Udoma explains how FG plans to fund 2018 Budget

 

The Federal Government on Thursday explained how the 2018 Federal Budget would be funded saying that the bulk of the funding would come from the expected increase in oil and gas revenue as well as other independent revenue strategies it plans to adopt during the year.

It believes that the growing uncertainty in the global oil market as a result simmering geopolitical tensions between some major oil producing countries, is expected to continue to drive upwards oil prices to the country’s advantage.

The Minister of Budget and National Planning, Udoma Udoma, said at the presentation of the details of the “2018 Budget of Consolidation” in Abuja that funding would also come from government restructuring of its equity holding in the oil and gas joint ventures, recovery of stolen assets, increased tax revenues and higher income from Nigeria Customs Service.

The Minister said the government expected about N866.2 billion, or 41.7 per cent of funding from oil revenues alone, with about 11.8 per cent of the funding would come from independent revenue sources.

Also, it expects about 9.9 per cent from joint venture oil and gas equity restructuring and 9.2 per cent from Corporate Income Tax (CIT).

Other funding sources, as explained by the Minister, include recoveries from stolen assets (7.2 per cent), Nigeria Customs (4.5 per cent), Value Added Tax (2.9 per cent), grants and donor funding (2.8 per cent), signature bonus (1.6 per cent), tax amnesty (1.2 per cent) and other sources (7.2 per cent).

He explained further that the overall deficit component of the budget, which amounted to about N1.95 trillion (about 1.74 per cent of the country’s gross domestic product (GDP), would be financed mainly by N1.6 trillion projected to come from borrowing.

Out of the figure, about N793 billion is expected to be sourced domestically, while about N849 billion would come from foreign sources.

Another N306 billion, according to the minister, would come from privatisation proceeds and additional N5 billion would be realised from the sale of other government property to finance the deficit.

The 2018 Budget, the minister said, was designed to consolidate on the achievements of the “2016 Budget of Change” and “2017 Budget of Recovery & Growth”, would advance the delivery of the goals of Nigeria’s Economic Recovery and Growth Plan (ERGP) 2017–2020.

Highlights of the N9.12 trillion Appropriation Act signed by President Muhammadu Buhari on Wednesday showed that about N2.01 trillion, or 21 per cent, would go for debt service, with provision to retire maturing bond to local contractors increased by 7 per cent, from N177 billion in 2017 to N190 billion.

Recurrent (non-debt) spending rose by 17 per cent, from N2.99 trillion the previous year to N3.51 trillion, while capital expenditure (excluding transfers) grew by 22 per cent, from N2.36 trillion in 2017 to N2.87 trillion (31.5 per cent).

Udoma said the government would adopt some key reform initiatives in the ERGP to increase revenues, namely deployment of new technology in revenue collection, upward review of tariffs and tax rates; stronger enforcement action against tax defaulters and improved efficiency in revenue performance by government agencies.

In addition, the minister said the government plans to cost recovery in lieu of previous cash call arrangement, apart from oil-related revenue including royalty recovery, new/marginal field licences, early oil licensing renewals, review of fiscal regime for oil production sharing Contracts (PSCs).

Revenues to be realised from the restructuring of the government’s equity in JV oil assets, he said, would be reinvested in other assets to grow the industry.

With the recent approval by the president of increased excise duty rates on alcohol and tobacco, Udoma said more revenues would be realised from there, while improved tax administration initiatives would also affect collection efficiencies across various tax categories, including the tax amnesty programme.

On the government’s approach to the 2018 Budget, the Minister said appropriation seeks to sustain the reflationary policies in the 2016 and 2017 budgets, which helped pull the economy out of recession in the second quarter of 2017.

“We plan to continue to spend more on ongoing infrastructure projects that have potentials for job creation and inclusive growth,” he said.

“We will continue to leverage private capital and counterpart funding for the delivery of infrastructure projects.”

On capital expenditure allocations in the budget, Udoma said the Federal Ministry of Power, Works and Housing will take about N682.96 billion; followed by transportation (N251.4 billion), defence (N157.7 billion), agriculture and rural development (N149.2 billion), and water resources (N147.2 billion.

Other capital allocations include industry, trade and investment (N105.2 billion), education (N102.9 billion), health (N86.5 billion), interior (N75.1 billion), science and technology (N68.3 billion), Niger Delta Affairs (N58.1 billion), and office of the Secretary of the Government of the Federation (N52.9 billion).