The Joint Senate Committee on Finance and Appropriation has said the implementation of the 2013 budget did not record up to 40 per cent within the first half of the year.
The Committee also pegged the exchange rate for 2014 at N160 to $1 while it fixed benchmark oil price at $76.50 per barrel.
The report of the Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) for 2014-2016 was presented to the Senate for consideration and adoption.
The MTEF and FSP are statutory requirements that must be submitted to the National Assembly for its consideration and approval prior to the presentation of the National Budget to the National Assembly by the Federal Government as mandated by Section 11 of the Fiscal Responsibility Act, 2007.
The committee said: “An assessment of the performance of the 2013 Budget shows that various reasons have been given for the failure of the budget implementation, its impact has remained unimpressive.
“From the progressive, optimistic but cautions MTEF and FSP projections and policy objectives over the years, the nation has not moved from the old practice of heavy recurrent and light capital projection which led subsequent poor implementation of the budget in the years past.
“From the statistics on the first and second quarter releases of the 2013 budget including the SURE-P implementation so far, is far from impressive.
“Not up to 40 per cent of projections for the first half of the year have been realised.
“Operators of the budget have blamed the situation on oil theft, vandalisation of pipelines and similar situations already mentioned.
“Although the operators of the spending was pegged at N1.591 trillion (Capital budget), of this sum, only N827 billion had so far been released and cash-backed for the implementation of Capital projects as at the end of the third quarter, 2013, for reasons the executive claimed were occasioned by reduced revenue inflows from oil and non-oil revenue sources especially revenues from the Nigeria Customs Service,
On the controversial Subsidy Reinvestment and Empowerment Programme it said, “Moreover, it is disheartening to learn that a total of N93.5 billion of the N180 billion SURE-P allocation for 2012 which could not be exhausted in the 2012 budget, was rolled over to 2013.
“This shows that only 40% of the SURE-P budget was utilized. That brings the total SURE-P budget for 2013 to N273.5 billion, instead of the usual annual N180 billion for SURE-P.
“It was observed that of the N273.5 billion budgeted under SURE-P for 2013, only Ml04.1 billion had been expended on various projects and programmes, and that a provision had again been made to roll over to 2014 a total sum of N94.34 billion – an indication that about 34.50 per cent of the 2013 SURE-P allocation would not be spent.”
On benchmark oil price and production, the committee said: “The benchmark price of oil adopted for 2013 is $79/barrel while oil production was set at 2.52 million barrel per day (mbpd).
“But provisional data from the Nigerian National Petroleum Corporation (NNPC) show that the average oil lifting (including condensates) in the second quarter of 2013 was 2.06 million barrels per day (mbpd) representing a shortfall of 0.46 (or 1S.25 per cent), below the 2.52mbpd projected for 2013.
“Expectedly, the operators explain that the fall in oil lifting during the quarter was the product of incessant crude oil theft, illegal bunkering and pipeline vandalisation.
“It is suicidal to continue to explain away failing budgetary projections as if such constitute economic progress.
On Oil Revenue Performance, the committee noted that “A review of Crude Oil sales of N764.52 billion, Gas sales of N74.75, Rent of N0.03 billion and other Oil and Gas Revenue of N0.36 billion fall below their quarterly projections of Nl,060.98 billion, N89.90 billion, M0.22 billion and 0.77 billion by N296.46 billion (or 27.94 per cent), N15.15 billion (or 16.85%), N0.19 billion (or 86.42 per cent) and NO.4.1 billion (or 53.41%) respectively.”
The implication of the above figures, it said, “is that if we do not do something to align our forecast with actuals, our budget will continue to fail in this respect.”
On Non-Oil Revenue Performance the committee said, “The gross non-oil receipts in the first half of the year amounted to N927.74 billion showing a shortfall of N498.1 billion (or 34.93 per cent) below the half year estimate of Nl,425.84 billion. The performance indicates that all the non-oil revenue items were below their respective estimates.
“Value Added Tax collection of N379.117 billion, Company Income Tax collection of N341.37 billion and Customs 8c Excise Duties collection of N207.2 billion respectively, fell short by N93.46 billion (or 19.78 per cent), N154.65 billion (or 31.18 per cent) and Nl 89.28 billion (or 47.74%) when compared with their projections for the half year. Subsequently, FIRS, however, surpassed its budget projection of N2,979,324,000 as it remitted N3,461,821,770,168.18 between January and August.”
On aggregate expenditure performance, it said: “Available data shows here also that the actual aggregate expenditure had always fallen short of the projections since 2011.
“For instance, the actual aggregate expenditure for 2011, 2012 and first quarter of 2013 were N4,099.3 billion, N4.160.0 billion and N918.3 billion (first quarter) respectively, as against the projections of N4,483.7 billion, N4.697 and Nl,246.80 billion.
“Similar trends were observed the actual performance of recurrent and capital expenditure for the period 2011-2013.
“It follows therefore that the projections in the MTEF document may not be as realistic as we would wish since the problem of dwindling revenue as a result of oil theft and shortfall of collection by Nigeria Customs Service has not been addressed. Government must take steps to ensure that projections are made to match actuals by equipping relevant institutions and agencies to effectively drive for fund, and remove from the system the things that hamper full realisation of the budget objectives.”
On 2014 budget projections, the committee said: “The 2014 Budget is predicated on crude oil production of 2.3883mbpd with a benchmark price of $74pb and a projection of aggregate expenditure of N4.77 trillion of which the capital expenditure is N1.45 trillion. New borrowing of N572 billion projected for 2014 would increase the total of local and foreign debt to N8.25 trillion from N7.11 trillion in 2013.
