Forex restrictions adversely affected economy - FG

The Federal Government yesterday lamented that the foreign exchange restrictions by Central Bank of Nigeria (CBN) in the first half of this year adversely affected the economy.

Minister of Budget and National Planning Udoma Udo Udoma, who spoke at the stakeholders’ consultative forum on the 2017- 2019 medium term expenditure framework held at the Banquet Hall of the State House in Abuja, also enumerated such activities as oil production disruptions in the Niger Delta, low oil revenue, low power generation, fuel supply problems in the first quarter (which have been resolved) and insurgency.


Udoma said inflation hit 16.5 percent in June; unemployment increased to 12.1 percent in March from 10.6 percent in December 2015 and created challenges for some state governments in paying salaries, in addition to the Federal Government giving bailout to states.

The consultations for 2017 to 2019 medium term expenditure framework and fiscal strategy 2017 to 2019 is in keeping with the dictates of the Fiscal Responsibility Act and the final draft is the material upon which those years’ budget would be based.

The Federal Government has projected a modest revenue of N7,418,631,892,072 as distributable revenues next year, but the exact amount for next year’s budget, Udo Udoma said, is expected to be ready before members of the National Assembly resume from their recess in September.
Giving a breakdown of this year’s budget performance so far, Udoma disclosed that 35 percent or N2.123 trillion of the N6.060 trillion vote has already been spent so far.

Debt servicing he said, took N598.63 billion; statutory transfer- N175.68 billion (including prorated capital expenditure of N78.58; overhead- N125.4 billion; Pension and gratuity- NN79.18 billion and personnel cost- N891.31 billion.

As at July 18, Udoma stated that N253 billion had been released as capital expenditure (capex). “This has largely been released for MDAs’ utilisation on investment in critical infrastructure projects. However, the release of these funds to the MDAs has to be justified with possibilities of job creation,” Udoma said.

“Total aggregate capex, inclusive of capex share in statutory transfers, is N331.58 billion as at July 18, 2016, made up of the N253 billion already released and statutory transfer which includes a prorated capex of N78.58 billion.

The revenue projection for 2017 is made up of N5.402 trillion net accruals from mineral sources, customs and excise and taxes (statutory revenue) as well as N2.016 trillion from value added tax (VAT).

The minister added that N7, 858,105,163,246 and N10,162,111,175,201 are the revenue projections for 2018 and 2019.

Speaking on the underlying assumptions that will drive the macroeconomic parametres and targets for the Medium Term Expenditure Framework (MTEF), Udoma said the government was considering a conservative oil price benchmark of $42.5 per barrel of crude in 2017, $45 per barrel for 2018 and $50 per barrel in 2019; 2.2 million barrels next year per day production of crude oil in 2017, 2.3 million in 2018 and 2.4 million in 2019 with and exchange rate of N290/$ for the three years.

The government’s growth projections for the MTEF, the minister said, is targeted at “National Real GDP growth of 3.02 in 2017; 4.26 in 2018 and 4.04 in 2019; Nominal GDP (N billion): N108,734,534.85 in 2017, N118,979,374.57 in 2018 and N129,772,715.04 in 2019; population growth of the 3.2 for the three years and inflation rate of 12.92 percent in 2017, 11.88 percent in 2018 and 12.57 percent in 2019.

The government expects inflation to be higher in 2019 than the preceding year because of the uncertainties of the election year.

Non-oil revenue receipts for the next three years Udoma said, are expected to increase significantly due to a gradually recovering domestic economy; a projected increase in consumption and the government’s expected improvement in FIRS tax collection efforts, especially with respect to broadening and strengthening of the tax net.

This, he said, will include Company Income Tax (CIT) projected to increase from N1.788 trillion in 2016 to over N1.86 trillion in 2017 and beyond; VAT collections/receipts to increase by about 42.4 percent in 2017; operating surpluses projection has been moderated downwards for 2017 and, thereafter, a modest growth; customs collections are projected to moderate in 2017 before picking up in the other years and recoveries of misappropriated funds projected to increase. These recoveries include refunds from strategic alliance contracts and recoveries of other misappropriated funds and fines.

Udoma said although the projected distributable revenue is higher over the medium term, it will not be sufficient to address the current fiscal challenges at the national and sub national level without substantial private sector investment.

The key strategies for achieving the fiscal objectives and macroeconomic targets include: support for rapid development of SMEs through increased funding, design agricultural input subsidy for direct benefit for farmers and encourage foreign construction companies to patronise local producers of inputs as well as subcontracts to small indigenous construction firms. There are also fast tracking the development of the non-oil sector through the diversification of productive base of the economy, encouraging private sector participation in production and marketing, broadening scope of revenue collection, strengthening linkages with Medium Term Development Plans and the SDGs to achieve a more developed infrastructure that supports growth, job creation and increased private sector investment, focus on value chain that will generate wealth and improve sufficiency, promotion of environmental sustainability-by cleaning up oil spillage in the Niger Delta region, building indigenous technology and the implementation of a flexible exchange rate.

The “Federal Government will intensify its efforts at pursuing non-oil revenue driven economy, but we need some game changers”.

The state and local governments, the minister urged, are “to consider strengthening their internally generated revenues by focusing on areas of comparative advantage; sustaining the implementation of fiscal sustainability plan; and focusing spending on priorities that will increase productivity and job creation.”