This week, we turn our attention to the latest development around the passage of the 2019 appropriation bill. On Tuesday, local media reported that the upper chamber of the national assembly finally passed the 2019 appropriation bill after increasing the amount proposed by the executive last year November by ₦86 billion to ₦8.916 trillion. The chairman of the Senate committee on appropriation, Senator Danjuma Goje pointed that the increase was meant to provide more fund for security and intelligence agencies, as well as fund the severance benefits of outgoing lawmakers, their aides and other one-off costs.
While we agreed that the national assembly acted within its constitutional capacity in increasing the size of the 2019 appropriation bill, our concern hinged on the bloated impact of the new increase on the estimated budget deficit and increased need for borrowing.
Earlier in our note published on December 22, 2018, we had raised the flag on certain revenue assumptions of the 2019 proposed budget, which we believed were too optimistic for the government to achieve its revenue target if the deficit is to be tamed at ₦1.86 billion. For instance, the federal government projected total revenue of ₦6.97 billion in 2019, and this is expected to be realized from Oil revenue (₦3.73 trillion), Non-oil revenue (₦1.39 trillion) and Other revenues (₦1.85 trillion). We hinted that the Oil revenue target which was based on the assumption of the daily average production of 2.3MBPD and $60PBL can only be achieved if crude oil price rises above $80PBL given that Nigeria’s actual average output in Q4’18 (before the January 2019 OPEC cut) revolved around 1.7MBPD. On the other hand, we averred that Non-oil revenue target will likely suffer some setback due to the slow growth of the real sector.
Hence, with the new budget size increase coming at a time two of Nigeria’s oil majors – Aiteo and Total declared force majeure over the recent fire incidence which affected the Nembe Creek Trunk Line on April 21, 2019, we believe more doubt is cast on the achievability of the revenue target for the 2019 budget.