Following Tuesday’s presentation of the 2016 budget estimates to a joint session of the National Assembly by President Muhammadu Buhari, some economic experts have expressed doubts over the ability of the Federal Government to fund the proposed budget.
The president had presented a N6.08 trillion budget for 2016 with recurrent expenditure of N2.65 trillion and capital expenditure of N1.8 trillion.
The budget, which is to be driven by a oil benchmark of $38 per barrel is based on projected revenue of N3.86 trillion and deficit of N2.22 trillion with the latter set to be financed through domestic borrowing of N984 billion, and external borrowing of N900 billion, totaling N1.84 trillion.
But some economic experts who spoke to Vanguard while hailing the budget proposal, expressed doubts over some aspects of the document, especially the ability of the government to generate the projected fund to finance the budget.
In his reaction, the Chief Executive Officer, SOFUNIX Investment and Communications Limited, Mr. Sola Oni, said “The key issue is how do we finance the budget so that it does not end up as a mere political campaign gimmick?”
Mr. Oni, who is also an Investment analyst added that “one fundamental approach is how the Federal Government can leverage on the robust platform provided by the capital market in Nigeria to bridge infrastructural gaps.
“If we are deviating from over dependence on income from crude oil, which its budgetary base price of 38 dollar per barrel has slumped to 36 dollar even before the approval by the National Assembly, it stands to reason that there are many rivers to cross in order to realize the potential benefits embedded in the budget”.
Financial Derivatives Company in its comment on the budget proposal expressed doubts over government’s ability to achieve a Capital expenditure spending of N1.8 trillion, which is 30 per cent of the total budget, if the government fails to achieve the projected revenue.
The company said: “The budget also clearly acknowledges current inadequacies in the supply of foreign exchange to Nigerians and its impact on traders and business operators who are hugely reliant on imported inputs. It also went as far as assuring Nigerians and foreign investors that the Central Bank of Nigeria will incorporate some flexibility to its foreign exchange management which will encourage additional inflows of foreign currency”.
On his part, David Adonri, Managing Director, Highcap Securities Ltd, said the 2016 budget appeared over ambitious for various reasons.
“The budget appears to me to be over ambitious because the crude oil revenue is dwindling very fast and the forecast is that it will dwindle further. Judging by the revenue the government collected since June up to date, the revenue has dwindled and allocation to states has also dwindled, I don’t see the reason why the budget should be higher than last year’s budget.
“Secondly, from my analysis so far, I don’t know how realistic it is that they are going to meet the revenue target. You can see that the revenue from crude oil sales is less than N1 trillion, and then the non-oil revenue which is about N1.5 trillion appears to be over ambitious.
“Then the balance which is going to come from budget deficit is the very worrisome aspect because N1.5 trillion projected as revenue from independent sources which are not stated was because of certain things they are going to do if they plug some holes here and there. That they can realise that N1.5 trillion appears to be subjective. And then that they plan to realise N350 billion from monies that will be recovered from corrupt politicians to the best of my knowledge is clouded in uncertainties.
However, two other economic analysts, Emeka Okolo and Higo Aigboje, looked at the 2016 budget from the area of implementation.
In their separate reactions, they said the budget looked good on paper, but if past experiences are anything to go by, its implementation may just be the problem.
Mr. Okolo, who is Managing Director, Molten Trust Limited said: “What I am concerned is that the budget should be implemented; we are no longer interested in discourse everyday again; we want implementation of the budget. On paper, it is good, but implementation is always the issue.
“I know that some will say that the main issue is that borrowing is too much, borrowing is not the issue. The main issue is to use the borrowing for what it is meant for, that is the bottom-line. If they can implement it faithfully, that is okay”.
Mr. Aigboje, Managing Director/Chief Executive Officer, Capital Bancorp Plc, reacted thus: “The 2016 budget is very positive if it is faithfully implemented and can bring about economic prosperity. Nigeria’s problem is not about budgets, but about the implementation process”.