29 December 2014, Lagos – The three tiers of government shared N6.3 trillion as statutory allocations from January to October this year. However, revenue from crude oil into the federation account fell by 3.3 percent to N5.7 trillion during this period, reflecting the impact of the falling price of crude oil.Data published by the Central Bank of Nigeria, CBN, reveal that revenue from crude oil into the nation’s federation account dropped by 3.3 percent to N5.797 trillion in the first ten months of the year, from N5.997 trillion in the corresponding period of 2013.From N1.834 trillion in the first quarter of 2013, oil revenue fell to N1.808 trillion in the first quarter of 2014. In the second quarter oil revenue dropped to N1.795 trillion, and again to N1.723 trillion.
Since June, crude oil prices have been on the downward trend. According to the CBN, average price of Nigeria crude oil fell from $114 per barrel in June to $59.97 per barrel as at December 24th.
According to Dr. Bright Okogu, Director-General, Budget Office, the decline in crude oil price is one of the challenges of implementing the 2014 Budget.
In an analysis of the 2015 proposed budget, he said that releases for 2014 recurrent budget are on track, while N610 billion has been released for capital expenditure.
He said for the implementation of SURE-P Budget, “Of the N268.37 billion provisioned for SURE-P, N208.3 billion (or 77.6 percent of the SURE-P budget) has been utilized in various job creation initiatives and infrastructure projects.
“This level of implementation is coming amidst various challenges to the 2014 Budget revenue, including: fall in average oil production of 2.2mbpd against 2.38mbpd budgeted; oil price falling from about $114pb in June now to about $60pb; and Under-remittance of internally generated revenue by some MDAs.”
Statutory allocations drop by 4.5% Analysis of statutory allocations to the three tiers of government as published by the Central Bank of Nigeria in its monthly and quarterly reports reveal that total allocations from January to October fell by 4.5 per cent or N296 billion from N6.626 trillion in the corresponding period of 2013.
In the first quarter, statutory allocations fell to N1.827 trillion from N2 trillion in the first quarter of 2013. Allocation to the Federal government rose to N912 billion from N908 billion, while allocation to the 36 states fell to N669.57 billion from N734.07 billion.
Allocation to the 774 local governments fell to N374.79 billion from N401.68 billion.
From N2.11 trillion in the second quarter of 2013, allocations to the three tiers of government fell N1.926 trillion in the second quarter of 2014. Allocations to the federal government in the second quarter of 2014 fell to N864.2 billion from N885.5 billion in 2013.
For states and local governments, allocation fell to N692.08 billion and N388.13 billion respectively, from N773.01 billion and N422.62 billionIn the third quarter, allocations to the federal government fell to N924.68 billion from N686.86 billion in the corresponding quarter of 2013.
Allocation to states and local government however rose to N694.39 billion and N398.09 billion from N686.86 billion and N394.12 billion respectively in third quarter of 2013.
FG’s deficit rises 21%
Further analysis reveals that the budget deficit of the federal government rose by 21 percent in the first ten months of 2014.
Recall that the 2014 appropriation bill of the federal government projected revenue of N3.73 trillion and expenditure of N4.96 trillion, implying deficit of N1.23 trillion.
Statutory allocation data show that total federal government revenue from January to October dropped to N2.979 trillion, from N3.064 trillion in the corresponding period of 2013.
The revenue for the ten months however represents 79.8 percent of the total revenue projected for the year, less that 83.3 percent or N3.1 trillion expected for the ten months period.
Federal government expenditure also dropped from N3.817 trillion to N3.6 trillion. Consequently, total deficit rose to N753 billion from N620 billion in the 2013 period.
Experts fault budget 2015 assumptions
Meanwhile a group of experts have faulted the crude oil price and exchange rate assumptions of the budget 2015 proposals of the federal government.
The proposed 2014 Budget of the federal government is based on a crude oil price benchmark of $65 per barrel (initially $78) and exchange rate of N165 to the dollar.
Experts at the Center for Social Justice however submit that, “the benchmark price of crude oil and the exchange rate projection seem to be based on inaccurate data and information and will lead to lack of predictability in the budget”.
In its preliminary views on the 2015 Federal Budget, the Center stated, “Insisting on a benchmark price of $65pb at a time crude oil is trading below $60pb is an exercise in futility which seeks to lay the foundation for budget failure.
It is also a ready-made excuse for the budget not to achieve its objectives. A budget must be realistic and its revenue framework based on accruable revenue sources.
Planning with facts and statistics which the planner knows to be wrong is a waste of time. For the government to merely hope without any empirical basis that the price of oil will rebound in 2015, as the basis for fixing a benchmark higher than the actual price raises issues about the credibility of the budget.
The benchmark should have been lower than current prices and if the price eventually goes up, savings can accrue to the Excess Crude Account.
“Insisting on an exchange rate of N165 to $1 at a time when the currency is facing severe pressure and the Central Bank has fixed a band of + – 5per cent around the N168 to $1 corridor appears overtly optimistic.
Why not use N168 to $1 or the interbank rate of N167.5 to $1? With the sell-off of stocks by foreign investors, increased frivolous spending for the 2015 campaigns and obvious liquidity challenges, the naira may likely depreciate further.
Undue optimism in the face of daunting challenges pointing in the opposite direction is not the way for credible planning.”
*Babajide Komolafe – Vanguard