An old-fashioned expansionary budget


Wednesday, February 17, 2016 8:51 AM / FBNQuest Research

The FGN has submitted an expansionary budget for 2016 in an effort to reverse the slowdown in the economy, unlike its counterparts in Ghana and Kenya.

In its favour it has set a deficit of N2.22trn (US$11.3bn), equivalent to 2.2% of GDP, whereas Kenya’s is approaching 8% and Ghana has gone cap-in-hand to the IMF.

The core of the FGN proposals, subject to the agreement of the National Assembly, is capital spending of N1.85trn (including the capital element of statutory transfers and interest on capitalized loans).

In terms of the FGN’s plans for social investment, the proposals include “special interventions” of N300bn and N260bn under recurrent and capital spending respectively.

The capital spending in the chart covers just the ministries, departments and agencies (MDAs).


It therefore excludes the federal executive bodies and the capital supplementation for a wide range of bodies and federal schemes.

The principal threat to the execution of the FGN’s fiscal agenda remains the ambitious projection for non-oil revenue collection, an increase of 41% on 2015’s unfulfilled budget.

Udo Udoma, the budget and national planning minister, has ruled out a hike in companies’ income tax and said that there would be no increase in the 5% rate of VAT “at the moment”.

The South African Treasury achieved sizeable y/y annual increases in tax collection from efficiency gains in the decade or so after 1994. The FGN projections for this year greatly exceed Manuelesque proportions.

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