Govt To Formulate Template For Future Fiscal Policies

As Buhari Begins Work On 2016 Budget

PRESIDENT Muhammadu Buhari has initiated plans for the formulation of a three-year Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP), which will henceforth form the template for future national fiscal policies.

The MTEF consists of a macroeconomic framework that indicates fiscal targets and estimated revenue and expenditure, including government financial obligations in the medium term.

The documents also set out the underlying assumptions for these projections, provide an evaluation and analysis of the previous budget and present an overview of consolidated debt and potential fiscal risks.

Sources in government said government said the President, last week, directed heads of revenue generating agencies; Federal Ministries of Finance; National Planning Commission, the Central Bank of Nigeria as well as the Budget Office of the Federation to meet with the Vice President, Prof. Yemi Osinbajo to fashion out the Federal Government’s three year fiscal plan.

Authoritative sources at the Federal Ministry of Finance said the agencies have been briefing the Vice President since last week, with a view to producing the Fiscal Strategy Paper and the MTEF, which would in turn produce the key budget assumptions like the expected crude oil volume; benchmark price; the exchange rate; inflation; expected revenue and deficit among others.

The briefing has gone far and I am sure a realistic MTEF will soon be produced even before the assumption of a Finance Minister so as to shorten the delay in the presentation of the 2016 spending plan. Don’t forget that the MTEF and the FSP are supposed to receive the approval of the National Assembly first, because it is the basis upon which the real budget is formulated, the source said

Continuing, he said, “Feelers from the briefing also indicated that following the inability of the government to realise its revenue projection, President Buhari may have decided against a supplementary budget. Instead, the source said government might be eager to manage the situation and focus on a more realistic projection in the 2016 spending plan.”

This year’s budget projection, which has remained unrealistic due to the drop in crude oil prices, is based on assumption that oil production would remain at 2.2782 million barrels per day and at a benchmark oil price of $65/barrel, while GDP growth rate was expected to remain at 5.5 per cent. It was thought also that exchange rate would be N165 to the US Dollar; non-oil revenue (including non-Federation account) would rise to about N1,684.63 billion. Those who drafted the fiscal policy assumed that fiscal deficit would be N755 billion (or 0.79 percent of GDP); and that Domestic Borrowing of N570b would be reduced from N571.9 b in 
2014.”

The immediate past Finance Minster, Dr. Okonjo Iweala, while presenting the spending plan last December 17, said, “the $65pb represents a $13 drop per barrel from the $78pb (i.e., about N142 billion of FGN budget revenue) originally proposed to the National Assembly. To partly make up for this, we have taken steps in this Budget to introduce some short-to-medium term revenue and expenditure measures. Most of these measures are designed to kick-in towards the beginning of second quarter of 2015 and will considerably boost the ratio of non-oil revenues to oil revenues.”

She declared that the 2015-2017 MTEF was prepared and transmitted to the National Assembly (NASS) early in September 2014, adding that the oil prices started to fall as the Economic Team was gearing to have the 2015 Budget presented to the NASS in October shortly after transmitting the MTEF.

But crude oil prices have continued to oscillate between $45 and $48 per barrel since then. This is below the approved budget benchmark, thus affecting the 2015 budget implementation.

Meanwhile, in the last one year, only a little had been done to upgrade living condition of the citizens in terms of funding of key infrastructure such as roads, potable water, provision of health facilities, provision of qualitative education and sundry services, which come under the Capital votes in the fiscal policy of last year

In fact, in the last one year, only N55b has been released to finance key element of the budget. The last quarterly capital releases were made in the third quarter of last year, sometimes around August, yet the report of how those funds were spent is yet to be produced by the Budget Office of he Federation.

According to the Permanent Secretary in the Federal Ministry of Finance, Mrs. Anastasia Daniel-Nwaobia, who has been acting in the absence of a substantive finance minister, only about N55b has been released, so far, for the financing of capital votes out of an approved sum of N2.607 trillion.

The Permanent Secretary, who was represented by the new Director General of the Budget Office, Alhaji Aliyu Gusau, at a hearing on the implementation of the 2015 by the House of Representatives, said that within the same period, though there has been shortfall in revenue projection, her ministry was able to fund nearly 100 per cent of the recurrent portion of the budget through additional borrowing of N882b to meet up with its financing requirement as well as debt servicing.

Accordingly, she said the sum of N1.24t has been released as recurrent and another sum of N782.57b for debt servicing, none of which is for capital projects but for consumption by officials of government, the full cost of which is to be borne by ordinary Nigerians, Including the unborn.

On the revenue performance, she noted that of the N3.45 trillion that was appropriated, only N1.74t had been realised as at September, while N944.76 the N1.8t budgeted for personnel cost in the recurrent budget was released as at the second quarter of 2015.

\