2017 budget: FG to settle N2trn contractors’ debt

ALTHOUGH Federal Government’s projected capital spending of N2.24 trillion for 2017 is a nominally significant increase over the N1.75 trillion for 2016, the current budget is actually bigger than that of 2017 in real terms.

According to Minister of Budget and National Planning, Senator Udoma Udo Udoma who gave detailed breakdown of the 2017 budget projections in Abuja on Monday, the N1.75 trillion for 2016 is an equivalent of $30.76 billion while the N2.24 trillion 2017 projection is just $23.80 billion.

This is as a result of depreciation of naira from around N190 to N305 upon which the 2017 budget projections are made.

However, there is cheering news for local contractors who have been owed significant amount of money for many years as there is a projection of N2 trillion bond issuance contained in the budget estimates for 2017 specifically to settle part of their debts.

“The largest capital allocation goes to the Federal Ministry of Power, Works and Housing, allocated N564 billion (7.7%) or 25% increase over 2016 estimate.

“To address contractors’ liabilities the Federal Government intends to issue over N2 trillion worth of bonds to clear outstanding contractors’ liabilities.

“These bonds would have a 10-year maturity and the amortization is expected to begin in 2018. With regards to existing liabilities on bonds which were issued to contractors by past administration, we have set aside the sum of N177.46 billion in the 2-17 budget as a sinking fund to retire the maturing bonds.

“The second largest capital allocation is for the Ministry of Transport, which has the sum of N277 billion”, Udoma disclosed.

Based on the key assumptions and budgetary reform initiatives, the 2017 Budget envisages a total FGN revenue of N4.94 trillion, exceeding FY 2016 projection by 28%.

The Projected revenue receipt from oil is N1.985 trillion and Non-oil is N1.373 trillion.

On revenue projection, Udoma explained that contribution of oil revenue is 40.2% compared to 19% in 2016 driven mainly by JVC cost reduction, higher price, exchange rate and additional oil related revenues.

“The overall projected budget fiscal deficit of N2.36 trillion for 2017, which is about 2.18% of GDP.

“This is within the threshold stipulated in FRA.  The budget deficit is to be financed mainly by borrowings which have been projected at N2.32 trillion.

“Of this amount, N1.067 trillion (46% of this borrowing) is intended to be sourced externally, while N1.25 trillion will be sourced domestically. The debt service to revenue ratio is projected to be about 33.7% in FY2017.”

The Minister said that by setting aside N2.24 trillion (inclusive of capital in statutory transfers), which is 30.7% of the total budget for capital expenditure, the objective, as set out in the SIP, of devoting at least 30% of the budget to capital expenditure has been achieved.

Some of the new initiatives introduced in the 2016 budget include a new Social Housing Programme for which N100 billion was provisioned.

Also N50 billion was set aside for Special Economic Zone Projects to be set up in each of the geo-political zones to drive manufacturing or exports.

Government has also restored the suspended Export-Expansion Grant (EEG) with provision of N20 billion voted in the form of tax credit.

Another sum of N15 billion was set aside for recapitalization of Bank of Industry (BOI) and Bank of Agriculture (BOA) to support Micro, Small and Medium Scale Enterprises (MSMEs)

“These new initiatives will support economic diversification and inclusion in our growth-drive”, he stated.

According to him, President Muhammadu Buhari has constituted a cabinet committee to raise additional revenues from oil and other sectors to support the funding of the 2017 budget.

He added that the report of the committee would be ready in time for the National Assembly to take into account while considering the budget, next year.

“We should not allow ourselves to be discouraged by those who say we can’t find the money to fund the spending required to implement this budget. We must, and we can, find the resources. We will challenge our revenue generating agencies, particularly the FIRS and Customs to improve their efficiencies and broaden their reach so as to achieve the targets set for them in the 2017 budget.

“Indeed, a cabinet committee has been set up by President Muhammadu Buhari to come up with innovative and creative ways to raise additional revenues from the oil sector, and other sectors, to support the funding of the 2017 budget.

“The president is determined that we must find the resources; we must fund this budget; we must implement this budget; we must exist recession and we must move back on the path of growth.

“The report of that committee will be ready in time for the National Assembly to take this into account in considering the budget in the New Year, when they return from their Christmas recess.’’

Also, the minister of State for Budget and National Planning, Mrs Zainab Ahmed, said the ministry would present the monitoring and evaluation report of the 2016 budget to the Federal Executive Council (FEC) in January 2017.

Ahmed said this at an interactive session with  some stakeholders on the performance of the 2016 budget, at the Public Presentation of the 2017 Budget Proposals in Abuja on Monday.

The minister also said that the implementation plan for the 2017 budget would be approved by the National Assembly together with the 2017 budget proposals.The Recurrent non-debt expenditure of N2.98 trillion is made up of:

1. Personnel costs – N1.86 trillion (63%)
2. Overhead – N229.81 billion (7%)

iii. Service-Wide Vote pensions – N89.98 billion    (3%)

191. Consolidated Revenue Fund Pensions – N191.63 billion (6%)
192. Other Service -Wide Votes – N116.50 billion (5%)
193. Presidential Amnesty Programme -N65 billion (2%)

vii. Refund to Special Accounts – N50 billion, (2%)

viii.    Special Intervention Prog. (recurrent)     – N350 billion    (12%)

The largest recurrent allocations are for the following four MDA’s namely:

482. Ministry of Interior – N482.37 billion;
483. Ministry of Education – N398.01 billion;

iii. Ministry of Defence                 – N325.87 billion;

252. Ministry of Health – N252.86 billion.

(i)    A new Social Housing Programme of N100 billion provisioned for a new Social Housing Programme towards a N1 trillion fund

(ii) Special Economic Zone Projects of N50 billion for Special Economic Zone Projects to be set up in each of the geo-political zones to drive manufacturing/exports

(iii)Export-Expansion Grant (EEG) N20 billion voted for the revival of EEG in the form of tax credit

(iv)Recapitalization of Bank of Industry (BOI) and Bank of Agriculture (BOA)of    N15 billion provisioned to support these development finance institutions to support Micro, Small and Medium Scale Enterprises (MSMEs)

34. These new initiatives will support economic diversification and inclusion in our growth-drive.

N1.047 trillion is dedicated to key infrastructural spending, made up as follows:

1. Power, Works and Housing: – N529billion;
2. Transportation: – N262 billion;

iii. Special Intervention Programmes: – N150 billion.

1. Defence: – N140 billion;

v.Water Resources:                     – N85 billion;

1. Industry, Trade and Investment: – N81 billion;

vii.  Interior: – N63 billion;

viii.Education – N50 billion

ix.Universal Basic Education Commission-N92billion

1. Health: – N51 billion
2. Federal Capital Territory: – N37 billion;

xii. Niger Delta Ministry:                             – N33 billion;

xiii.   Niger Delta Development Commission-N61 billion

xiv. Agriculture – N91 billion.