Earlier, President Buhari presented the 2019 appropriation bill to the National Assembly. Expenditure and revenue estimates in the budget came in at N8.8tn and N6.9tn respectively, implying a deficit of N1.9tn.
A further breakdown of the proposed expenditure showed that non-debt recurrent spending, statutory transfers, and debt servicing account for c. 76.0% of the total proposed expenditure while the much needed capital expenditure (CAPEX) takes a paltry 23.0%.
From another perspective, the sum of all recurrent expenditure lines almost entirely offset the revenue target of N6.9tn, suggesting that CAPEX spending will be financed by debt. As in the 2018 budget, the 2019 budget is cloaked in lofty assumptions ranging from oil production target of 2.3mbpd (despite OPEC+’ cuts), an inflation rate of 9.9% (amid minimum wage expectations) and a GDP growth forecast of 3.0%.
Overall, the budget presentation draws our mind to the urgent need to not only diversify and grow revenue sources but to moderate cost of governance and judiciously boost allocation for CAPEX spend. Additionally, beyond proposing budgets, we believe effective implementation is of utmost importance, which is usually dragged by the late passage. However, as Nigeria heads into an election year, we do not expect a speedy passage of the appropriation bill.