They have come again! The Minister of Finance, Ngozi Okonjo Iweala last week presented the 2015 Federal Budget. The budget which was much anticipated in the light of the slump in crude oil prices and the propsed ‘austerity’ comprise of the following.
The FGN 2015 Budget has an Aggregate Budget Revenue of N3.602 trillion
Made up of: oil revenue of N1.918 trillion and non-oil revenues of N1.684 trillion (implying a ratio of 53% oil revenues to 47% non-oil) .
Aggregate Budget Expenditure of N4.358 trillion is proposed for 2015 Budget, which is about 8% less than in 2014 budget
This expenditure figure is made up of N412 billion for Statutory Transfers, N943 billion for Debt Service, N2,616 billion for Recurrent (Non-Debt) and N634 billion for Capital Expenditure (inclusive of SURE-P).
The budget also proposes a “luxury tax” which they hope will help generate a meager N10 billion. The Minister of Finance also used the opportunity to give an update on the performance of the current 2014 budget (which I agree was passed very late). Here is what she said
“we faced a quantity shock in the sense that the oil produced averaged about 2.2mbpd in the first three-quarters of 2014 (target was 2.39mbd)…..The effect of these quantity shocks is further compounded by the more recent price shock with prices crashing from 114 dollars per barrel earlier in June to about 58 dollars per barrel now.“ This is below this year’s bench mark price of 77.5 dollars per barrel and has resulted in a fall in this year’s budget target of N3.73 trillion. As at the end of October, total revenues were about N2.72 trillion ….We will not know the extent of the shortfall until we close our books for this year but it is obvious that the trend is less,’’ NOI
On Capital Expenditure.
“ In the third quarter we could not cash back a N100 billion of third quarter capital and we have not been able to release fourth quarter capital.Nevertheless, we have managed to keep most of our priority projects going with the support of SURE-P resources. Of the N1.12 trillion in the budget for capital, the sum of N610 billion has been released but we were only able to cash back 465 billion of this amount. And about 84 per cent has been used by MDAs as at the end of October.”
What she however, failed to say was that since this Government was elected in 2011 they have never met their budgetary revenue expectation and have never met their budgetary capital expenditure. For economic and political neutrals in this very polarized country, it is quite frustrating when you hear policy makers repeat the same old mantra year after year. In this analysis, I will attempt to look at the performance of the fiscal budget. Emphasis will be placed on budget and how much we actually generated in revenue and spent.
According to data from the Budget Office, the federal government has failed in every year since 2011 to generate up to the cash it budgeted for. It has also since then been unable to spend all it set out to spend in any fiscal year.
Fiscal Inflow (Actual vs Budgeted)
As the chart above depicts, the government has basically failed to generate as much Fiscal revenues to fund its budgeted revenues. In 2014, it budgeted fiscal revenues of N3.732 trillion. This year it has dropped that to N3.6 trillion and going by prior year results it is unlikely to achieve that target.
Budgeted Capital Expenditure vs Actual Cash Spent
As the above chat depicts, we have in the last 3 years been unable to achieve a performance beyond 70% since it did so in 2011 and have not been able to hit 60% since 2012. This data excludes the SURE-P which derives its funding from subsidy savings and is not an excuse for the poor showing. Such is the woeful nature of the performance for a country that is in dire need of critical infrastructure. Even in the boom oil years of 2012 and 2013 we have not been able to spent up to N1 trillion on Capital Expenditure in Nigeria.
Recurrent Budget vs Actual Fiscal Spend
This is where the government scores highest. In fact between 2011 and 2013 we spent more than what was budgeted for on recurrent expenditure. It’s not surprising considering how bloated the government is. I know many will blame this on some welfare policies such as the subsidy program, but the truth remains that the National Assembly and Presidency are probably the ones who are on welfare and not ordinary Nigerians.
The above chart shouldn’t be surprising after you’ve seen the breakdown of our budget performance in the past 3 years. In fact, every budget since 2011 has been based on fiscal deficit as the government expects to spend more than it earns. So, if what it budgets it will earn is smaller than what it actually earns then the deficit will widen even more. Between 2011 and June 30 2014 we have spent N4.5trillion in fiscal deficits funding compared to N3.64trillion that was budgeted as Fiscal deficit. The government has in essence borrowed an extra N873billion more than it had proposed to borrow outside its fiscal earned revenues.
For a minister of finance who trumps up fiscal conservatism this is indeed a score card of failure. Why should we continue to spend less on Capital expenditure year after year but then see our deficit balloon. It suggests a lot of inefficiencies in governance and a process that is bureaucratically flawed to get things done on time. These inefficiencies are not new and did not start with this government. However, it is obvious that nothing much has changed either. Our actual revenues has still come short of budget and actual capital expenditure has also fallen short of budget. So it’s either was are bad at budgeting or we are not efficient enough to perform or even both. Gleaning from the past, it is apparent the 2015 budget is another 365 days from failure. If nothing, the slump in oil prices is not about to make it any easier.