President Muhammadu Buhari recently presented the 2019 budget proposal to a joint session of the National Assembly, a plan which seeks to continue the reflationary and consolidation policies of the 2017 and 2018 budgets respectively, which helped put the economy back on the path of growth.
A breakdown of the N8.83 trillion 2019 Appropriation bill, which fell below the N9.12 trillion 2018 approved budget by 3.18%, showed that provision for recurrent expenditure (non-debt) increased to N4.04 trillion (from N3.52 trillion in 2018), capital expenditure got N2.03 trillion (a decrease from N2.87 trillion in 2018), N2.14 trillion (higher than N2.01 trillion in 2018) was earmarked for debt servicing, N492 billion (a decrease from N530 billion in 2018) for statutory transfer and N120 billion (a decline from N190 billion in 2018) for sinking fund.
Hence, as a percentage of total budget, capital expenditure ratio (excluding the capital component of Statutory Transfers) plunged to 23.02% (from 31.46% projected in 2018); recurrent expenditure (non-debt) ratio rose to 45.75% (from 38.56% in 2018); and debt servicing ratio rose marginally to 24.29% (from 24.16% in 2018). On the other hand, Federal Government revenue was projected at N6.97 trillion, 2.85% lower than N7.17 trillion for 2018. The marginal decrease in revenue projection was partly due to lower income expectation from FGN Independently Generated Revenue (IGR) and recoveries of looted funds.
Of the total revenue, inflow from Crude Oil revenue was projected at N3.69 trillion (23% up from N2.99 trillion in 2018) while Non-Oil and Other revenue would make up the balance of N3.28 trillion. A further breakdown of the projected non-oil and other revenue (constituting 47.05% of total revenue) comprised of Companies Income Tax (CIT) of N799.5 billion, Value Added Tax (VAT) of N229.34 billion, Customs & Excise Receipts of N302.55 billion, FGN IGR of N624.58 billion, FGN’s Share of Signature Bonus of N84.23 billion, recoveries of N203.38 billion, and N710 billion as proceeds from the restructuring of government’s equity in Joint Ventures, etc.
Meanwhile, the resulting budget deficit of N1.86 trillion (1.33% of GDP) is expected to be financed by debt to the tune of N1.65 trillion equally shared between domestic and foreign sources, while the balance of N210 billion is to be financed from proceeds of privatisation of some non-oil assets by the Bureau of Public Enterprises (BPE).
The key assumptions of the 2019 budget proposal include: a higher crude oil price benchmark of USD60 per barrel (USD51 per barrel in 2018), crude oil production and foreign exchange rate unchanged at 2.3 million barrels per day and N305/USD respectively, lower real GDP growth rate of 3.1% (3.50% for 2018) and a slower inflation rate of 9.98% (12.5% for 2018).