Monday, March 16, 2015 9:44 AM / FBN Capital Research
The distraction of the elections has not prevented the National Assembly from working on the 2015 budget and the 2015-17 medium term expenditure framework. The local media reported on Thursday that the two houses of the assembly had agreed a harmonized position.
Their headline assumption is US$53/b for the oil price this year, a compromise between the Senate’s US$52/b and the House of Representatives’ US$54/b. We noted at the time of the Senate’s approval of its draft that the legislature had “smelt the coffee” following the slide in the oil price (Good Morning Nigeria, 27 February 2015).
This is a conservative assumption, which would leave the FGN with some room for manoeuvre and recalls the revised threshold of just US$40/b in the Angolan budget for 2015. Our own forecasts, which date from early January, have an average price of US$58/b for the year, with US$65/b for end-year.
That spending compression has become unavoidable is clear from the sharp fall in gross revenues in the federation account for monthly distribution from N630bn in July 2014 to N416bn in January.
Details of the harmonised position of the assembly are very limited. We do know that its projection for statutory allocations amounts to N368bn, which includes a N30bn reduction from recent years to N120bn for the assembly itself.
The Senate’s earlier draft increased the FGN’s capital spending by 10% (from the executive’s proposals of mid-December) to N700bn, and trimmed the recurrent budget from N2.61trn to N2.58trn.
At this stage and in the absence of new figures for revenues, it is difficult to put the impact of the oil price slide into context. The federal minister for works told the Senate last week that just N46bn had been released from his ministry’s capital budget for 2014 of N99bn, and that his allocation for the current year had been slashed from N100bn to N11bn.
Although we are waiting for the budget to be signed off, we can expect a more aggressive stance from the revenue collection agencies. New taxes on luxury goods and services have been promised, as has a review of the many waivers and exemptions in place. These welcome steps and the elimination of ghost workers and pensioners from the federal payroll will not be sufficient.
1. Growth in job creation, a fillip to tax revenue
2. Changing aspirations for Nigeria Inc
3. The IMF broadly supportive of government policy
4. Modest uptick in lending to agric