THE 2015 Appropriation Bill of N4.357 trillion has aggregate revenue projection of N3.602 trillion made up of oil revenue of N1.918 trillion and non-oil revenues of N1.684 trillion (implying a ratio of 53 per cent oil revenues to 47 per cent non-oil).
A breakdown of the budget proposal showed that N411,840,000.00 was for statutory transfers, N943,000,000.00 was for debt services, N2,616,426,233 for recurrent non debt expenditure and N387,112,573,767 was for capital expenditure. The revised projected crude oil benchmark remains $65 per barrel with oil production put at 2.2782 million barrels per day (mbpd) and exchange rate of N165 to the U.S. Dollar.
Senators have described the budget as deficit and unrealistic as the global oil prices continue to witness steady decline. By the third week of January, a barrel of the North Sea benchmark had fallen to $48.54, its lowest level since April 2009. The United States crude oil was also at its lowest level, of $47.10 a barrel. Furthermore, the price of Organisation of Petroleum Exporting Countries (OPEC) basket of 12 crudes stood at $41.19 a barrel as at middle of January, compared with $45.68 early January. Crude oil prices started dropping in the international market from as high as 110 dollars per barrel in June 2014. With the continuous decline in prices, experts have predicted that global oil prices may never again rise up to a $100 per barrel.
Crude oil accounts for about 95 percent of Nigeria’s foreign exchange receipts. Thus the reality of possible crippling budget shortfalls as the global oil price fell over $20 below the budget benchmark. This implies a deficit of about $64 million on a daily basis and estimated $23.2 billion dollars by the end of the year. This is provided oil companies are able to produce without disruption to their activities.
More so, with the exchange rate rising to over N180 to a dollar, the national budget is looking likely to record over N300billion naira deficit. In this vein, Strong indications have emerged that the Senate would propose that the oil benchmark for the 2015 budget be reduced to $40 per barrel in line with the reality of falling crude prices in the international market. According to a member of Senate Committee on Finance, Ita Enang, the benchmark should be fixed at $40 per barrel in line with the prevailing oil prices in the international market. But economic experts have warned that further slash in the oil benchmark may truncate the national budget. This may grossly affect execution of capital projects. Thus, lawmakers have asked the Federal Government to tackle the emerging economic recession in the country following dwindling oil revenue.
The need to tackle economic issues is coming on the heels of the incomplete implementation of the 2014 budget. It was reported that just a little over 75 percent of the budget was implemented. Whether the funds were able to accomplish what it was budgeted for, is a topic for another day. This was despite the 2014 budget being based on $78 per barrel and crude oil selling for over $100 per barrel for the larger part of the year. But as usual, the Excess Crude Account has been depleted and there is virtually nothing to fall back on. This is 2015, and there is serious need for servicing a budget deficit.
The minister of finance and coordinating minister of the economy, Dr. Ngozi Okonjo-Iweala recently admitted that there were still leakages and incidences of non-remittance of requisite funds to treasury by some agencies. She said government was going to improve tax revenues not by increasing tax rates as many have advised, but by strengthening its tax administration.
Recent reports have it that, the federal government plan to raise about N450billion through internally generated revenue (IGR) for the 2015 budget but it would not be sufficient going by the continuing fall in the price of crude oil at the international market experts have said. According to the 2015 budget proposal, government plans to contribute an extra N160 billion in tax receipts by ramping up an initiative by the Federal Inland Revenue Service and McKinsey. It plans to limit the issuance of tax waivers, which has been fraudulently abused. This will unlock about N36bn in additional tax revenues in 2015.
In the case of urgent servicing of budget deficit, there is need to revisit the Fiscal Responsibility Act (FRA) which has been trampled upon over the years. Nigeria enacted the Fiscal Responsibility Act (FRA) on 30 July, 2007. The FRA covers only the Federal Government and its objective is to ensure prudent management of the nation’s resources, long-term macro-economic stability, greater accountability and transparency in fiscal operations and debt sustainability, among others. The FRC Act, 2007 requires MDAs to remit 80 per cent of their operating surpluses to the coffers of the government. However, many of the MDAs usually fail to remit the surpluses to the government until they are summoned by the Fiscal Responsibility Commission (FRC).
