Buhari Presents ₦8.612 Trillion Budget For 2018

President Muhammadu Buhari (C) presenting the 2018 Appropriation Bill before the Joint Session of the National Assembly in Abuja on Tuesday

●Deficit, debt servicing put at ₦2.005tr, ₦2.014tr ●Recurrent expenditure, capital projects take ₦3.494tr, ₦2.652tr ●Oil benchmark, exchange rate pegged at US$45 per barrel, ₦305/$ ●‘How we deployed ₦450b capital vote for 2017’

President Muhammadu Buhari yesterday presented to a joint session of the National Assembly a budget estimate of ₦8.612 trillion for the 2018 fiscal year.

The Guardian Nigeria report continues:

The key parameters and assumptions for the 2018 budget with a deficit of ₦2.005 trillion as presented include an oil benchmark of US$45 per barrel, oil production estimate of 2.3 million barrels per day, exchange rate of ₦305/$ for 2018, real Gross Domestic Product (GDP) growth of 3.5% and an inflation rate of 12.4%.

The proposed ₦8.612 trillion of the 2018 aggregate expenditure comprises recurrent costs of ₦3.494 trillion; debt service of ₦2.014 trillion; statutory transfers of about ₦456 billion, sinking fund of ₦220 billion (to retire maturing bond to local contractors) as well as capital expenditure of ₦2.652 trillion which is the 30.8% of the entire budget.

On revenues, the president said that the “total federally-collectible revenue is estimated at ₦11.983 trillion in 2018. Thus, the three tiers of government shall receive about 12% more revenues in 2018 than the 2017 estimate. Of the amount, ₦6.387 trillion is expected to be realised from oil and gas sources. Total receipts from the non-oil sector are projected at ₦5.597 trillion.”

President Buhari, however, disclosed that “the Federal Government’s estimated total revenue is ₦6.607 trillion in 2018, which is about 30% 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 ₦2.442 trillion as revenue from the oil sector while it expects ₦4.165 from non-oil as well as other revenues.

Buhari listed the non-oil and other revenue sources of ₦4.165 trillion as share of Companies Income Tax (CIT) of ₦794.7 billion, share of Value Added Tax (VAT) of ₦207.9 billion, Customs & Excise receipts of ₦324.9 billion, Federal Government’s Independently Generated Revenues (IGR) of ₦847.9 billion, share of Tax Amnesty Income of ₦87.8 billion and various recoveries of ₦512.4 billion, ₦710 billion as proceeds from the restructuring of government’s equity in joint ventures and other sundry incomes of ₦678.4 billion.

“It is expected that our fiscal operations will result in a deficit of ₦2.005 trillion or 1.77% 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 ₦1.699 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% 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%. 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 ₦555.88 billion for power, works and housing; transportation which is to get ₦263.10 billion; and special intervention programmes which will get ₦150.00 billion. Others are defence which has ₦145.00 billion; agriculture and rural development which takes ₦118.98 billion and water resources with ₦95.11 billion.

Buhari also said that industry, trade and investment would get ₦82.92 billion; interior to get ₦63.26 billion; education takes ₦61.73 billion; Universal Basic Education Commission will take ₦109.06 billion as health gets ₦71.11 billion.

Similarly, the Federal Capital Territory is to get ₦40.30 billion while zonal intervention projects will get ₦100.00 billion. The North East Intervention Fund has been allocated ₦45.00 billion just as the Niger Delta Ministry gets ₦53.89 billion and the Niger Delta Development Commission gets ₦71.20 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 ₦2.1 trillion was approved but ₦450 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 dualization 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 ₦100 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 1,950MVA of 330-132kV transformer capacity at 10 transmission stations, as well as 2,930MVA 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 5,000MW. “This is constraining power delivery to consumers. We are working with the privatized 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 ₦701 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 10MW 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 50MW.”

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.

Breakdown Of 2018 Budget Estimates

Budget size: ₦8.612 trillion (16 % higher than 2017 estimates)

Assumptions, projections
==================
• Benchmark crude oil price-US$45 per barrel
• Oil production estimate – 2.3 million barrels per day
• Exchange rate – ₦305/US$ for 2018
• Real GDP growth of 3.5%
• Inflation Rate of 12.4%

Expenditure Estimates
================
The proposed aggregate expenditure of ₦8.612 trillion (16% above 2017 budget estimate)
will comprise
• Recurrent Costs of ₦3.494 trillion
• Debt Service of ₦2.014 trillion
• Statutory Transfers of about ₦456 billion
• Sinking Fund of ₦220 billion (to retire maturing bond to local contractors)
• Capital Expenditure of ₦2.428 trillion (excluding the capital component of statutory transfers).

Recurrent Expenditure
=================
A substantial part of the recurrent cost proposal for 2018 is for the payment of salaries and overheads in key ministries providing critical public services such as:
• ₦510.87 billion for Interior
• ₦435.01 billion for Education
• ₦422.43 billion for Defence
• ₦269.34 billion for Health

Capital Expenditure
===============
Key capital spending allocations in the 2018 Budget include:
• Power, Works and Housing: ₦555.88 billion
• Transportation: ₦263.10 billion
• Special Intervention Programmes: ₦150.00 billion
• Defence: ₦145.00 billion
• Agriculture and Rural Development ₦118.98 billion
• Water Resources: ₦95.11 billion
• Industry, Trade and Investment: ₦82.92 billion
• Interior: ₦63.26 billion
• Education ₦61.73 billion
• Universal Basic Education Commission: ₦109.06 billion
• Health: ₦71.11 billion
• Federal Capital Territory: ₦40.30 billion
• Zonal Intervention Projects ₦100.00 billion
• North East Intervention Fund ₦45.00 billion
• Niger Delta Ministry: ₦53.89 billion
• Niger Delta Development Commission: ₦71.20 billion

Key projects and programmes to be implemented in 2018:
=========================================
• ₦9.8 billion for the Mambilla Hydro Power Project, including ₦8.5 billion as counterpart
funding
• ₦12 billion counterpart funding for earmarked transmission lines and substations
• ₦35.41 billion for the National Housing Programme
• ₦10.00 billion for the 2nd Niger Bridge
• About ₦300 billion for the construction and rehabilitation of strategic roads

Regional Spending Priorities for Peace, Security and Development
==============================================
• ₦65 billion for the Presidential Amnesty Programme has been retained in the 2018 Budget
• Capital provision for the Ministry of Niger Delta increased to ₦53.89 billion from the ₦34.20 billion provided in 2017
• Completion of East-West Road, with a provision of about ₦17.32 billion in 2018