The 2016 budget is clearly delineated as to expected revenue and expenditure. The quotient of its profile in respect of capital and recurrent expenditures are equally well defined. While inadequate foreign exchange remains an issue, there’s the assurance that the Central Bank of Nigeria will rise to the occasion to provide the needed succor, reports, Assit. Editor, Nduka Chiejina
President Muhammadu Buhari yesterday presented his inaugural budget proposal to the joint session of the National Assembly. The estimate has a lot of promises. With a plan to spend N6.08 trillion in the next fiscal year, President Buhari outlined how he hoped to execute his “Budget of Change” to impact positively on the people.
Growth and Funding:
The 2016 Budget is a clear departure from previous budgeting activities with the resolve of the Federal Government to optimise the impact of public expenditure by adopting a zero budgeting approach, which ensures that resources are aligned with government’s priorities and efficient allocation. This, President Buhari said, is to ensure that our resources are managed prudently and utilised solely for the public good.”
This new development was hailed by Dr Abdulwahab Isa of the Economic Research and Budget Analysis Centre in Abuja, who stated that “this new approach to budgeting will only ensure that projects are captured in the budget for which funds are available unlike in the past where a blanket budgeting method left may projects at the mercy of the funds’ managers.”
The Buhari administration hopes to maintain the country’s debt to Gross Domestic Product (GDP) ratio as one of the lowest in the world.
The 2016 budget is clearly delineated as to expected revenue and expenditure. The quotient of its profile in respect of capital and recurrent expenditures are equally well defined. While inadequate foreign exchange remains an issue, there’s the assurance that the Central Bank of Nigeria will rise to the occasion to provide the needed succor, reports, Assit. Editor, Nduka Chiejina
President Muhammadu Buhari yesterday presented his inaugural budget proposal to the joint session of the National Assembly. The estimate has a lot of promises. With a plan to spend N6.08 trillion in the next fiscal year, President Buhari outlined how he hoped to execute his “Budget of Change” to impact positively on the people.
Growth and Funding:
The 2016 Budget is a clear departure from previous budgeting activities with the resolve of the Federal Government to optimise the impact of public expenditure by adopting a zero budgeting approach, which ensures that resources are aligned with government’s priorities and efficient allocation. This, President Buhari said, is to ensure that our resources are managed prudently and utilised solely for the public good.”
This new development was hailed by Dr Abdulwahab Isa of the Economic Research and Budget Analysis Centre in Abuja, who stated that “this new approach to budgeting will only ensure that projects are captured in the budget for which funds are available unlike in the past where a blanket budgeting method left may projects at the mercy of the funds’ managers.”
The Buhari administration hopes to maintain the country’s debt to Gross Domestic Product (GDP) ratio as one of the lowest in the world.
According to President Buhari, “the deficit, which is equivalent to 2.16 per cent of Nigeria’s GDP, will take our overall debt profile to 14 per cent of our GDP. This remains well within acceptable fiscal limits.” This deficit, he said, will be financed by a combination of domestic borrowing of N984 billion, and foreign borrowing of N900 billion totaling N1.84 trillion. Over the medium term, we expect to increase revenues and reduce overheads, to bring the fiscal deficit down to 1.3 per cent of GDP by 2018.”
In 2016, reveue will be driven essentially by non-oil proceeds, while oil related revenues are expected to contribute N820 billion, non-oil revenues, comprising Company Income Tax (CIT), Value Added Tax (VAT), Customs and Excise Duties and Federation Account levies, will contribute N1.45 trillion, almost double of what is expected to come in from oil. This announcement by the President might mean that VAT may be increased as it is being canvassed in some quarters from the present five percent to maybe 10 per cent.
Already the Federal Inland Revenue Service (FIRS) is gearing up, according to its Executive Chairman, Mr Tunde Fowler, to capture more payers into the tax net.
By enforcing strict compliance with the Fiscal Responsibility Act 2007 and public expenditure reforms in all MDAs, Buhari said his administration has projected up to N1.51 trillion from independent revenues. This is possible because the Acting Chairman, Fiscal Responsibility Commission, Mr. Victor Muruako, recently said his commission had made remittance of operating surplus by MDAs its battle cry, such that it has induced payment of over N367 billion operation surplus by MDAs to the consolidated revenue fund as at August, 2015.
