Budget and Plans | |
Budget and Plans | |
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Wednesday,
November 08, 2017 / 10:30 AM /FBNQuest Research
The core assumptions are those in the framework,
namely: an unchanged average exchange rate of N305 per US dollar; oil
production of 2.30 mbpd; an oil price of US$45/b; and GDP growth of 3.5%, which
had been revised down from 4.8% in the Economic Recovery and Growth Plan
2017-20 of February this year.
Cursory media accounts of the presentation
yesterday indicate some changes from the framework. Total FGN spending and the
capital element remain N8.6trn and N2.4trn respectively. However, the accounts
put the deficit at N2.0trn rather than the N2.9trn in the framework.
If they are confirmed, the FGN has either pushed
up its revenue projections or trimmed the recurrent expenditure, or a
combination of both. The former would be more likely because governments the
world over tend to reduce the salaries, allowances and pensions of their
employees as a last resort. It would also be less plausible, given the uphill
struggle to lift the FGN’s non-oil revenues from a pitiful 2.9% of GDP in 2016.
The media accounts also report that borrowing of
N1.7trn will cover the greater part of the deficit. There is no detail about
the non-debt creating sources of financing for the balance. These could be
asset sales, signature bonuses and recoveries, for example.
In line with international practice, the budget
would ideally be passed in time for its implementation in the New Year. This,
however, would be little short of miraculous because of the assembly’s holiday
in December and the obvious tensions between the executive and the legislature.
The process has sometimes dragged into mid-year.
This accountant’s nightmare leads to delays in
capital releases, prevents the correct monthly distributions from the
federation account and creates confusion over deficit financing, not least for
investors. In Q1 2017 the FGN raised US$1.5bn from Eurobond sales, which were
deployed to cover the deficit in the 2016 budget year (that ran through to May
this year due to the annual tussle).
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