Nigeria implements 21% of capital budget in 2017
The New Year is barely two weeks away and Nigeria’s Federal government has only achieved 21 percent of its planned annual spend on capital projects for this year, amounting to a deficit of N1.7 trillion.
As of December 15, only N450 billion had been released for capital projects, according to data obtained from the finance ministry, as against the N2.18 trillion that was budgeted for the full-year.
Despite being short of the budget by 79 percent, the N450 billion that has been released so far this year represents a 160 percent increase from the actual capital release of N173 billion in 2016.
Capital spending in 2015, 2014, 2013 and 2012 was however higher, at N601 billion, N744.4 billion, N587.6 billion and N958 billion respectively, according to data compiled by BusinessDay.
Kemi Adeosun, minister of finance, said some N750 billion would be released this week, according to local reports, which should take total capital expenditure to N1.2 trillion, 50 percent of the budgeted amount.
A Dec. 13 email seeking comment from the finance ministry was not replied.
Analysts say the late passage of the 2016 budget meant the amount allocated for capital projects in that year wasn’t completely disbursed until June 2017, which could explain the low capital releases from the 2017 budget.
According to an implementation report available on the website of the budget office, there were no capital releases from the 2017 budget in the first half of the year, given the previous budget still had some leg to run.
Despite this however, Taiwo Oyedele, partner and head of tax and regulatory services at consulting firm, Price Waterhouse Coopers (PWC), contends that the government should have still released the budgeted funds earlier than it did.
“Underperforming government revenue probably constrained the government’s spending power, but there were idle funds in the Treasury Single Account that could have used temporarily,” said Oyedele.
Reacting to the historic underperformance of the implementation of capital projects in Nigeria, Oyedele said “Capital budgets should be drawn with a four or five year timeline to allow for accountability, continuity and consistency.”
Unfazed by missed targets and a distorted budget cycle in the last two years, the Federal government aims to spend 21 percent more on capital projects next year, which comes to N2.64 trillion compared to N2.18 trillion in 2017.
Actual capital expenditure as a percentage of total expenditure slumped to a 5-year low of 3.9 percent in 2016.
In 2015, actual capital expenditure as a percentage of expenditure was 12.6 percent (N601 billion vs N4.77 trillion).
In 2014 and 2013, the percentage was 14 percent (N587 billion vs N4.12 trillion) and 21 percent (N958 billion vs N4.56 trillion) respectively.
In 2012, the percentage was 18 percent (N744.42 billion vs N4.13 trillion).
Pressed to spend its way out of economic recession, Nigeria resorted to expansionary budgets in 2016 and 2017, the latter hitting a record high (in naira terms) of N7.4 trillion.
While the country may have narrowly exited recession following two quarters of consecutive growth in the second and third quarters of 2017, the rebound is not significantly down to the government’s fiscal policies, but to recovering oil prices and production.
Nigeria is moving ahead with an expansionary fiscal policy in 2018 despite the failings of the 2016 and 2017 budgets.
The FG’s actual spending in 2016 was N4.396 trillion, which is only 72.5 percent of its expenditure plan of N6.06 trillion for the financial year under review.
In 2017, the government plans to spend N7.44 trillion, a 69.2 percent increase over 2016 expenditure.
As at the end of the second half of 2017, only N1.27tn was spent. This amount was for debt servicing and recurrent expenditure as there were no capital releases in the period.
The Federal government’s actual revenues were off target by some 60 percent or N1.5 trillion in the first half of 2017, as only N1.004 trillion was earned in the period.
The FG is looking at a total spending of N8.612 trillion in 2018, with significant resources allocated to infrastructure and other capital projects.
The proposed expenditure of N8.61tn in the budget is the largest thus far for Nigeria, in nominal terms.
The budget devotes N2.65 trillion or 30.8 percent of its total spending on capital items, while the remaining amount will be spent on recurrent items, if the budget is implemented as proposed by the Executive. The deficit size for 2018 is N2.005 trillion.
The FG hopes to close the deficit by selling some government properties, privatising some state owned enterprises and taking in more debt.
On the Recurrent expenditure side, Nigeria will be committing N2.014 trillion to Debt servicing while N220 billion is expected to be pooled into sinking funds, to retire maturing debt obligations.
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