A grip on financial management and tackling ghost workers
It is clear the present government wants to have a tight grip on how finances are managed. According to President Buhari, in addition to the proper linkage of budgeting to strategic planning, we are enhancing the utilisation of the Government Integrated Financial Management Information Systems (GIFMIS) to improve financial management. The recently established Efficiency Unit is working across the MDAs to identify and eliminate wasteful spending, duplication and other inefficiencies. We engaged costing experts to scrutinise the 2016 budget proposals. They have already identified certain cost areas that can be centralized for economies to be made.”
One component of this new initiative is that government expects to purchase goods and services at the same price as the private sector if not individuals. A fall out of this development is that government now has to plan its purchases for the year around existing market prices of goods and services and ensure that inflation does not wipe out its planned purchases.
To achieve this, both fiscal and monetary authorities have to work together to get a firm handle on the triggers of inflation. To buttress this, Buhari stated that his administration aims “to ensure macroeconomic stability by achieving a real GDP growth rate of 4.37 per cent and managing inflation. To achieve this, we will ensure the aligning of fiscal, monetary, trade and industrial policies.”
Another new entrant into the budget cycle preparation is the Special Intervention Programmes component. To meet this objective, President Buhari noted that “in fulfillment of our promise to run a lean government, we have proposed a nine per cent reduction in non-debt recurrent expenditure, from N2.59 trillion in the 2015 Budget to N2.35 trillion in 2016. Furthermore, we have budgeted N300 billion for Special Intervention Programmes, which takes the total amount for non-debt recurrent expenditure to N2.65 trillion.
With regards to ghost workers, though President Buhari did not use the phrase ghost workers in his speech, he said his administration hopes to build from where the last administration left off by stamping out the incidence of ghost workers. According to the president, “we have directed the extension of the Integrated Personnel Payroll Information System (IPPIS) to all MDAs to reap its full benefits. We will also strengthen the controls over our personnel and pension costs with the imminent introduction of the Continuous Audit Process (CAP). These initiatives will ensure personnel costs are reduced. Our commitment to a lean and cost effective government remains a priority, and the initiatives we are introducing will signal a fundamental change in how Government spends public revenue”
Creating jobs
The major flank of the President’s budget speech was his desire to create jobs. President Buhari assured Nigerians “that this administration will have a job creation focus in every aspect of the budget implementation.
His words: “Nigeria’s job creation drive will be private sector-led to be encouraged by a reduction in tax rates for smaller businesses as well as subsidised funding for priority sectors such as agriculture and solid minerals.”
Sectoral allocations
A significant portion of the recurrent expenditure has been earmarked to institutions offering critical services. They are: Education (N369.6 billion); Defence (N294.5 billion); Health Services (N221.7 billion) and Interior Ministry (N145.3 billion). President Buhari said: “We will ensure our teachers, armed forces personnel, doctors, nurses, police men, fire fighters, prison service officers and many more critical service providers are paid competitively and on time.”
As a way of laying a solid foundation for the education sector and creating employment opportunities, the President spoke of a plan to hire some 500,000 teachers, who would be deployed in primary schools across the country.
He said: “As an emergency measure, to address the chronic shortage of teachers in public schools across the country, we also will partner with state and local government areas to recruit, train and deploy 500,000 unemployed graduates and National Certificate of Education (NCE) holders. These graduate teachers will be deployed to primary schools, thereby, enhancing the provision of basic education especially in our rural areas.”
In 2016, government also intends to partner with states and local government areas to provide financial training and loans to market women, traders and artisans, through their cooperative societies, because “this segment of our society is not only critical to our plan for growing small businesses, but it is also an important platform to create jobs and provide opportunities for entrepreneurs,” Buhari said.
Borrowing
As earlier disclosed by Finance Minister Mrs. Kemi Adeosun, President Buhari stated that borrowings in 2016 will be primarily channeled to fund capital projects with N113 billion set aside for a Sinking Fund towards the retirement of maturing loans. A princely N1.36 trillion has been provided for foreign and domestic debt service. According to President Buhari, “this calls for prudent management on our part, both of the debt portfolios and the deployment of our hard earned foreign exchange earnings.”
The amount set aside for the Sinking Fund is over four times the amount the previous administration offered to set aside annually. In 2014, former Minister of Finance, Mrs. Ngozi Okonjo-Iweala, announced that the government had “set up a Sinking Fund of N25 billion per annum to support the retirement of maturing bonds as above, rather than roll them over.”
Foreign Exchange position
While admitting the current inadequacies in the supply of Foreign Exchange (Forex) to Nigerians who need it, Buhari however assured that the Governor of Central Bank (CBN) is currently fine-tuning its forex management to introduce some flexibility and encourage additional inflow of foreign currency to help ease the pressure.
