FG borrows N600bn to augment 2016 budget
A total of N600bn has so far been borrowed by the Federal Government to augment the shortfall in government revenue caused by the drop in oil prices as well as activities of vandals along oil pipelines across the country.
The amount, which was borrowed from the domestic market between January and June this year, is said to be 33 percent of the N1.8trillion approved borrowing in the 2016 budget.
Minister of Budget and National Planning, Sen. Udo Udoma, made this known in his presentation to civil society groups on the proposed Medium Term Expenditure Framework, MTEF, 2017-2019.
The MTEF, which is expected to be submitted to the National Assembly in October, provides the basis for annual budget planning and consists of a macroeconomic framework that indicates fiscal targets, estimates, revenues and expenditure, including government’s financial obligations in the medium term.
The document, prepared by the Ministry of Budget and National Planning, also sets out the underlying assumptions for these projections, provides an evaluation and analysis of the previous budget, and presents an overview of the consolidated debt and potential fiscal risks.
Udoma said the 2016 budget performance was reflective of the low revenue output attributable to the global and domestic development. Revenues into government coffers has dropped significantly in recent times due to various challenges affecting oil and non-oil receipts.
“Non-oil revenues declined compared with forecasts in the budget due to slow-down in economic activities and the acute shortage of foreign exchange.
“The shortfall was augmented by domestic borrowing amounting to N600bn, about 33 per cent of approved borrowing of N1.81tn.”
Gross revenue into the Federation Account has been experiencing a huge decline since the beginning of this year, owing to the shutdown of production for repairs of critical infrastructure.
The 2016 budget had projected daily oil production output of 2.2 million barrels, with the budgeted oil benchmark price of $38 per barrel. The Federal Government therefore, projected a total revenue of N3.86tn where oil-related revenues were expected to contribute N820bn.
Similarly, non-oil revenues comprising Companies Income Tax, Value Added Tax, Customs and Excise duties and Federation Account levies are expected to contribute N1.45tn, while N1.51tn is projected to be earned as independent revenues from the Ministries, Departments and Agencies of government through strict compliance with the Fiscal Responsibility Act, 2007.
Analysts have blamed the huge budget deficit on the inability of the federal government to successfully diversify the economy away from oil. They advise government to borrow for investment and not consumption so as jolt the economy.