Friday, November 24, 2016 4:55pm / BudgIT
The 2017-2019 MTEF is incomplete, as it does not include Federation targets (Federal, States and Local Governments) as well as clear classification of revenue lines. It is important to note that Medium Term Expenditure Framework does not only apply to the Federal Government but state governments also draw their projections from previous documents. The current MTEF document does not include a detailed 2016 budget performance report. It is important to know the Budget Office of the Federation has not released any budget implementation report for 2016. In terms of comprehensiveness of the MTEF documents as previously seen, the 2017-2019 projection is a setback.
The projections show that the Federal Government continues to expand its debt and this will keep increasing the debt service costs in medium-term. These costs could be up to 40% of the actual revenues in 2017, an alarming index despite a low debt-to-GDP ratio. A recent downgrade of Nigeria's credit ratings further down in the junk category was because of the risky expansion of debt without attendant massive revenue growth.
The MTEF document shows that Nigeria might borrow in order to afford her recurrent expenditure. This is a worrisome trend, as it shows oil revenue and tax receipts are no longer enough to pay salaries, run overheads and service debts.
Nigeria has a serious revenue challenge and the huge hope on the Treasury Single Accounts is currently being dimmed despite the bogus projections for Independent Revenues in the medium-term. The targets for revenues are overly optimistic and without serious overhaul of the tax system and waiver structure, we don't foresee more than a 60% performance.
The capital expenditure growth is encouraging but careful interest must be on the line items to ensure that they provide a balanced social and economic support for the economy currently in recession. We have seen cases where various items of questionable status in terms of benefit to the public are classified as capital projects.
Aggressive recovery of loot, rise in oil prices coupled with stable oil production and astronomical spike in tax revenues are key factors to make these revenue projections realistic. We hope that the presentation of the 2017 Budget by President Muhammadu Buhari on December 1, 2016 will be detailed and puts into full consideration of the current downturn in the economy.