Buhari said he is aware of the problems many Nigerians currently have in accessing forex for their various purposes – from traders and business operators, who rely on imported inputs as raw materials; to manufacturers needing to import sophisticated equipment and spare parts; to airline operators who need foreign exchange to meet their international regulatory obligations; to the financial services sector and capital markets who are key actors in the global arena.
The President attributed the fall in the value of the naira “to the current inadequacies in the supply of to deserving Nigerians. However, the President said he has been “assured by CBN Governor Godwin Emefiele that the bank is currently fine-tuning its foreign exchange management to introduce some flexibility and encourage additional inflow of foreign currency to help ease the pressure.”
Actualising the CBN strategy of stabilising the forex market will very much depend on the inflow of the greenback, which for now, has crude oil as its major earning source. The fall in crude prices in the international spot oil market has in no small measure contributed to the quagmire. Nonetheless, a moderate $38/barrel of crude benchmarked, a sustained 2.2million barrel production per day (all things being equal), may turn the tide.
Dr Isa was skeptical about the President’s response to the faith of the naira. Isa was of the opinion that government’s involvement in the management of the value of the naira should be left to the forces of demand and supply while the naira should be allowed to find its true value. “Government’s continued interference and dabbling into forex management is not in the best interest of the currency,” he said.According to President Buhari, “the deficit, which is equivalent to 2.16 per cent of Nigeria’s GDP, will take our overall debt profile to 14 per cent of our GDP. This remains well within acceptable fiscal limits.” This deficit, he said, will be financed by a combination of domestic borrowing of N984 billion, and foreign borrowing of N900 billion totaling N1.84 trillion. Over the medium term, we expect to increase revenues and reduce overheads, to bring the fiscal deficit down to 1.3 per cent of GDP by 2018.”
In 2016, reveue will be driven essentially by non-oil proceeds, while oil related revenues are expected to contribute N820 billion, non-oil revenues, comprising Company Income Tax (CIT), Value Added Tax (VAT), Customs and Excise Duties and Federation Account levies, will contribute N1.45 trillion, almost double of what is expected to come in from oil. This announcement by the President might mean that VAT may be increased as it is being canvassed in some quarters from the present five percent to maybe 10 per cent.
Already the Federal Inland Revenue Service (FIRS) is gearing up, according to its Executive Chairman, Mr Tunde Fowler, to capture more payers into the tax net.
By enforcing strict compliance with the Fiscal Responsibility Act 2007 and public expenditure reforms in all MDAs, Buhari said his administration has projected up to N1.51 trillion from independent revenues. This is possible because the Acting Chairman, Fiscal Responsibility Commission, Mr. Victor Muruako, recently said his commission had made remittance of operating surplus by MDAs its battle cry, such that it has induced payment of over N367 billion operation surplus by MDAs to the consolidated revenue fund as at August, 2015.
A grip on financial management and tackling ghost workers
It is clear the present government wants to have a tight grip on how finances are managed. According to President Buhari, in addition to the proper linkage of budgeting to strategic planning, we are enhancing the utilisation of the Government Integrated Financial Management Information Systems (GIFMIS) to improve financial management. The recently established Efficiency Unit is working across the MDAs to identify and eliminate wasteful spending, duplication and other inefficiencies. We engaged costing experts to scrutinise the 2016 budget proposals. They have already identified certain cost areas that can be centralized for economies to be made.”
One component of this new initiative is that government expects to purchase goods and services at the same price as the private sector if not individuals. A fall out of this development is that government now has to plan its purchases for the year around existing market prices of goods and services and ensure that inflation does not wipe out its planned purchases.
To achieve this, both fiscal and monetary authorities have to work together to get a firm handle on the triggers of inflation. To buttress this, Buhari stated that his administration aims “to ensure macroeconomic stability by achieving a real GDP growth rate of 4.37 per cent and managing inflation. To achieve this, we will ensure the aligning of fiscal, monetary, trade and industrial policies.”
Another new entrant into the budget cycle preparation is the Special Intervention Programmes component. To meet this objective, President Buhari noted that “in fulfillment of our promise to run a lean government, we have proposed a nine per cent reduction in non-debt recurrent expenditure, from N2.59 trillion in the 2015 Budget to N2.35 trillion in 2016. Furthermore, we have budgeted N300 billion for Special Intervention Programmes, which takes the total amount for non-debt recurrent expenditure to N2.65 trillion.
