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Market Digest Nigeria

Finance

Nigerian Government’s Oil Revenue Projection Fell By 51% In 2019

Crude Oil

The Nigerian government’s projected earnings from oil, which it intended to use for the implementation of its 2019 spending plan, was 51 per cent wide off the mark.

Crude Oil

 Figures sighted in the Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP), which is before the National assembly for approval, said the president approved a petroleum revenue assumption of N3.69tn but was only able to draw in an approximate of N1.83tn, which is an estimated shortfall of N1.90tn from the amount it hoped to earn.

Crude oil pipeline

According to the ministry of finance, which prepares the MTEF/FSP, the federal government hoped that the country would make a gross sum of N9.93tn from fossil fuel. Unfortunately, only N4.60tn came into the consolidated revenue account housed with the Central Bank.

“Gross oil and gas budget revenue were projected at N9.33 trillion for FY2019, but only N4.60 trillion was realized. This represents a 49.4% performance. After deductions (including 13% derivation), net oil and gas revenue inflows to the Federation Account amounted to N2.831 trillion.

“This represents a shortfall of N4.77 trillion (or 62.8% of the budget),” the ministry said.

 The reduced amount, which the three organs eventually had to share, was down to ‘lower than projected oil production, high production cost, as well as higher costs incurred by NNPC on federally-funded projects.’

On the non-oil axis, the federal government said it projected to raise N4.35tn but collected N3.83tn instead, creating a collection deficit of N520bn. When the three organs of government shared the levies among themselves, the federal government said it was left with N1.23tn.

It said, however, that it projected to collect an estimated N1.41tn from non-oil sources.

When the 2.11bn the federal government earned from the mining sector was added to the 3.65tn received from oil and non-oil sources, the federal government was left with N3.68tn to pay salaries and carry out capital projects.

After adding earnings from other sources, such as revenues generated by government agencies other than the NNPC, borrowings from the Central bank, deductions from special accounts like the Excess Crude Account, among others, the federal government said it had N4.54tn to run its activities for 2019.

In the spending of the N4.54tn, the executive did a disservice to its retired staff and the health sector.

The president approved N528.07bn to be shared among retired civil servants. Out of this sum, only N307.38.bn was disbursed. This left pensioners without a due amount of N220.69bn.

The National Health Act of 2015 makes it mandatory for the federal government to pay 1 per cent of the money that accrues to the consolidated revenue account in a given year into the basic health care fund. The MTEF/FSP said the sum that came into the revenue account in 2019 was N51.22bn. The health care fund received just N10bn of that amount.

The federal government also makes annual payments to the Nigerian Bulk Electricity Trading (NBET) LTD for the settlement of outstanding shortfalls in the Nigerian electricity supply industry. The president vowed to pay N150.40bn. NBET received N110.48bn, leaving a deficit of N39.92bn for the already burdened power sector to deal with.

While several agencies received less than the president approved for their expenses, certain items in the budget earned markups.

Despite being unable to pay the dues it budgeted for its retirees and the exact amount constitutionally owed to the basic health care fund for 2019, the federal government spent more than the president said it would on recurrent expenditure.

President Muhammadu Buhari said N4.06tn should be spent on recurrent expenses minus debt services. However, the executive allocated N4.25tn for its reoccurring expenses, N185.17bn more than approved.

It also spent more on servicing its foreign debts. It projected N433.80bn. However, it went on to pay N448.66bn, giving N14.87bn more than it anticipated to its foreign debtors. The president approved N2.25tn for debt service. The federal government had paid N2.45tn to service its loans at the end of the year.

The increased sum given to reoccurring spending meant that the government had less than approved to spend on executing capital projects. Buhari approved N2.09tn for capital expenditure, however, N1.16tn was released. This is N929.44bn less than the president promised to spend on public infrastructure.

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