2016 budget: FG releases N753bn to MDAs

As DMO says $29.9 loan is to address infrastructure deficit

Kemi Adeosun, Minister of Finance and Senator Udoma Udo Udoma, Minister of Budget and Planning.

The Federal Government has so far released a total of N753,633,667,464 to Ministries, Departments and Agencies out of the 2016 budget.

A release by the Ministry of Finance on Tuesday showed that this was the sum released by the government as of October 31.

This represents 11 per cent of the N6.8trillion budgeted by the government for the year.

According to the release, the highest allocation of N312,511,048,789 went to ‘others’, for which no breakdown was provided.

This is followed by Ministry of Power, which has so far been allocated N209,246,760,165 and Defence which got N69,512,363,730.

Other allocations are Transport, N30,540,042,428; Water Resources, N25,201,857,951; Interior, N21,210,059,596; Health, N18,472,539,524; Health, N18,472,539,524 and Education, N16743,672,981.

The Ministry of Niger Delta got N8,161,196,486; Science and Technology N6,861,349,721; Mines and Steel N3,360,000,000; and Petroleum N2,413,847,044.

The budget, which had a crude oil price benchmark of N38 per barrel and an estimated daily crude production of 2.2million barrels, also had a deficit of N2.22trillion which the government planned to finance through local and multilateral loans.

Although the price of crude has rallied above the $38 benchmark, the country has been finding it difficult to meet its crude production target because of the activities of militants in the Niger delta region.

This has negatively impacted the ability of the government to raise revenue to finance the budget. It has consequently resorted to raising loans to finance the budget.

While efforts are on to get loans from multilateral agencies such as the World Bank and the African Development Bank, the Senate on Tuesday turned down a request by the Federal Government for a $29.9billion loan to finance critical infrastructure between 2016 and 2018.

Meanwhile, the Director General of the Debt Management Office (DMO), Dr. Abraham Nwankwo, on Tuesday, provided clarifications on the proposed $29.9bn foreign loans request submitted to the National Assembly by President Muhammadu Buhari last week.

The DG, while speaking on a Channels TV, explained that the loans, which cover a period of three years, would help in addressing the biting infrastructure deficit in the country.

According to him, “When you are in this kind of economic situation, you have to decide where you want to start addressing the problem. You then come to the conclusion that the most critical point to start is to deal with infrastructure problem. If you deal with infrastructure problem, the cost of power will be lower, the cost of transportation will be lower, and the cost of most other services will be lower.”

According to him, one of the features of the proposed loan is the low concessionary nature of the interest rate,  which has an average interest rate of 1.5 per cent. This arrangement differs from previous loan arrangements with the Paris Club of creditors, which came with floating interest rates as high as 18 per cent.

He also explained that the facility will help revive infrastructure like railways which will smoothen movement of heavy goods across the country.

He stressed that tackling infrastructure deficit would force down costs of goods and services on the long run, explaining that the development will have a significant impact on the price level in the economy.

“That impacts the economy by bringing down the general price level, (they call it the consumer price index, which is a classical measure of the price level and the rate of inflation.) When you do this, the Central Bank of Nigeria will set the monetary policy rate low, because all over the world, the central bank knows it has to put the monetary policy rate high enough to catch up with inflation rate, otherwise we will be talking of negative real rate of interest which destroys the economy. So the way to go about it is that you have adequate infrastructure, power road, transportation ICT. All these make the cost of production in the economy much lower and when this happens, the cost of goods and services will be lower and then inflation will start coming down. And if inflation comes down, the monetary policy rate will be lower and this will translate to a lower lending rate. That is the sequence,” Nwankwo explained.