With regards to ghost workers, though President Buhari did not use the phrase ghost workers in his speech, he said his administration hopes to build from where the last administration left off by stamping out the incidence of ghost workers. According to the president, “we have directed the extension of the Integrated Personnel Payroll Information System (IPPIS) to all MDAs to reap its full benefits. We will also strengthen the controls over our personnel and pension costs with the imminent introduction of the Continuous Audit Process (CAP). These initiatives will ensure personnel costs are reduced. Our commitment to a lean and cost effective government remains a priority, and the initiatives we are introducing will signal a fundamental change in how Government spends public revenue”
Creating jobs
The major flank of the President’s budget speech was his desire to create jobs. President Buhari assured Nigerians “that this administration will have a job creation focus in every aspect of the budget implementation.
His words: “Nigeria’s job creation drive will be private sector-led to be encouraged by a reduction in tax rates for smaller businesses as well as subsidised funding for priority sectors such as agriculture and solid minerals.”
Sectoral allocations
A significant portion of the recurrent expenditure has been earmarked to institutions offering critical services. They are: Education (N369.6 billion); Defence (N294.5 billion); Health Services (N221.7 billion) and Interior Ministry (N145.3 billion). President Buhari said: “We will ensure our teachers, armed forces personnel, doctors, nurses, police men, fire fighters, prison service officers and many more critical service providers are paid competitively and on time.”
As a way of laying a solid foundation for the education sector and creating employment opportunities, the President spoke of a plan to hire some 500,000 teachers, who would be deployed in primary schools across the country.
He said: “As an emergency measure, to address the chronic shortage of teachers in public schools across the country, we also will partner with state and local government areas to recruit, train and deploy 500,000 unemployed graduates and National Certificate of Education (NCE) holders. These graduate teachers will be deployed to primary schools, thereby, enhancing the provision of basic education especially in our rural areas.”
In 2016, government also intends to partner with states and local government areas to provide financial training and loans to market women, traders and artisans, through their cooperative societies, because “this segment of our society is not only critical to our plan for growing small businesses, but it is also an important platform to create jobs and provide opportunities for entrepreneurs,” Buhari said.
Borrowing
As earlier disclosed by Finance Minister Mrs. Kemi Adeosun, President Buhari stated that borrowings in 2016 will be primarily channeled to fund capital projects with N113 billion set aside for a Sinking Fund towards the retirement of maturing loans. A princely N1.36 trillion has been provided for foreign and domestic debt service. According to President Buhari, “this calls for prudent management on our part, both of the debt portfolios and the deployment of our hard earned foreign exchange earnings.”
The amount set aside for the Sinking Fund is over four times the amount the previous administration offered to set aside annually. In 2014, former Minister of Finance, Mrs. Ngozi Okonjo-Iweala, announced that the government had “set up a Sinking Fund of N25 billion per annum to support the retirement of maturing bonds as above, rather than roll them over.”
Foreign Exchange position
While admitting the current inadequacies in the supply of Foreign Exchange (Forex) to Nigerians who need it, Buhari however assured that the Governor of Central Bank (CBN) is currently fine-tuning its forex management to introduce some flexibility and encourage additional inflow of foreign currency to help ease the pressure.
Buhari said he is aware of the problems many Nigerians currently have in accessing forex for their various purposes – from traders and business operators, who rely on imported inputs as raw materials; to manufacturers needing to import sophisticated equipment and spare parts; to airline operators who need foreign exchange to meet their international regulatory obligations; to the financial services sector and capital markets who are key actors in the global arena.
The President attributed the fall in the value of the naira “to the current inadequacies in the supply of to deserving Nigerians. However, the President said he has been “assured by CBN Governor Godwin Emefiele that the bank is currently fine-tuning its foreign exchange management to introduce some flexibility and encourage additional inflow of foreign currency to help ease the pressure.”
Actualising the CBN strategy of stabilising the forex market will very much depend on the inflow of the greenback, which for now, has crude oil as its major earning source. The fall in crude prices in the international spot oil market has in no small measure contributed to the quagmire. Nonetheless, a moderate $38/barrel of crude benchmarked, a sustained 2.2million barrel production per day (all things being equal), may turn the tide.
Dr Isa was skeptical about the President’s response to the faith of the naira. Isa was of the opinion that government’s involvement in the management of the value of the naira should be left to the forces of demand and supply while the naira should be allowed to find its true value. “Government’s continued interference and dabbling into forex management is not in the best interest of the currency,” he said.
Source:THE NATION
