N4.495tn budget proposal for 2014 unrealistic – Analysts SEPTEMBER 23, 2013 BY OYETUNJI ABIOYE 1 Comment President Goodluck Ebele Jonathan | credits: File copy Financial analysts have described the 2014 budget proposal sent to the National Assembly for debate on Tuesday as dicey and unrealistic. The Federal Government has proposed a budget of N4.495tn for the 2014 fiscal year that will be predicated on an oil revenue benchmark of $74 per barrel. While the proposed budget projection shows a reduction of N492bn from the N4.987tn appropriated by the National Assembly in 2013, the 2014 oil benchmark of $74 per barrel also marks a reduction of $5 per barrel from the $79 in the 2013 budget. The budget proposal is contained in the Medium Term Expenditure Framework and Fiscal Strategy Paper sent by President Goodluck Jonathan to the National Assembly last Tuesday. The MTEF and FSP are also proposing a reduction in the capital expenditure and a rise in the recurrent expenditure in 2014. Capital expenditure has been pegged at 26 per cent, while recurrent expenditure is pegged at 74 per cent. In the 2013 Appropriation Act, recurrent expenditure was 68 per cent, while capital expenditure was put at 32 per cent. According to the expenditure framework, the reduction in capital spending in 2014 is the fallout of the government’s projected reduction in revenue in 2014. The document also stated that expected revenue from non-oil sectors in 2014 would be benchmarked at 25 per cent of total revenue. Reacting to the budget proposal, an Associate of Economics at the Ekiti State University, Dr. Abel Awe, said the expected revenue from the non-oil sector benchmarked at 25 per cent of the total revenue was not achievable since the government had yet to diversify the revenue base. According to him, it is unrealistic to expect one quarter of the total revenue from the non-oil sector when the nation still has poor tax structure and lean agriculture and solid mineral exports. He said, “For the 2.3 million barrels per day projected oil production output, we just hope there will be peace in the Niger Delta, considering the fact that 2014 is the year preceding the general election. Our economy is vulnerable to shock in the domestic sector-drop in production output; and shock from the international oil market- volatility of oil prices. The fundamentals show that the 2014 budget proposal is dicey.” Another financial analyst and Chief Executive Officer, Figures Only, a financial advisory and research firm, Mr. ToluAdegbenga, faulted the 2014 budget proposal on the ground that the size of the recurrent expenditure was too high. He said, “The size of the recurrent expenditure is too high. It means the cost of governance is too high. Government recently said it had yet to disburse 70 per cent of what it budgeted for capital expenditure in 2013. How do you look at that?” While noting that the capacity to monitor the budget on the part of the government was too poor, Adegbenga said the government needed to consider the fact that 2014 was the year preceding election and, as such, there was likely going to be inflationary pressures. The Senate has set next Tuesday for the debate on the MTEF. The budget proposal also showed that the Federal Government had pegged oil price for 2015 and 2016 fiscal years at $75 and $76 per barrel, respectively. It also put the budget projections for 2015 and 2016 at N4.743tn and N4.839tn, respectively. In arriving at the decision at $74 per barrel as the oil price benchmark for 2014, the government said it took cognisance of “the weakening future prices occasioned by rising oil theft and unconventional oil supplies as well as slow economic recovery.” The projected crude oil production of 2.383 million barrels per day in 2014 is 143,000 barrels lower than the 2.526 million barrels per day in the 2013 budget. The proposal also shows that the government is projecting a 6.75 per cent Gross Domestic Product growth in 2014, which indicates a slight increase from 6.5 per cent in 2013. The GDP growth, the government stated, would be driven by strong performance in agriculture, wholesale and retail, construction and real estate sectors, among others.
Posted on: Mon, 23 Sep 2013 14:09:15 +0000
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