Budget Debate: Senate Warns Govt against Mortgaging Future with Borrowing
The 2017 budget process yesterday kicked-off in Senate with senators decrying the executive’s seeming penchant for borrowing, noting that continuous borrowing would deprive the nation of meaningful accruable revenues in future.
Leading debate on the budget, the Senate Leader, Senator Ahmad Lawan, said the budget of N7.3 trillion was made up of N2.979 trillion recurrent (non-debt) expenditure, N2.58 trillion capital expenditure, N1.663 trillion for debt service, N419.0 billion as statutory transfers and N177.4 billion sinking fund for maturing bonds.
He said the budget was predicated on $42.5 per barrel oil benchmark, oil production volume of 2.2 million, exchange rate of N305 to $1 and gross domestic product (GDP) growth rate of 4.37 per cent.
According to him, the aggregate revenue available for the funding of the budget is N4.94 trillion, which he said was 28 per cent higher than 2016 projection with a projected deficit of N2.36 trillion.
He added that the GDP which was an equivalent of 2.18 per cent of the nation’s GDP would be financed by borrowing about N2.32 trillion.
Lawan said the proposed borrowing would consist of N1.067 trillion from external sources while the balance of N1.254 trillion would be sourced from the domestic market.
He added: “With the 2017 budget of recovery and growth, the future of this country looks very bright as the year to year growth in capital demonstrates this administration’s desire to make this country more competitive in order to bring the economy out of recession and into steady growth and prosperity for all.
“Mr. President, distinguished colleagues, the 2017 capital budget is designed to align expenditure to long-term objectives, sustainable development, as well as fiscal consolidation, inclusive growth and job creation, stabilisation of the welfare of Nigerians by focusing more on macro- economic stability, consolidating on structural reforms, enhancing governance and institutional goals, diversification of the economy with key emphasis on agriculture, investments in priority sectors like solid minerals and self-sufficiency in food and other products.
Lawan gave a breakdown of capital expenditure allocation to ministries as N529 billion for the Ministry of Power, Works and Housing; Transport N262 billion; special intervention programme N150 billion; Defence N140 billion; UBEC N92 billion; Trade and Investment N81 billion; Water Resources N85 billion; Interior N63 billion; Niger Delta Development Commission (NDDC) N61 billion; Federal Capital Territory (FCT) N37 billion and Niger Delta Ministry N33 billion.
He also gave a breakdown of recurrent expenditure of notable ministries to include: N482 billion for Ministry of Interior; N398 billion for the Ministry of Education; N325 billion for Defence and N252 billion for Health.
In his contribution, Deputy Senate President, Ike Ekweremadu, said unless a deliberate attempt was made to stop borrowing, the future revenue of the country would be swallowed up by the cost of debt service.
He therefore canvassed the need for the government to come up with policies meant to guarantee reduction in the country’s recurrent expenditure.
Also speaking, Senator Barnabas Gemade threw his weight behind Ekweremadu, noting that borrowing should be addressed to forestall a situation where government would only be earning revenues in the nearest future to service debts.
He commended the allocation of N100 billion for housing in 2017 but noted that the breakdown of the housing vote was not contained in the budget, a situation he believed was antithetical to budget spirit which he said required the breakdown of the proposed expenditure.
In the same vein, Senator Rose Oko lamented continued maintenance of excess crude account despite knowledge that it is unconstitutional as she advocated the need to jack up the oil benchmark from $42.5 to $45 per barrel in view of the recent appreciation in the price of crude oil in the international market.
But Senator Joshua Lidani hailed the voting of N100 billion for the judiciary, saying it would go a long way to enhance the independence of the third of arm of government especially in the face of recent invasion of judges’ homes by security operatives over corrupt allegations.
However, Senator Chukwuka Utazi lamented the voting of paltry N50billion for education’s capital expenditure, saying this explains the drastic fall in Nigeria’s educational standard.
He said instead of voting a huge sum to improve the country’s education, the government voted N140 billion for defence, pointing out that the root of insecurity is poor education which he said could be addressed by spending huge sums on education.
For Utazi, voting N140 billion for defence while allocating N50 billion for education amounts to leaving the leprosy while curing ringworm. According to him, when the youth secure sound and qualitative education, the tendency to fight criminality and insurgency would be relatively low.
The debate continues today and tomorrow.
Meanwhing, despite expectations of fireworks in the debate for the N7.3 trillion 2017 budget following the criticism of the Medium Term Expenditure Framework (MTEF) for not projecting current realities, particularly regarding the foreign exchange rate, opposition was barely registered by members at plenary yesterday.
Several members, including some of the All Progressives Congress (APC) extraction, who earlier queried the source of the funding for the largest budget ever proposed by the federal government, were lethargic in their presentations, during the budget debate which continues today.
The Majority Leader of the House, Hon. Femi Gbajabiamila, in the lead debate, conceded that the budget is an ambitious one, but the ambition is precursor to the success, he said.
He presented the highlights of the budget to include oil production projection of 2.2 million barrels per day, with benchmark of $42.5 per barrel, and exchange rate of N305/US$1.
Other key assumptions of
the budget include a revenue projection of N4.94 trillion, with N1.98 trillion expected from oil revenue and N1.37 trillion non oil revenue, while expenditure includes N419 billion for statutory transfers, N1.66 trillion for debt servicing, N177 billion to a sinking fund for retirement of maturing bonds, N2.98 trillion to non debt recurring expenditure and N2.24 trillion to capital expenditure.
Gbajabiamila added that the budget deficit for the budget is N2.36 trillion, and to finance the deficit, government proposes to borrow N1.06 trillion from external sources and N1.25 domestic borrowing.
“Prior to this time, capital allocation in our yearly budget was way below 30 percent and now this administration has raised it to over 30 per cent. Before now, budget performance has been about 30 per cent but somehow with little resources available, this administration hovers around the mid 50s range in terms of budget performance,” he said.
Gbajabiamila added that while the administration targets better budget performance, it has been able to achieve the current rate by blocking leakages, broadening tax base and collection, and eliminated ghost workers.
While Nigeria has been hit by recession like several oil producing countries, the N7.3 trillion budget is intended to reboot the economy with a massive dose of capital injection and payment of local debts to contractors to stimulate and reflate the economy, Gbajabiamila said.
Several lawmakers simply praised the budget proposal but a few argued against it.
Hon. Ossai Nicholas Ossai (Delta PDP) argued that the exchange rate of N305 to the dollar is unrealistic, going by MTEF.
Backed by Speaker Yakubu Dogara, Gbajabiamila raised a point of order to the effect that MTEF has already been passed.
Hon. Mark Terseer Gbillah (Benue APC) however also argued that the exact exchange rate remains undetermined.
“We have a monetary committee that seems to hold us to ransom,” he said.
The lawmaker also noted that the Internally Generated Revenue (IGR) should be critically considered as the expected revenue from some agencies have not been captured in the budget.
He cited one of the agencies as Niger Delta Power Holding Company.
Hon. Abdulrazak Namdas ( Adamawa APC) said the restiveness in the Niger Delta region makes the daily production projection unrealistic.