FG Revises MTEF, Fiscal Deficit Now N2.05tn

•  Senate postpones budget debate, to pass MTEF

Damilola Oyedele and James Emejo in Abuja

The federal government has revised the 2018-2020 Medium Term Expenditure Frame work (MTEF) with adjustments resulting in the downward review of the fiscal deficit to N2.05 trillion from almost N3 trillion.

The latest assumption projects N710 billion to be generated from the restructuring of government equities in all the Joint Venture oil assets, and N360 billion additional revenue from revision of terms to improve government take in the production sharing contracts.

The figures and others adjustments contained in the revised document were presented by the Minister of State for Budget and National Planning, Mrs. Zainab Ahmed at a meeting with the Senate and House of Representatives Joint Commitee on Finance and Appropriation, yesterday.

Other projections are additional N60 billion from Excise Duties on Cigarettes and Alcohol, N305 billion as additional Company Income Taxes expected to result from the Voluntary Assets and Income Declaration Scheme (VAIDS) and N100 billion from improvements by the Federal Inland Revenue Service (FIRS) in the collection of Value Added Tax (VAT).

It also includes N2.5 billion from special taxes on insurance of luxury cars as well as surcharge on luxury goods, and N250 billion provision as unspent balance carried forward from 2017.

“Following the above, the fiscal deficit is now N2.05 trillion, down by over N940 billion, also pushing the debt/GDP ratio downwards from 2.06 per cent to 1.77per cent,” Ahmed said.

She explained that the revision is an outcome of the work of a committee constituted by the Federal Executive Council, after it had approved the MTEF/GDP.

The committee, chaired by the Minister of Finance, Mrs. Kemi Adeosun, identified additional sources of about N1 trillion revenue to cut the 2018 budget deficit and new borrowings, she said.
The new figures formed the basis of the 2018 budget proposal, Ahmed added.

The 2018 N8.612 Appropriation bill is based on benchmark oil price of US$45 per barrel, oil production estimate of 2.3 million barrels per day, including condensates, exchange rate of N305/US$ for 2018, real GDP growth of 3.5 per cent and inflation rate of 12.4 per cent.

The Minister said with the recent approval of $2.5 billion Eurobond for funding of the 2017 capital budget, spending will be increased in the next couple of weeks.

In her summary of the 2017 budget performance with Actual as at the third quarter of 2017, Ahmed put capital spending at N450 billion indicating 47 per cent, and an expenditure total at 87 per cent, as recurrent expenditures generally run ahead of the budget.

Oil production has averaged 1.9 mbpd as against the projected 2.2mbpd at $52 per barrel.
“FGN (Federal Government of Nigeria) oil revenues and customs revenue performed almost to target, oil revenues amounted to N1.6 trillion vs N1.6 Q3 prorata budget,” she added.

“We have met our debt service obligations and have continued to pay salaries duly, including gradual liquidation of arrears of personnel emoluments going back to 2012,” the minister told the committee.
The Director General of the Budget Office, Mr. Ben Akabueze, said the budget proposal is benchmarked on oil price of $45 per barrel, even though crude currently sells at an average of $60 per barrel, to ensure there is a buffer to cushion any eventuality in price drop.

He added that the assumptions are not unreasonable.
The committee members however said the assumptions are unrealistic and unreasonable in some instances.
The Chairman of Senate Committee on Finance, Senator John Owan, said capital budget of N2.482 trillion in the 2018 budget is too little to reflate the economy in a country just getting out of recession.

“I think there is a problem really because first, why don’t we have anything on interest rates as part of the MTEF, that is the first thing to even talk about the union; allowing the monetary and the fiscal to be balanced?,” he said.

“The other issues are, what is the implication of overspending the prorated amount that you are expected to have spent? You talked about spendings from January to September; will come with a supplementary budget if you are to spend more money than the approved budget,” Owan added.

Meanwhile, the debate for the consideration of the 2018 budget proposal in the Senate has been postponed to next week.
It was earlier scheduled to hold today and tomorrow.
The President of the Senate, Dr. Bukola Saraki yesterday said the postponement is to allow for the passage of the MTEF/FSP which could be laid today, Wednesday.

Also, the House of Representatives will today commence debate on the general principles of the 2018 MTEF which was submitted before it by the executive.

Its eventual passage would pave the way for consideration and likely passage of the N8.6 trillion 2018 Appropriation Bill which is expected to be debated on the floor from November 28-30.
A public hearing on 2018 budget is slated for December 4.

Deputy Speaker of the House, Hon. Sulaimon Yussuff Lasun, made the announcement while presiding over plenary.
He charged members to avail themselves with copies of the 2018 appropriation as presented and laid by President Muhammadu Buhari to the parliament.

According to him:”Members are to indicate the date they wish to contribute to the debate as there is need for us to participate actively and that the bill is given expeditious attention.”

The commencement of deliberations of the appropriation raises the likelihood that the budget may be passed by the end of December to allow for its implementation starting from January 1, 2018 as requested by Buhari.
Yet, it would be too soon to predict an easy passage as there could be controversies lurking around deliberations.