Lack of fund threatens budget implementation …FG’s borrowing plan yet to be approved

The implementation of the capital component of the 2018 budget is yet to start due to lack of funds, nearly two months after the signing of the Appropriation Act by President Muhammadu Buhari, Daily Trust investigations reveal.

The 2018 budget has a total deficit of N1.95 trillion, equivalent to 67 percent of the total N2.87trillion capital expenditure for the year.

The Minister of Budget and National Planning, Udoma Udo Udoma had, while presenting the details of the budget, said the deficit is to be financed mainly by borrowing of N1.643 trillion both from

external and internal sources.

The government will borrow N793 billion from the domestic sources and N849 billion from foreign sources.

However, the borrowing plan of the federal government is yet to be approved by the National Assembly which embarked on a two-month recess last month.

A presidency official said the borrowing plan has been sent to the National Assembly before their recess, but a ranking member of the House of Representatives said he was not aware.

Experts fear that the faceoff between leadership of the Legislature and the Executive may likely affect the smooth passage of the supplementary budget request and the approval of the borrowing plan.

Government sources said both new and old projects have to slow down, even as the completion deadlines for some have to be altered in the absence of the borrowing plan which is the key source of the funding for the projects.

Some projects facing delay

Some of the major infrastructure projects that may be affected by the delay in implementation of the budget are Kano-Maiduguri road N10bn; rehabilitation of ZariaFuntua-Gusau-Sokoto-Birnin Kebbi (ongoing) N704million; outstanding portion of dualisation of Odukpani-Itu, Itu-Ikot Ekpene: lot 2. Itu-Ikot Ekpene (ongoing) N11.1 billion; rehabilitation of Enugu-Port Harcourt dual carriageway section II: Umuahia-Aba in Abia State (ongoing) N3.7 billion.

Others are rehabilitation and expansion of AbujaKaduna-Zaria Kano three lane dual carriageway (ongoing) N22.3 billion; Dualisation of Ibadan-Ilorin Section II in Oyo State (ongoing) N2.8billion; Construction of Bodo-Bonny road with a bridge across the Opobo channel in Rivers State (ongoing), N8.7 billion and several other railways project under the ministry of transport.

Transport Minister Rotimi Amaechi recently told journalists that the $6.7 billion funding proposed IbadanKaduna rail project is yet to be negotiated. The loan will be provided by the China EXIM Bank if the deal is concluded.

“When we met with the China EXIM Bank, they wanted us to reduce it but we don’t see how we can reduce it. But we will put it before the president, so that he too will also make a case for the loan when he goes to China in September,” he said.

He also said government would commit 15 percent in counterpart funding to the project and that if they could sign the loan this year, they would commence work in 2019.

Daily Trust findings show that already the China EXIM Bank committed $1.89 billion loan to Nigeria in various projects in the country.

Concerns over rising external borrowings

The government’s debt strategy is now to reduce the domestic borrowing and increase the percentage of external loan to a ratio of 60:40.

The new external borrowing in the 2018 budget requires the National Assembly resolution, the Director General of the Debt Management Office, Patience Oniha, told Daily Trust when contacted via phone yesterday.

Recently she told Daily Trust in an interaction that the borrowing ratio between domestic and external debts is now around 70:30 and efforts to reduce the local debt are on.

The total Eurobond issued by the federal government as of first half of 2018 was about $8.5 billion in addition to the $300 million Diaspora bond.

The total external public debt stood at $22.07 billion as at the end of first quarter of 2018. The DMO will tomorrow update the nation of the total public debt at the end of the second quarter of the year.

The budget deficit financing activities of the federal government may lead to an increase in yields in the domestic market from current levels, Head of Research, FSDH Merchant Bank, Mr. Ayo Akinwunmi, has said.

The researcher said corporate organisations and governments may also soon start borrowing at higher interest rates from the domestic market.

Speaking on the vulnerability of the country’s rising external debt to the dangers of naira devaluation, Akinwunmi stated: “The growth in the debt stock is mainly driven by external debt and was accelerated by the devaluation of the naira.”

A Professor of Economics at the University of Benin Anthony Monye-Emina said any implementation setback means slowdown in governance and infrastructure would continue to deteriorate.

Monye-Emina however said external borrowing is becoming too much and urged the government to draw from the external reserves to implement some of the projects instead of borrowing.

revenue

FAAC salaries

only pays

Analysis by Daily Trust indicated that the revenue to the federal government is not enough to settle the recurrent (non-debt) expenditure of government. The recurrent – salaries of workers, pension, overheads, special intervention programme and Presidential Amnesty Programme – will gulp the sum of N3.512 billion (N292 billion on monthly average). The total Federation Account Allocation Committee (FAAC) disbursement to the FG for the second quarter was N844 billion or N281billion on average. This is about N11 billion short compare to the expenditure projection within the same period.

Slowdown may another recession

trigger

There are fears of decline of the economy if the slow implementation of the budget persists. Experts said one of the consequences of poor budget spending is the decline in the GDP growth.

The Monetary Policy Committee of the Central Bank of Nigeria (CBN), at its July meeting, welcomed the positive economic growth in the Q1of the year, but observed that the recovery was still fragile and called for the speedy implementation of the 2018 Federal government Budget and the Economic Recovery and Growth Plan (ERGP) to strengthen output growth in the Nigerian economy.

The MPC called for an accelerated implementation to further support the fragile growth recovery.