revenue leakages from operating surpluses of scheduled Ministries, Departments and Agencies (MDAs), non-remittance and utilisation of accrued stamp duties is the order of the day.
“Further, the executive has not taken steps for the review of Petroleum Production Sharing Contracts as recommended in various Nigerian Extractive Industries Transparency Initiative studies. This will bring in additional revenue of not less than $1.6 billion every year. Also, the Petroleum Industry Bill is stuck in executive legislative bickering and this has stalled reforms in the oil and gas sector which would have increased revenue available from oil and gas extraction.
“Increasing recurrent expenditure accruing from the increased public minimum wage will imply that we have to part-fund salaries with borrowed money which is not sustainable either in the short, medium or long term. Also, continuing subsidies on petrol will compound our funding crisis.
The clamour for the reduction of the cost of governance was not taken on board in the approved budget as the key cost centres (legislature and executive) maintained their very high running costs. Apparently, the Nigerian public has only been fixated with the cost of running the National Assembly to the neglect of the heaviest cost centre.
“We recall that this would be the first budget in the second tenure of President Buhari. The implementation should therefore signal a departure from the old thought process and implementation strategy which was steeped in delays and failure to follow the defined procedures of the Fiscal Responsibility Act 2007 (FRA). We expect the Minister of Finance to duly comply with the provisions of section 26 the FRA”he said.
Also commenting, a development economist, Mr Odilim Enwegbara submitted that the timing of signing the budget is not the problem but the challenge will belies with the source of revenue to back up the budget.
“Whether the budget was signed in June or whenever, it is a 12-month budget cycle. What is important is the revenue to back it up. How will the revenue come?
The problem is that the debt service to revenue ratio is too high. We are talking of 70 per cent and now N2.04 trillion is going for debt service. Where is the revenue from?
If the price of oil remains as it is, the budget cannot be implemented.
Normally the recurrent is not the issue because the government can get money to augment its running cost. The problem is the capital side of the budget. I don’t think the government can implement the capital budget.
“Do we have the credibility to borrow money to implement the capital side?
The second issue there is, do we have the money to pay for the recurrent given that the minimum wage is now N30,000? So, these are the complexities that we have to contend with. That is why I am sure that before 2020, the country will slip into another recession.
Mark my word, before 2020, Nigeria will pack up” he noted.
For his part, the co-ordinator of Human Rights Writers Association (HURIWA), Comrade Emma Onwubiko, argued that something is wrong with the budgeting system, the reason it is rehashed every year.
“What most Nigerians have come to observe about our budget is that the budget of previous years are usually rehashed, updated and represented as the budget of the current year.
The national assembly that ought to carry out the oversight responsibility is not up and doing. Most times they are compromised.
The budgets we have been operating in Nigeria are not realistic. It is not just about the projection in terms of how much crude oil we produce per day or how much is the going price. The issue is that something is wrong with the entire package that we call budget.
Something has to be done so that Nigeria can have an implementable budget.
Every year the substantial percentage of the budget goes to the recurrent to pay salaries of cabinet members, public office holders and the allowances of appointees. Very little goes to the capital which is the aspect of the budget that can lift the living condition of Nigerians” he noted.