An­a­lysts raise bud­get im­ple­men­ta­tion con­cerns

Business a.m. - - FINANCE & INVESTMENT -

NIGE­RIA CON­CLUDED ITS highly an­tic­i­pated Eu­robond is­sue last week Wed­nes­day, rais­ing a to­tal of $2.86 bil­lion, com­pris­ing a $1.18 bil­lion 7-year se­ries, $1 bil­lion 12-year se­ries, and $750 mil­lion 30-year se­ries, de­spite the com­mend­able work of the DMO, an­a­lyst have said that 2018 bud­get im­ple­men­ta­tion may not be fun­da­men­tally dif­fer­ent from his­tor­i­cal prac­tice.

The ro­bust sub­scrip­tion and bet­ter than ex­pected pric­ing of the lat­est Eu­robond is­sue, shows that in­vestors’ view of Nige­ria’s dol­lar debt po­si­tion still re­mains pos­i­tive, given the sus­tained spells of emerg­ing mar­ket as­set sell-offs, con­tin­ued hawk­ish pol­icy stance by the Fed­eral gov­ern­ment, with bond yields above 3 per­cent lev­els in the U.S, and re­cent plunge in oil price which could have weak­ened Nige­ria’s ne­go­ti­at­ing power.

The Cen­tral Bank of Nige­ria re­cently re­leased its quar­terly eco­nomic re­port by for the third quar­ter of 2018. The fis­cal oper­a­tions seg­ment of the re­port high­lighted a fed­eral gov­ern­ment ex­pen­di­ture of N1.0 tril­lion in Q3 2018. Col­lec­tively, the fis­cal au­thor­ity spent N3.6 tril­lion in the first 9 months of 2018, im­ply­ing a 40 per­cent im­ple­men­ta­tion rate so far.

Com­bin­ing the lat­est EuFALLING robond is­sue with the do­mes­tic net bond is­suance of N571 bil­lion raised thus far, the fed­eral gov­ern­ment is very close to com­plet­ing the to­tal bor­row­ing of N1.6 tril­lion re­quired to partly fund the deficit in the 2018 bud­get.

Nev­er­the­less, the im­ple­men­ta­tion rate is un­sur­pris­ing con­sid­er­ing the late pas­sage and assent of the 2018 ap­pro­pri­a­tion bill that ex­tended into the bet­ter half of the year. At the cur­rent run rate, it is ap­par­ent that 2018 bud­get im­ple­men­ta­tion may not be fun­da­men­tally dif­fer­ent from his­tor­i­cal prac­tice; in 2016, the im­ple­men­ta­tion rate was 72.5 per­cent and 2017 was 86.9 per­cent.

An­a­lysts at United Cap­i­tal said, “with the re­cently is­sued Eu­robond ex­pected to cover 45.5 per­cent of the deficit in the 2018 bud­get, we opine that the late bud­get pas­sage and poor bud­get im­ple­men­ta­tion re­mains a cog in the wheel of the Nige­rian fis­cal pol­icy.“

Cor­dros Cap­i­tal an­a­lysts also said “Rais­ing the en­tire N800 bil­lion short­fall di­rectly from the do­mes­tic mar­ket may prove a daunt­ing task for the fed­eral gov­ern­ment. Hence, we ex­pect the CBN to help mod­er­ate ex­ces­sive pa­per is­suances while sus­tain­ing the gov­ern­ment’s goal of cut­ting down on bor­row­ing costs. With all these said, the gov­ern­ment have a big prob­lem of im­ple­ment­ing the bud­get, it might even have an im­ple­men­ta­tion rate that is lower than the pre­vi­ous years.”

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