President Muhammadu Buhari, last week presented the 2018 Budget estimates to a joint session of the Senate and the House of Representatives. The presentation came a week later than the deadline the government gave itself to present the N8.612 trillion budget, which is N1.7trn or 16 per cent higher than the N7.44trn appropriated in 2017. From the N8.612trn proposed expenditure for 2018, N3.494trn is for recurrent costs, while N2.652trn is earmarked for capital expenditure. Debt servicing will gulp N2.014trn, and statutory transfers, N456bn. The N2.014trn provision for debt servicing is 30 per cent of total revenue.
It is fitting to note that the president nevertheless, explained that the increased statutory transfers arose from higher transfers to the Niger Delta Development Commission, NDDC and the Universal Basic Education Commission, UBEC on account of increased oil revenue. This clearly shows the direction the government is going. More allocation for education at the basic level could not have come at a better time considering the commotion that Kaduna State government and teachers are having presently. The same goes for the Niger Delta area. NDDC is being allocated the largest money for the first time since its creation. This is good to keep activists, communities and even militants at bay.
The proposed budget has a deficit of N2.005trn, which is a drop from the N2.36trn in the 2017 Budget. Other key assumptions of the estimates include crude oil benchmark of $45 per barrel, oil production estimate of 2.3 million barrels per day, mbpd, and an exchange rate of N305/$, the same as in the 2017 Budget. A breakdown of the budget shows that the Ministry of Power, Works and Housing was allocated N555.88bn, followed by Transport and Defence, with N263bn and N145bn, respectively. Others are Agriculture and Rural Development, N118.98bn, Water Resources, N96bn, Education, N61.73bn, and Health, N71bn.
But how will the government fund the estimates? The President says for instance, the deficit will be funded partly by new borrowings estimated at N1.669trn, stating that “50 per cent of this borrowing will be sourced externally, while the balance will be sourced domestically.” The balance of the deficit of N306bn, he said, would be financed from proceeds of the privatisation of some non-oil assets by the Bureau of Public Enterprises, BPE. Government will also partly fund the budget with N500bn recovered loot, according to the Chairman, Presidential Advisory Committee Against Corruption, Prof Itse Sagay, although the Minister of Finance and the Budget and National Planning Office have not confirmed this. Nonetheless, the President has assured the people that his government is monitoring the debt service to revenue ratio, over which many analysts have expressed concern.
Overall, the 2018 Appropriation is not much different from the 2017 Budget. On paper, the restoration of the January-December budget cycle is good, if the presidency and the legislature can work in harmony. It will be good for planning purposes, both in the public and private sectors of the economy. In that regard, the legislature, which has shown a lot of maturity and willingness to cooperate with the executive is encouraged to do its job but nonetheless fastrack the passage. The dividends of early passage cannot be over emphasised.
With the Ministries of Power, Works, Housing and Transportation getting the lion’s share of the budget, Nigerians expect to see considerable infrastructural development, with focus on roads, railways, power and water projects, the Ibadan-Ilorin expressway, the Ilorin-Jebba road, the much-anticipated second Niger Bridge and the Lagos-Ibadan standard gauge rail line to the Apapa and Tin-Can Island Ports, which handle over 70 percent of export/ import cargoes in the country among others should be priorities next year.
More importantly, both the National Assembly and the executive must ensure that outstanding funds from 2017 budget, which have not been utilised owing to limited time must be utilised next year. There should not be any lag in implementation of the capital component of that budget. As we are aware, first quarter of next year is the best window for road works, thus funds must be made available for the projects to continue. With the 2019 elections beckoning, the implementation of the 2018 Budget is a defining one for the Buhari administration. Its prompt passage and effective implementation will help to boost the confidence of investors in the economy and in Buhari’s administration.