Posted On: Mon 19 Jun 2017 By NATIONAL ACCORD NG
Minister of Budget and National Planning, Senator Udoma Udo Udoma, has indicated that government will work hard to increase revenues so as to be able to fund the Budget.
Senator Udoma also said that in spite of criticisms about government borrowings, the country’s fiscal deficit is still well within the three per cent (3%) limit and government is keeping very tight control on the size of the budget to make sure the fiscal deficit remains within the 3% threshold.
The Minister who was speaking at the 2017 breakdown session said although certain developments affected the realization of projected government revenue last year, the administration is working hard to ensure increase in revenues to fund the 2017 budget.
“In terms of implementation of the Budget, we are making strenuous efforts to find the resources required. We are challenging our revenue generating agencies, particularly the (Federal Inland Revenue Service) FIRS and Customs, to improve their efficiencies and broaden their reach so as to achieve the targets set for them in the 2017 Budget”, he explained.
He added that government will strive to maximize the revenues it can generate from the oil and gas sector as it is clear that the foreign exchange generated from the sector is critical for government’s plans to diversify to the non-oil sectors.
As government is introducing measures to improve on the efficiencies in that sector to increase Government’s take, the Minister said “we are also engaging more extensively with the communities and people of the Niger Delta to minimize disruptions to oil production”.
Reviewing the 2016 Budget performance, Senator Udoma said there was reasonable progress on implementation and achievement of set targets even though aggregate revenues was less than projections, mainly due to disruptions in oil production in the Niger Delta region.
The developments in the oil sector, according to him, adversely impacted oil revenues and foreign exchange receipts, and also negatively affected non-oil revenues as non-oil activities are critically dependent on the foreign exchange generated by the oil sector.
“As at year-end, FGN’s 2016 actual revenue was N2.95 trillion (76.4% of the N3.85 trillion budgeted). Oil revenue was N697.8 billion (97.2% of budget); Company Income Tax (CIT) and Value Added Tax (VAT) collections were N457.91 billion and 108.72 billion respectively, representing 52.8% and 54.8% of amounts budgeted; while Customs collections of N247.42 billion implied a 63.6% performance, he explained.
Despite the shortfall in revenue, he said government met its debt service obligations and personnel costs while overhead costs were largely covered.
He pointed out that although capital expenditure suffered because key recurrent spending like debt service and payment of salaries had to be met first, the amount of N1.22 trillion released for capital under the 2016 budget remains the highest aggregate capital releases for a single fiscal year for Nigeria. “This was achieved despite the lower oil prices and revenue shortfalls, which underscores the government’s commitment to investing in critical infrastructure”, he noted.
The Minister explained that in designing the 2017 Budget, certain critical international factors that affect Nigeria as a country were considered, including the protracted period of lower oil prices, major macroeconomic realignments in China, increasing divergence in monetary policy in major economies, uncertain economic, political and institutional implications of BREXIT, weak demand in advanced economies and its spill-over effects; and geopolitical tensions in several countries.
On the domestic front also, the budget had to be designed at a critical time when the economy was experiencing contraction in growth (-2.06% in Q1 2016, now -0.52% in Q1 2017), insurgency and Insecurity parts of the North East, crude oil theft and pipeline vandalisation, foreign Exchange (FX) scarcity and Exchange rate tension.
External reserves were down to US$26.59 billion in May 2016 but now about US$30.28 billion, high Unemployment rate (from 13.9% as at Q3 2016 to 14.2% in Q4 2016), and inflation (18.55% as at December 2016, 16.25% as at May 2017), he added.
The Economic Recovery and Growth Plan (ERGP), which was launched early this year, is meant to address these economic challenges. The Minister pointed out that although the 2017 Budget was prepared before the finalisation of the ERGP, it drew extensively from the policies set out in the ERGP.
He explained that the 2017 Budget reflects “our fiscal plan to restore the economy to the path of sustainable and inclusive growth, the specific goals and targets of which are set out in the 2017 – 2020 Economic Recovery and Growth Plan (ERGP)”.
The Minister said the 2017 Budget is an infrastructure Budget and government takes transportation very seriously, which is why so much has been voted for roads and railways.