2019 Budget Unsupportive of Economic Growth – Experts


As Nigerians continue to relish last week’s passage of the 2019 Appropriation Bill into law by the Senate, some financial analysts have said the budget may not support the growth of the economy as expected.

The Senate had passed the budget last week after increasing it by N86 billion to N8.9 trillion, from the initial N8.8trillion the federal government had proposed to spend in 2019, while the projected revenue at N7 trillion and all budget assumptions were retained by the lawmakers.

But analysing the budget, analysts at Afrinvest (West Africa) noted that beyond unrealistic revenue estimates, their biggest worry was the federal government’s spending plans, which they said reflected lack of fiscal discipline and was unsupportive of growth.

According to them, spending to gross domestic product (GDP) was weak at 6.4 per cent, while capital expenditure was still below recommended levels.

“In 2019, total recurrent expenditure is projected at N6.9 trillion, crowding out capital spending which is 30 per cent of total spending. The recurrent expenditure is split between non-debt and debt at 67.4 per cent and 32.6 per cent respectively.

“An estimated 63 per cent of non-debt recurrent expenditure is to be spent on FG’s payroll, which is likely to rapidly expand by 2020 when adjustments are made to reflect the recently passed minimum wage of N30,000 per month. Considering our estimated revenue of N4.1 trillion in 2019, projected debt servicing is elevated at 54.9 per cent of revenue.

“Finally, the total recurrent expenditure to our 2019 revenue estimate is 168.3 per cent, suggesting that FG’s fiscal position is untenable. While the FG projects fiscal deficit at N1.9 trillion or 1.4 per cent of GDP, our estimates of N4.8 trillion and 3.4 per cent respectively shows that this is likely to be worse than expected,” they said.

The analysts added that petroleum subsidies remain a drain on the limited resources.
According to them, Nigerian National Petroleum Corporation (NNPC), about $2 billion was spent on “cost under-recovery” or petrol subsidies in 2018.”

“Our estimate of $2.6 billion and $4.4 billion at the official and I&E window exchange rates respectively suggest that the spending on subsidy is significantly more than estimated. The implication is that government revenues are weaker with subsidies, thus restricting spending on more productive areas of the economy.

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“The lack of sufficient investment in human capital is one area of concern. The FG continues to under-invest in health and education, further indicated by the allocation to the respective ministries at N50.2 billion and N47.3 billion in 2019, despite significant underperformance in human capital development indicators.

“With the removal of petrol subsidies, and taking the 52.7 per cent revenue sharing formula into consideration, we estimate the FG could access from N321.5 billion to N707.2 billion in more revenues,” they said.

Beyond the passage of the 2019 Appropriation Bill into law by the National Assembly, some economists and operators had called for strict implementation of the budget.

The analysts have also stressed the need for the federal government to return to the January- December budget cycle.

A former Director General of the West African Institute for Financial and Economic Management (WAIFEM), Prof. Akpan Ekpo, on his part, had called for closed monitoring of the budget implementation when signed into law by the president.

Ekpo said: “The problem with Nigeria is that we just allocate money, we don’t monitor the outcome. The main thing is to get the result of what you are putting money into.

“So, the allocation is no longer the issue, but budget implementation. For example, if, last year, money was allocated for security, how was it implemented? What did they buy for security? Was it properly utilised?

“Again, we are in the fifth month, and we are still talking about the 2019 budget. A budget is supposed to be a tool for macro stability. Once it is delayed for five months, it creates a lot of distortions in the economy. So, going forward, we need to return to the December-January budget cycle.”

The Director-General, Lagos Chamber of Commerce and Industry, Mr Muda Yusuf, had described the passage of the budget by the lawmakers as a welcome development.