An investigation by the House of Representatives on unremitted revenue last year said that 60 percent revenue generating agencies of the Federal Government failed to remit over N9.4tn to the coffers of the government between 2009 and 2012. The Chairman, House Committee on Finance, Abulmumin Jibrin, had said of the N3.06tn the agencies generated in 2009, only N46.8bn or 1.53 per cent was remitted to the government. In 2010, the sum of N3.07tn was generated, but N54.1bn or 1.76 per cent was remitted; and in 2011, the generated figure stood at N3.17tn, out of which only N73.8bn or 2.33 per cent was remitted. This is even as the Fiscal Responsibility Commission was reported to have recovered N259.59bn operating surpluses from Federal Government Ministries, Departments and Agencies between 2009 and 2013.
For example sometime around December 2013, Former Central Bank of Nigeria Governor, Sanusi Lamido Sanusi revealed that the Nigerian National Petroleum Corporation failed to remit fund to the coffers of the federal government since around 2012. The allegation of the missing $50billion remains a mystery up till today despite assurances by Okonjo-Iweala that an external auditor was commissioned on the matter and that it would submit its report before one month thereafter. Also, nothing else had been heard about the N225million bullet proof car scandal in the aviation ministry since Ms. Stella Odua was merely relieved of her position. Now, she is vying for a Senate seat.
A media report in October 2013 also revealed that, Nigerian Ports Authority (NPA), Nigerian Maritime Administration and Safety Agency (NIMASA) and some other key revenue-spinning federal government corporations and agencies have not been remitting their operating surplus to the federal government’s treasury as statutorily mandated.
Other agencies mentioned that have been violating the Fiscal Responsibility Acts (FRC) included the Nigeria Customs Service (NCS), Bureau of Public Enterprises (BPE), Federal Airport Authority of Nigeria (FAAN) and Nigerian Electricity Regulatory Commission (NERC), the Nigerian Ports Authority, the Central Bank of Nigeria (CBN) and the Nigerian Civil Aviation Authority (NCAA). For instance, FRC in a report lamented that Securities and Exchange Commission (SEC) management lied that the agency recorded losses in 2007 and 2008 when in reality SEC recorded an operating surplus of N11 billion in 2007 alone! In this category also is the Federal Inland Revenue Service (FIRS), which draws funds directly from Federation Account as cost of collection. This monthly cost of collection is most times higher than allocations to some states and their local government councils despite the relatively small staff strength of the Service.
These and other violations are reasons why the Senate recently accused ministries, departments and agencies (MDAs) of encouraging fiscal indiscipline, which invariably undermine the budgets. The lawmakers even said internally generated funds from revenue earning agencies should be enough to fund the budget, but for the gross fiscal indiscipline being displayed by the MDAs. The lawmakers, therefore, vowed to ensure regular oversight to curb the excesses of the MDAs even though lawmakers themselves have often been accused of.
In a nutshell, there is need to review the earnings of the MDAs like Chairman Senate committee on Finance, Ahmed Muhammed Makarfi suggested. Apparently to track the earnings of the MDAs, the Federal Government has directed its MDAs to close their revenue accounts with deposit money banks latest by February 28. The government gave the directive while unveiling an electronic revenue collection platform aimed at checking theft, diversion of collected revenue and all sorts of corrupt practices associated with revenue collection. The balances in the revenue accounts, it said, should be transferred to the Consolidated Revenue Fund of the Federal Government.
This measure should be taken very seriously if the government is really ready to curtail wasteful spending and corruption in MDAs. Finally, the federal government should abide by the FRA by making sure that fiscal deficit (annual borrowing) doesn’t exceed three percent of its gross domestic production. The government should also try to verify that all tiers of government comply with the approved limits of consolidated debts and comply with the conditions for obtaining loans. More so, the Fiscal Responsibility Commission (FRC) should continue to enforce and monitor the implementation of the entire Act.