By VICTORIA NGOZI IKEANO

ThIS year’s federal budget christened ‘Budget of Growth and Recovery’, which now has a life cycle of June 2017 to May, 2018, following its signing by the Acting President last month, has N2.18 trillion reserved for capital expenditure. This is about N590 billion higher than last year’s capital votes and represents some 32 per cent of the N7.44 trillion total budget. This amount is N1.38 trillion more than the N6.06 trillion 2016 budget. When discounted for inflationary trends, this increase may not be very much but the sectoral and other comparisons give useful insights.

Overall the federal government expects things to start looking up now. For example, the budget is predicated on an oil output of 2.2 million barrels per day at a price of $44.5 dollars per day.  Recall that in this administration’s life, price of oil had gone down to $40 dollars per barrel while production itself had dipped to some 1.8 million barrels per day.  But, oil is providing 41 percent of this fiscal year’s total N5.08 trillion projected revenue. An interesting aspect of the revenue profile is that 11 per cent of it would be from recovered looted funds. This is significant as it means that N1 out of every N10 is from these recovered monies.

The Federal Government cannot afford any more delay in the implementation of the capital projects to kickstart the recovery. That is why the recent announcement by Finance Minister, Kemi Adeosun, that the ministry is releasing N350 billion as first tranche of the capital votes for capital projects is overdue. A budget basically has two components, namely, the recurrent and capital expenditures. While the recurrent is essentially for payment of salaries and overhead costs, the capital part is basically for execution of projects. Thus, whereas the former services mainly civil/public servants, the latter generally provides needed infrastructural amenities for the public like roads, hospitals, transport facilities, etc. Quite apart from provision of social amenities, massive public works programmes help to reflate the economy by injecting huge amounts of money into the system, thereby stimulating economic activities. The employment opportunities they engender with concomitant multiplier effects are what bring this about. It is somewhat anomalous that in our clime, more money is voted for recurrent expenses than for capital projects every year.

Since total expected revenue (N5.08 trillion) is less than the total budget expenditure (N7.44 trillion), it means we have a deficit budget, the shortfall being N2.36 trillion. The government says it would make up this deficit by getting loans of N1.07 trillion from foreign sources and N1.25 trillion domestically, in addition to N35 billion expected from sale of federal government property and privatisation. On the surface, it may seem surprising that the government is getting more loans from within than outside. The foreign loans are of course denominated in dollars.

Among its domestic loan sources is issuance of federal government savings bonds where small investors can invest as little as N5, 000 with a maximum of N50 million per investor. There is, too, the sukuk offer which is also within reach of small-time investors, N10,000 being set as the minimum subscription with multiples of N1,000 thereafter. And the federal government plans to get some N100 billion from this sukuk subscription, which happens to be the first in the country.

Interests and rental incomes have to be paid on the bonds, sukuk offers and other kinds of borrowed money in addition to retiring the principal amounts at the due dates.    Since government ordinarily provides social services and is not involved in any venture that can generate profit as such, one wonders if it is wise to take loans to supplement funding of infrastructural projects whether from foreign or local sources. I mean these are not self-financing loans that can be repaid from the projects, except perhaps if the government intends to charge economic (commensurate) prices for its social services as train fares, road fares (toll gates) health charges, etc. Instructively, N177.5 billion is set aside for bonds – to pay off maturing bonds and local contractors. In all, N1.84 trillion is reserved for debt servicing. Of this amount, a whoopping N1.49 trillion is for domestic debt service, N175.88 billion for servicing of foreign debt and as stated earlier, N177.46 for retiring of maturing loans (bonds).

A breakdown of the capital expenditure per ministry shows that the Federal Ministry of Power, Works and Housing has the highest allocation of N553.7 billion. This is understandable because that organisation is like three ministries combined into one portfolio, each of which is capital intensive. Next is the Ministry of Transportation with N241.71 billion allocation. This shows the priority government is according the three modes of transportation, particularly rail and marine transportation. Third-placed is Ministry of Defence which has N139.29 billion.

Obviously, security issues are high on the government’s agenda. What with the continuing threat of Boko Haram, even though we are told that what we are witnessing now are the last death-pangs of the organisation.  Remember, too, that the military is now being drafted into special operational duties to checkmate serious crimes as cattle rustling, communal crises that are beyond control of the Police and combating of oil theft and pipeline vandalisation, all in the face of increasing criminality of all forms. Apparently, the Army, Navy and Air force need new high-tech equipment to combat these threats.

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Ditto the Police, which capital allocation for its Police Service Commission in the category of federal executive bodies is the highest at N758.90 billion, with that for the National Population Commission coming a distant second (N3.9 billion) and the Code of Conduct Bureau, third, with N1.39 billion. The other executive bodies, namely, Code of Conduct Tribunal, Revenue Mobilization, Allocation and Fiscal Commission, Federal Character Commission and the Federal Civil Service trail far behind with capital votes in millions of naira.

Continuing with the analysis of capital budgets for ministries, department and agencies of the federal government, the Ministry of Water Resources has the fourth largest allocation, N104.25 billion. One wonders what that allocation will be expended on because one hardly sees the effect of that ministry on ordinary Nigerians, yet water is of utmost importance for everyday living.

Ikeano, a journalist, writes via [email protected]

     

Most Nigerian homes are still without pipe borne water, drilling of boreholes by individual households has become a common occurrence while many rural communities still go to streams for their water needs. Perhaps, much of the ministry’s allocation would be spent on dams. Whatever it is, it will be interesting to see details of this ministry’s capital spending at end of the 2017 budget cycle.

In the fifth position is the Ministry of Agriculture and Rural development. Does the Agriculture Ministry’s capital budget also include construction of dams or is this reserved for Water Resources Ministry?  Trade and Industry Ministry has the sixth largest capital vote of N81.73 billion. This ministry is not engaged in any commercial activity as such. Its role is essentially to create an enabling environment for operation and attraction of local and foreign investors. Importance of getting industrial/manufacturing sector to operate at full capacity cannot be overemphasised as that sector impacts significantly on employment. Ministries of Interior, Education and Health take up the seventh, eighth and ninth positions respectively, with allocations of N63.76 billion, N56.72 billion and N55.61 billion in that order.

Worthy of note is that the office of the National Security Adviser is allocated a capital budget of N47.21 billion, which ranks it tenth and places its capital vote above those of Ministries of Science and Technology, Niger Delta, Justice, Environment, Mines and Steel Development, Foreign Affairs, Information and Culture. It is also higher than those of Ministries of Labour and Employment, Communication Technology, Petroleum Resources, Youth and Sports Development, Finance and Women Affairs. Is this due to security concerns too?

IKEANO, a journalist, writes via [email protected]