The National Assembly yesterday approved N8. 916 trillion as the 2019 budget, raising President Muhammadu Buhari's earlier proposal of N8. 826 trillion by N90 billion.Similarly, the deficit of N1.86 trillion proposed by Buhari was increased to N1. 908 trillion.
The budget was passed unanimously after the two chambers considered and adopted the report submitted by their committees on appropriations. President Buhari had in December 2018 presented a budget proposal of N8, 826,636,578,915 to the joint session of the National Assembly for approval, with N1. 86 trillion as deficit. However, N8, 916,964,099,373 was passed after yesterday's deliberation by both the Senate and House of Representatives.
Highlights of the 2019 budget as approved include: capital expenditure of N2.094 trillion, recurrent expenditure of N4.055 trillion, statutory transfers of N502 billion; fiscal deficit of N1.908 trillion (1.37%), special intervention fund of N500 billion and deficit to GDP of 1.37percent.
Areas of difference between the proposal and what was eventually passed are the N10 billion Federal Government intervention fund for victims of bandits attack in Zamfara; N23 billion for payment of severance package for members of the National Assembly; allowances for incoming legislators and their legislative aides as well as N66 billion increments in the budgetary allocations of key security and defence institutions, including the army, navy, air force and the police.
In passing the budget, the National Assembly adopted the Medium Term Expenditure Framework/Fiscal Strategy Paper (MTEF /FSP) in which the lawmakers approved 2.3mpd as daily oil production, $60 per barrel as oil price benchmark and N305/USD as exchange rate
The Chairman of the Senate Appropriation Committee, Danjuma Goje, explained that the increase in the deficit was a result of "the provisions for the severance benefits of the outgoing legislators and legislative aides, the induction/orientation and inauguration of new legislators, all of which occur once in four years but were inadvertently not captured in the 2019 budget proposal."
"There was also the need to provide more funds for the security and intelligence agencies to deal with additional emerging/unforeseen security challenges in the country."
The breakdown of the N2.094 trillion capital expenditure showed that the Federal Ministry of Power, Works and Housing has the highest allocation of N394. 906 billion followed by the Transportation Ministry which got N179. 384. The Defence Ministry got the third highest allocation of N159. 125 billion while the Agriculture Ministry got N107. 218 billion. The Water Resources Ministry got N92. 178 billion as capital allocation.
A striking aspect of the budget as passed is the provision of N160 billion for the payment of "Public Service Wage Adjustment for Ministries, Departments and Agencies (MDAs) including arrears of promotion and salary increases."Goje explained that the president was at liberty to submit more financial request for approval by the National Assembly to further fund the minimum wage increase if what had been approved was not enough.
In passing the MTEF/FSP three weeks ago, the Senate also approved GDP growth rate of 3.0 percent and inflation growth rate of 9.98 percent.Also approved as part of the MTEF are total federally collectable revenue of N14.89 trillions; net oil and gas revenue after costs, deductions & derivations amounting to N7.60 trillion; net non-oil revenue after costs, deductions and derivation of N2.38 trillion; and Federal Government retained revenue of N7. 92 trillion.
Meanwhile, analysts have observed that this is the first time that the budget proposal will go without major alterations, particularly in the core benchmarks like crude oil price and production, exchange rate and proposals of the Ministries, Department and Agencies, among others, except the deficit plan.
However, they said the budget may be doomed as the lawmakers based their approval on an estimated crude production of 2.3 million barrels a day, oil price of $60 per barrel and an exchange rate of N305 per dollar.While the country has the potential to reach that production level, it has not been achieved in the last five years, and more worrisome is the fact that the global oil cartel, Organisation of Petroleum Exporting Countries (OPEC), of which Nigeria is a member, has pegged the country's output at below 1.8 million barrels per day.
Also, there is no denying the fact that more than 90 per cent of Nigeria's foreign exchange earnings and 70 per cent of revenue come from the oil sector deals, but currently overloaded with debt issues.The Head of Research at FDSH Merchant Bank Limited, Ayodele Akinwunmi, said the widening fiscal deficit, as passed by the lawmakers, would have further consequences on the economy, particularly in the financial market.
He said the government should now be more committed to the implementation of the budget, particularly the capital component."I expect the fiscal deficit to increase further when the full impact of the new national minimum wage begins to show. This may lead to an increase in the interest rate in the financial market as the Federal Government borrows more from the financial market," he said.
Despite the earlier concerns raised concerning the 2019 budget assumptions, members of the Organised Private Sector (OPS) have urged the Federal Government to commence the implementation of the fiscal document in order to keep the economy running.Some of the conversations around the oil price benchmark have since been pushed to the back burner with the recent rise in oil prices to over $72 per barrel as against the benchmark of $60 per barrel.
Besides, the Lagos Chamber of Commerce and Industry (LCCI), Manufacturers Association of Nigeria (MAN) and the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) have described the passing of the budget at this time as a welcome development but cautioned that delay should not be a norm.
The Director-General of LCCI, Muda Yusuf said the government should move on to the implementation of the budget."We expect the executive to scrutinise the document and, thereafter, commence the implementation, especially the capital expenditure aspect. We hope that going forward, we will get out of the crisis of delayed budget", he added.
The President of NACCIMA, Iyalode Alaba Lawson, reiterated the association's position that the act of late passage of budgets is not good for either the economy or the nation's development aspirations for inclusive growth and sustainable development. "It is particularly not helpful to the private sector which government has acknowledged as the engine of growth and development of the economy. We urge the executive to swing into action for the implementation of the budget to make up for time already lost in the year," she added.
For MAN, there is the need for government to cut down on the recurrent expenditure to reduce fiscal deficit, borrowing and service charges. The association also canvassed shedding the current borrowing size of the government in the domestic financial market so as not to completely crowd out the private sector.
The association urged the commencement of the implementation of the harmonised taxes and levies and to allow the Joint Tax Board (JTB) monitor and enforce compliance by states and local governments.MAN said that the government should be more interested in result-oriented spending with frugality, be more transparent and accountable in order to assuage the psychology of taxpayers for improved tax compliance.MAN also called for the resuscitation of the domestic refining of crude oil and ensure the operability of the independent power producers for on/off-grid power generation and the micro grid initiative.