President Muhammadu Buhari on Wednesday presented a budget proposal of N8.83 trillion for 2019 before a joint session of the National Assembly. The proposed budget is 3 percent lower than the N9.12trn Appropriation for last year. The 2019 budget, according to the president, is aimed at diversifying the economy and lifting significant numbers of the citizens from the present socio-economic challenges.
The 2019 budget estimate is based on oil price benchmark of USD60; crude oil production of 2.3m bpd, exchange rate of N305/$1; real Gross Domestic Product (GDP) of 3.01 percent and inflation rate of 9.98 percent. But the Governor of the Central Bank of Nigeria, Godwin Emefiele, recently averred that the average rate of inflation in 2019 will not be less than 13.5 percent.
While N4.04 trillion is for recurrent expenditure, N2.03 trillion is for capital development. Also, N2.14 trillion is voted for domestic debt servicing, N120billion is for sinking fund and N492.3bn for statutory transfers. The budget deficit has been projected to decrease to N1.86trn or 1.3 percent of the GDP in 2019, from N1.95trillion projected for 2018.
The reduction, according to the president, is in line with government’s plans to progressively reduce deficit and borrowing. He was, however, short on the practical details of how the government intends to achieve this in the budget. Critics of the budget believe that a sharp decline in revenue generation could be the biggest challenge the budget will face in meeting its objectives. For instance, the Federal Government could only meet 50 percent of its projected revenues in 2018, and this could get even less in 2019 due to the fall in oil prices in the international market, currently at below $60 per barrel.
Given today’s reality, we have doubts over a successful implementation of the 2019 budget. While the $60 oil benchmark is too optimistic, the crude oil production of 2.3m bpd looks somewhat unachievable, because at no time in 2018 did Nigeria achieve 2 million bpd. The highest level was 1.9m bpd, in spite of relative peace in the Niger Delta region.
Therefore, there is urgent need to go beyond the hollow rituals of budget presentation and work towards improving our budget processes. So far, our budget preparations have been rather tardy. Over the years, this tardiness has negatively affected the passage of the budget by the lawmakers before the president can assent it. This has invariably affected effective implementation of the budget, especially the capital component. This can explain why our budget has not achieved more than 30 percent implementation.
For instance, the capital component of 2017 budget was only 21 percent. That of 2018 is reported to be below 15 percent, because the National Assembly passed the 2018 Appropriation Bill in May, while the President gave his assent late June. There is fear that the 2019 budget may suffer a similar fate because of the 2019 general election. Our fragmented budgeting process does not align with the government’s annual spending plan. There is need to strengthen the linkage between plans and budgeting preparations in order to ensure effective implementation of the budget.
The Fiscal Responsibility Act 2007 requires the Medium Term Expenditure Framework (MTEF) to be ready before the NASS by the end of June. But it got to the Legislature on November 6, 2018. Besides, the government has reneged on its earlier plan to return the nation’s fiscal calendar to January – December cycle, promised by the President when he presented the 2017 budget. The President has also withheld his assent to the bill that would institute a definite timeline of budgeting.
The uncoordinated budget process by the government and allegations of budget ‘padding’ by the legislators, might negatively affect the implementation of the Economic and Recovery Growth Plan (ERGP) as well as the economic blueprint of the administration. We, therefore, call for speedy passage of the budget as well as its effective implementation.