“The status of bad loans absorbed by the Asset Management Corporation of Nigeria (AMCON) was not stated, and the details of the number of projects completed that have rate of returns were not also available. The contingent liability of AMCON could be in trillions of naira.
SURE-P projection for 2014 is the N180 billion annual allocation plus the N94.34 billion unspent in 2013, bringing the total allocation for SURE-P in 2014 to N274.34 billion.”
On forecast for crude oil production per day, it said: “The MTEF document has projected a daily crude oil production of 2.3883mpbd, 2.5007mbpd and 2.5497mbpd for 2014, 2015 and 2016 respectively.
‘The forecast is based on the assumption that government will tackle the problems of vandalisation, oil theft and illegal bunkering that such factors will no longer impact negatively upon production.
“This implies that as long as adequate measures are not taken to address the leakages, the shortfalls associated with our annual budget would continue. The result is that the next budget could also fail to achieve its objectives.
“However, relevant agencies explained measures adopted to curtail the problem with production now at slightly above 2.2mbpd.”
It recommended that “In view of the above, the Joint Committee considers executive proposals of 2,3883mbpd, 2,5007mbpd and 2,5497mbpd for 2014, 2015 and 2016 respectively as reasonable.
“However, as long as adequate measures are not taken to address the leakages, the shortfall associated with our annual budget will continue.”
Although the 2014 – 2016 MTEF and FSP projects an average exchange rate of N160 to the dollar, “the Committee is of the opinion that the projected average exchange rate is reasonable and appropriate, considering the volatility of the world economy and the strong demand for the dollar”.
It added that effort should be made to keep the Naira stable.
The Joint Committee recommended the adoption of the average exchange rate of N160/USS1 for the next three years.
It also noted the benchmark prices of $74, $75 and $76 per barrel fixed for the sale of oil for 2014, 2015 and 2016 respectively are based on the current world market price for crude, as underpinned by the model of 10 years and 5 years moving average considering the possible outcome of the weakening future of the oil market as well as the discovery of Shale oil and the recent discovery and supply of oil in some new African countries that depended on Nigeria for crude oil.
“However, it is noticed that there is a provision to distribute N666.9 billion to the three tiers of government from the Excess Crude Account.
“Therefore, the effective benchmark proposed by the Executive is about $80pb.
“The Joint Committee, however, observes that though ‘ the benchmark prices are conservative and reasonable, they should be increased slightly to provide more funds.
“The Joint Committee after due consideration of the point raised above, hereby recommends the adoption of US. 76.50 per barrel to take care of some aspects of pension arrears and critical projects of economic importance.
“This is in addition to the distribution of N666.9 billion from the ECA as proposed by the v Executive,” the committee said.
On domestic and foreign debts, the committee said: “The current debt profile of N7.53 trillion and the budget deficit of 1.90 per cent of GDP proposed for 2014 which would partly be funded through borrowing, cannot be said to be the best approach to economic development.
“Already, the 2014 budget is contemplating new borrowing of up to the tune of N572 billion.
“If approved, it would raise our debt profile to an all-time high sum of N8.25 trillion excluding the AMCON contingent liability which could be in trillions of Naira.
“In view of the above, fiscal prudence needs to be exercised m line with the Fiscal Responsibility Act, 2007. The high level of domestic borrowing is pushing up interest rate and if not checked, the private sector could be crowded out of the credit market.
“This is more worrisome as the Central Bank of Nigeria (CBN) has retained and maintained the Monetary Policy Rate (MPR) of 12 per cent over the years. If the trend goes en unchecked, the nation’s debt profile could be as high as $15 billion by 2015.
“Looking at the present MTEF and FSP as it were, one wonders why the Sinking Fund and Debt Sustainability Analysis introduced in 2012 and maintained in 2013 was set up, especially as nothing was mentioned anymore about the idea and achievements made so far.”
It recommended: “To finance the deficit, the proposed domestic borrowing of N572 billion for 2014 is recommended.”
It said the on-going plan by the government to streamline the management of subsidy through a tighter payment regime is a quality decision.
“However, it would have been better appreciated if subsidy repayment details were included among the Executive submissions to the National Assembly to enhance accountability of the funds so far disbursed. Furthermore, there is provision of N971.138billion for petroleum product subsidy for the 2014 fiscal year; the same amount paid in 2013.
“Subsidy payment projections for 2015 and 2016 are, however, slightly increased from N971.138 billion in 2014 to N999.720 and N1028,301 billion respectively without any explanations.
“There is need here for further scrutiny to ensure accountability, prudence and transparency.
“Above all, a definite period must be worked out at which the nation will stop the importation of refined petroleum products into the country. The nation’s refineries must be made to work at full capacity, and new ones brought on stream to energize the policy.
“We could not get explanation from any of the agencies if the subsidy payment projection include subsidy on kerosene,” the committee said.
It recommended that the Senate Committee on Downstream Petroleum should strive to get details of subsidy payments for effective oversight functions.
The Joint Committee observed that “the effective benchmark proposed by the Executive is about $80pb and not $74pb because of distribution from Excess Crude
“Account totaling N666.9 billion already built into the Revenue and Expenditure Framework;
“The projected revenue from the Nigeria Customs Service of Nl,255,560,000,000 is not realisable as they were not effectively carried along in arriving at realisable revenue. This could create a shortfall of about M200b.”
