President Buhari has forwarded the 2017-2019 Medium Term Expenditure Framework and Fiscal Strategy Plan (MTEF and FSP) for the National Assembly to consider ahead of 2017 budget’s presentation. The MTEF and FSP is a three-year planning tool that defines government’s economic, social and development objectives and priorities. It also details the strategies to achieving government’s defined objectives and highlights key assumptions behind revenue objectives, and articulates the nature and significance of government’s debts and measures to reduce such liabilities.
Presently, although the House of Representatives has communicated its intention to begin immediate debate on the matter, the Senate has faulted the document for failing to attach the following:
- The draft copy of the Medium Term Development Plan upon which the 2017-2019 MTEF was predicated on;
- A comprehensive report on the implementation of the 2016 budget as at 30th September 2016 (the document reports up until June 2016);
- The Appropriation Act as at the third quarter and,
- All fiscal taxes, charges used to derive the projected revenue in the 2017-2019 budget and;
- A report on the structure of the debt, funding, sources, how borrowed funds are to be spent as well as a repayment plan and schedule.
The Senate has invited the Minister of Finance, Mrs Kemi Adeosun and Minister of Budget and National Planning, Barr. Udo Udoma to forward the details prior to its appearance before its hallowed chambers and brief it on key areas of the budget.
Below are some of the highlights & excerpts of the 30-page document forwarded to the National Assembly:
Introduction
The document reveals that developments in the global and domestic economy, low oil prices, resurgence of militancy in the Niger-Delta and on going security concerns across parts of the country continue to pose substantial challenges in the Nigerian Economy. However it hopes that the government will utilize the public budget as well as other associated policies to create economic transformation.
The Implications of Global Developments for Nigeria:
The document outlines that the shocks in lower commodity prices, slow growth, regional disintegration among trading partners and volatility in global monetary policy flows as having consequential implications in Nigeria. It also highlights that Britain’s decision to leave the European Union (BREXIT) will potentially have a significant impact on Nigeria’s economy. Bilateral trade with the United Kingdom before BREXIT was valued at about six billion pounds.
Growth
The economy recorded negative growth of O.36% in the first quarter of 2016 compared to the growth of 2.11 % in the last quarter of 2015. The 0.26 negative growth rate recorded is Nigeria’s worst grate rate since 2004 and is partly attributable to the underperformance of oil revenues which constrained government’s investments in critical sectors as well as forex inflows that support non-oil sector activities. However, the government is optimistic that its appropriate policy responses will rebound the growth path in the right direction.
Inflation
This trended upward to 16.5% as at June 2016. It also attributed the pushing up of general price levels to the negative impact cost of imported goods, electricity tariffs, petrol prices and overall food prices which are driven by seasonal and non-seasonal factors.
Unemployment and Underemployment
The document admits the persistent rise in the growth of a predominantly young labour force yet inconsistently states that the level of underemployment rose to 19.1 % in the first quarter of 2016. The substantial constraint on the importation of some industrial inputs by the manufacturing sector was also highlighted as significantly contributing to unemployment levels.
Foreign Trade and Investment
The considerable decline in Nigeria’s foreign trade volume and Foreign direct and portfolio investments were attributable to the perception of uncertainty by investors.
Review of 2015 Budget Performance
Gross revenue was N3,753.55 billion ( about 30.9% less than projection). Gross non-oil revenue was N2,353.75 billion. The net oil revenue was N2,511.79) billion (N865.27 billion lower than the projections) while net non-oil revenue was N2,230.29 However, total inflow which accrued to FGN was N3,209.56 billion as N463.88 billion was generated into the TSA following the strict measures by the government to fully implement the TSA. However, as a result of the shortfall in revenue outturns and increase in expenditure provisions, the actual fiscal deficit for 2015 was N1,043.47 billion which was higher than the deficit for 2014 but within the limit of 3% of GDP stipulated by the Fiscal Responsibility Act 2007.
Review of 2016 Budget Performance
The projected revenue for 2016 budget was N3,855.74 billion. However, at the end of the first half of the year, total FGN’s retained revenue was N951.52 billion ( or 50.6% less than prorated projections). The shortfall was attributed to the underperformance of oil revenue and the Federal Government’s share in Company Income Tax being significantly less than the projections by N646.32 billion (or 85.8%) and N271.76 billion (62.7% respectively). However, it was observed that this could be due to the fact that most companies commence remittance of their income taxes from second half of the year. Thus, CIT performance is expected to pick up even as FIRS in 2016, added about N700,000 companies to the tax base and is projecting 10% year on year improvement in its collection efficiency. However, on the oil revenue side, the performance of the oil revenue at (406.03) billion was higher than prorated projection by 13. 2 %.
Value Added Tax
This is predicated on an estimated aggregate national consumption of N80.05 trillion for 2017 down from N91.96 trillion estimated for 2016. The VAT collections over the medium-term are currently based on maintaining the rate at 5% while focusing intensely on broadening the coverage. While VAT collection is projected to increase by about 42% in 2017, the VAT rate of 5% may be reviewed in due course.
Fiscal Strategy for 2017-2019
The Federal Government will drive policies that will foster macroeconomic stability by managing inflation downwards, provide critical infrastructure to lower the cost of doing business and a more predictable and market reflective exchange rate. The Government also plans to improve its planning and budget preparation and execution strategies and pursuing an aggressive non-oil revenue generation mechanism.
The government’s planning, budgeting and monitoring process will also be supported with the implementation of an automated Zero-Based Budgeting. This time, the budgeting process is being automated to minimise human interface and address glitches experienced in the first implementation of the ZBB. A robust monitoring and evaluation framework has also been instituted to ensure that projects and programmes are executed to deliver on economic priorities. Other strategies include improving the efficiency in public expenditure, working towards co-ordinated reform in oil and gas sector management, expanding government’s non-oil gas revenue base, continue with public management finance reforms that engender accountability and transparency, maintain fiscal discipline and ensure government borrowings are targeted to spending on critical infrastructure, intensify economic diversification efforts, attract private capital for infrastructure and improve governance.
Principles of the 2017 Budget
The principles of realism, credibility, allocative efficiency, strategic priority spending, fiscal deficit target, transparency and accountability and safety nets will be used to guide the 2017 budget.