Rollover will increase deficit–Expert
The Senate President, Bukola Saraki has said that Nigeria’s 2018 capital budget will increase to N10 trillion considering the Federal Government plans to roll over 60 per cent of capital budget in 2017.
This came on the heels of report that unless the country revenue base is expanded funding the 2018 budget will remain as tasking as the 2017 budget which is heavily depended on borrowing.
But Head of Economics Department Imo State University, Dr Ben Ekeanywu said that rolling over 60 per cent of the 2017 capital budget will further expand the budget deficit, which stood at N2.7 trillion in 2017.
The 2016 budget was rolled over to 2017. Ekeanywu said the 2018 budget will face the difficulties similar to the ones the current fiscal year is facing. According financing the budget will be difficult and would as well have heavy loan component.
“The 2017 budget has heavy deficit and loan component. With the roll over of over 50 per cent of the capital budget, it means that the fiscal year will have to content with landmines coming from this budget.” He criticised the heavy dependence of the budget on loans, saying the process of accessing loans takes a very long time.
“The process of securing loans is long and should be well planned out from the beginning of the fiscal year, but when the expected loan is too heavy, you start to wonder how government expects to complete the process within that short period.
“The implication is delay in reaching development goals, but if the infrastructure which the budget is meant for, gets the adequate funding it requires, the economy will get better in the long run,” he said.
Speaking, the Minister of Finance, Mrs. Kemi Adeosun said that meeting the backlogs of the 2016 budget and inability to access foreign loans are major impediments to funding of capital projects in the 2017 budget.
Adeosun said this while appearing before the Senate’ Joint Committee on Finance and Appropriation. The Senate had on September 26 summoned the minister to explain the reasons for inadequate release of funds for capital projects in the 2017 budget.
Giving statistics of spending in the 2017 budget so far, Mrs. Adeosun said her ministry has released N1.5 trillion as cumulative personnel cost, N128.8 billion as statutory transfer and N37.6 billion as redemption fund for pensions.
She further stated that the ministry has released N92.5 billion for overhead expenses, N223.6 billion for service expenses and N340.9 for capital projects.
Adeosun noted that the projects in 2016 budget rolled over to 2017 and thus, the Federal Government had to prioritise by spending on projects that are nearing completion.
She emphasised that the roll over from the 2016 budget and the inability to get approval from the Senate for foreign borrowing has delayed implementation of the 2017 budget.
Saraki denied that the Senate delays approvals for borrowing plans. She said: “The cost of domestic borrowing is extremely high and our interest rates are high, this compounds our debt servicing problems.
How we plan to resolve this is to borrow more from the international market because we get longer tenures and lower interest rates. According to her repositioning of the economy is going to take some time.
“So borrowing from the short term market or the Treasury bill at 18 per cent interest rate will be a disservice to our economy. It will compound the debt servicing.”
She noted that it would be extremely difficult for the government to meet obligations in capital budget, pointing out that there was N2.3 trillion deficits in the 2017 capital budget.
Adeosun, who noted that the 2017 budget was projected mainly on external borrowing, said making further capital releases would depend on how fast the government could push the borrowing process, adding that domestic borrowing would not be enough to fund the gaps in the budget.
She stressed that the cost of domestic borrowing was getting too high; noting that borrowing from foreign sources was far cheaper than domestic borrowing.
The Finance Minister stated that even if the funds were to be available, government cannot release the entire N2.177 trillion capital vote within the three months left in the year.
Meanwhile the Senate on Thursday considered and adopted the report of its Joint Committee on Appropriation and Finance over its meeting on Tuesday with the Minister of Finance, Mrs. Kemi Adeosun; and Minister of Budget and National Planning, Senator Udo Udoma, on the implementation of the 2017 Appropriation Act.
Part of the recommendations of the panel, which was approved by the chamber, was that if Nigeria would have a January to December budget cycle in 2018, the Federal Government must not roll over 60 per cent of capital projects in the 2017 budget as being proposed by the executive arm of government.
The upper chamber of the National Assembly also warned the Executive against the selective implementation of projects “under the guise of completing priority projects.”