President Muhammadu Buhari yesterday presented to a joint session of the National Assembly a budget estimate of N8.612 trillion for the 2018 fiscal year.
The key parameters and assumptions for the 2018 budget with a deficit of N2.005 trillion as presented include an oil benchmark of $45 per barrel, oil production estimate of 2.3 million barrels per day, exchange rate of N305/$ for 2018, real Gross Domestic Product (GDP) growth of 3.5 per cent and an inflation rate of 12.4 per cent.
The proposed N8.612 trillion of the 2018 aggregate expenditure comprises recurrent costs of N3.494 trillion; debt service of N2.014 trillion; statutory transfers of about N456 billion, sinking fund of N220 billion (to retire maturing bond to local contractors) as well as capital expenditure of N2.652 trillion which is the 30.8 per cent of the entire budget.
On revenues, the president said that the “total federally-collectible revenue is estimated at N11.983 trillion in 2018. Thus, the three tiers of government shall receive about 12 per cent more revenues in 2018 than the 2017 estimate. Of the amount, N6.387 trillion is expected to be realised from oil and gas sources. Total receipts from the non-oil sector are projected at N5.597 trillion.”
President Buhari, however, disclosed that “the Federal Government’s estimated total revenue is N6.607 trillion in 2018, which is about 30 per cent more than the 2017 target. As we pursue our goal of revenue diversification, non-oil revenues will become a larger share of total revenues.”
In 2018, the Federal Government expects to generate N2.442 trillion as revenue from the oil sector while it expects N4.165 from non-oil as well as other revenues.
Buhari listed the non-oil and other revenue sources of N4.165 trillion as share of Companies Income Tax (CIT) of N794.7 billion, share of Value Added Tax (VAT) of N207.9 billion, Customs & Excise receipts of N324.9 billion, Federal Government’s Independently Generated Revenues (IGR) of N847.9 billion, share of Tax Amnesty Income of N87.8 billion and various recoveries of N512.4 billion, N710 billion as proceeds from the restructuring of government’s equity in joint ventures and other sundry incomes of N678.4 billion.
“It is expected that our fiscal operations will result in a deficit of N2.005 trillion or 1.77 per cent of GDP. This reduction is in line with our plans under the ERGP to progressively reduce deficit and borrowings,” he noted
On how to finance the budget, Buhari said: “We plan to finance the deficit partly by new borrowings estimated at N1.699 trillion. Fifty per cent of this borrowing will be sourced externally, whilst the balance will be sourced domestically.”
The president also provided explanations on how his administration intends to manage the nation’s debt.
“We are closely monitoring our debt service to revenue ratio. We shall address this ratio through our non-oil revenue-generation drive and restructuring of the existing debt portfolio. Presently, domestic debt accounts for about 79 per cent of the total debt.
“Our medium-term strategy is to reduce the proportion of our domestic debt to 60 per cent by the end of 2019 and increase the external debt to 40 per cent. It is noteworthy that rebalancing our debt portfolio will enhance private sector access to domestic credit. In addition, annual debt service costs will reduce as external debts are serviced at lower rates and repaid over a longer period than domestic debt.”
He listed key capital spending allocations in the 2018 budget as N555.88 billion for power, works and housing; transportation which is to get N263.10 billion; and special intervention programmes which will get N150.00 billion. Others are defence which has N145.00 billion; agriculture and rural development which takes N118.98 billion and water resources with N95.11 billion.
Buhari also said that industry, trade and investment would get N82.92 billion; interior to get N63.26 billion; education takes N61.73 billion; Universal Basic Education Commission will take N109.06 billion as health gets N71.11 billion.
Similarly, the Federal Capital Territory is to get N40.30 billion while zonal intervention projects will get N100.00 billion. The North East Intervention Fund has been allocated N45.00 billion just as the Niger Delta Ministry gets N53.89 billion and the Niger Delta Development Commission gets N71.20 billion.
Contrary to the position of some Nigerians that they are yet to identify a tangible project undertaken by the executive under the 2017 fiscal plan for which N2.1 trillion was approved but N450 billion has so far been released, Buhari listed some, mostly roads, for possible confirmation.
“ Over 766 kilometres of roads were constructed or rehabilitated across the country in 2017. For instance, work is at various stages of completion on these strategic roads with immense socio-economic benefits.”
He listed the dualisation of Oyo-Ogbomosho-Ilorin road; rehabilitation of Gombe-Numan-Yola road; dualisation of Kano-Maiduguri road; rehabilitation of Sokoto-Tambuwal-Jega road and Kotangora-Makera road that traverses Sokoto, Kebbi and Niger states; rehabilitation and reconstruction of Enugu-Port-Harcourt road; rehabilitation of Enugu-Onitsha dual carriageway road; rehabilitation of Aleshi-Ugep road and the Iyamoyun-Ugep section in Cross River State.
The rest are rehabilitation, reconstruction and expansion of Lagos-Ibadan dual carriageway; construction of Loko-Oweto Bridge over River Benue in Nasarawa and Benue states; and construction of Gokanni Bridge along Tegina-Mokwa-Jebba Road in Niger State.
President Buhari also announced that in the year under focus, his administration invested a lot of time and effort in identifying alternative means of funding new projects.
He said for example, the recent N100 billion Sukuk financing would cater specifically for the development of 25 roads across the country, adding that the economic team has also developed different structures that empower private investors to contribute to the development of roads of significant national importance.
“Already, we are seeing results. For example, the Bonny-Bodo road is being jointly funded by the Federal Government and Nigeria LNG Limited. This project was conceived decades ago but it was abandoned. This administration restarted the project and when completed, it will enable road transportation access for key communities in the Niger-Delta. The Apapa Wharf-Toll Gate road in Lagos State is also being constructed by private sector investors in exchange for tax credits.”
According to Buhari, the electricity sector remains a work in progress, noting that there has been a record of increased generation capacity. “We still have challenges with the transmission and distribution networks. That said, I am pleased to announce that since 2015, the Transmission Company of Nigeria (TCN) and Niger-Delta Power Holding Company (NDPHC) have added 1,950 MVA of 330-132kV transformer capacity at 10 transmission stations, as well as 2,930 MVA of 132-33kV transformer capacity to 42 substations nationwide. With these additions, the transmission network today can handle up to 7,000 Mega Watts (MW).”
The president listed the challenges of the administration to include the distribution network where the substations cannot take more than 5,000 MW. “This is constraining power delivery to consumers. We are working with the privatised distribution companies to see how to overcome this challenge. Nigerians should rest assured that this administration is doing all it can to alleviate the embarrassing power situation in this country. To sustain the continued expansion of generation capacity and enhance evacuation, we approved a Payment Assurance Guarantee Scheme which enabled the Nigerian Bulk Electricity Trader (NBET) to raise N701 billion. This assures the generation companies of up to 80 per cent payment on their invoices. This intervention has brought confidence back into the sector and we expect additional investment to flow through, particularly in the gas production sector.”
Buhari restated his administration’s commitment to the development of Green Alternative Energy Sources, revealing that it has signed Power Purchase Agreements (PPA) with 14 solar companies. “The administration has also approved the completion of the 10 MW Wind Farm in Katsina State, a project that was abandoned since 2012; and the concession of six small hydro-electric power plants with a total capacity of 50 MW.”
And to enable the successful takeoff of these, and future green projects, he informed the lawmakers that the Federal Government would be launching the first African Sovereign Green Bond in December 2017. The bond, he disclosed, would be used to finance renewable energy projects.