The Sun News

2017 Budget: Why poor funding’ll rob Nigerians of recovery gains

By Omodele Adigun, Moses Akaigwe, Uche Usim, Adewale Sanyaolu and Charles Nwaoguji

As Nigerians expect the Federal Government to hit the ground running with the 2017 budget signed into law by the executive after nearly six months of presentation, there is widespread apprehension that poor allocation to the critical sectors of the economy may hinder its implementation.
This comes as development and budget experts have expressed concern that power and transport sectors where much government’s attention should have been directed, only got poor allocation.
For power, expected to serve as tonic for revitalising the economy, Mr. Ayodele Oni, Partner, Bloomfield Law Practice, said the N69.96 billion allocation to the sector in the 2017 budget remained grossly inadequate considering the fact that it requires more funding to meet the target of an all-out electrification of the country.
Given a further breakdown of the 2017 budget, Oni said that the Transmission Company of Nigeria (TCN), got the lion share of N40.2 billion, followed by the National Rural Electricity Agency with N16.137 billion. NERC was allocated N2 billion; NEMSA, N2.837 billion; NAPTIN, N2.465 billion; NELMCO, N2. 718 billion and NBET, N3.595 billion.
Oni worried that as at December 31, 2016, the revenue shortfall in the Nigerian power sector was N1 trillion, while the sector’s indebtedness to commercial banks was $12.52 billion.
‘‘In addition to the indebtedness of the sector, it is also important to note the inability of the Nigerian Bulk Electricity Trading Plc (“NBET”) to pay the power generation companies, which shall also lead to the generation companies being unable to pay for the gas they bought to generate power.
Other fundamental issues such as the rate of tariff set by the industry regulator (NERC), gas supply to power plants and the generating capacity of existing plants, quality of the transmission network occasioning losses, electricity theft, and vandalism should have been carefully considered by the Federal Government when passing the budget.
On the other hand, he explained that the capital expenditure provision for TCN under the Multi-Year Tariff Order (MYTO) – 2015 Financial Model (which indicates amounts that needed to be spent) is N418.504 billion but only N40.2 billion has been earmarked for transmission projects under the 2017 budget.
‘‘It is understandable that as the FG has other pressing needs contending for resources and it would need to attract private investors into that segment of the market. However, one doubts the willingness of commercially-minded investors to provide investments into the Nigerian power sector, especially when they have to contemplate regulatory restrictions on securing certain licenses as well as having to charge cost-reflective tariffs.
Oni argued that from the above figures and also taking into consideration the recent intervention funds paid by the Federal Government, stakeholders are of the view that a larger figure should have been apportioned to power project given the determination by the Federal Government to ensure that there is  regular supply of power.
For road transportation, apart from the N262 billion for recurrent expenditures, the sum of N14billion was allocated to rail as counterpart funding for the Lagos-Kano, Calabar-Lagos, Ajaokuta-Itakpe-Warri, and Kaduna-Abuja projects.
This, some stakeholders argue, is inadequate considering that road remains the most dominant mode of transportation in the country, and therefore deserves as much attention as it can get.
Reacting to the budget as signed by the Acting President, the Executive Secretary of the National Association of Road Transport Owners {NARTO}, Aloga Ogbogo, remarked that more rail projects should have been accommodated in the budget in order to ease the pressure on roads.
Aloga said the worsening condition of federal roads has continued to take high toll on NARTO members’ heavy duty trucks and tankers as government continues to ignore the need to develop other vital transportation modes, especially the water ways.
Though noting that some major highways have received attention by way of allocations for construction and repairs, the Executive Secretary decried a situation where the Federal Roads Maintenance Agency {FERMA}, which is charged with the maintenance of highways, does not have direct budgetary allocation.
The Appropriation Act shows that the Federal Government intends to spend a total of N268 billion on construction and repairs of 171 roads across the country.
The allocation is about N37billion short of last year’s N305bn for 108 road projects. Aloga commended the Federal Government for its intention to address the bad state of the some highways in dire need of rehabilitation, including Enugu-Port Hracourt which has been in bad shape for years, the Mokwa-Jebba {where a bridge was recently washed off} and the Apapa port road in Lagos.
He, however, alerted the Department of Petroleum Resources {DPR} on the problems and dangers inherent in approving the location of tank farms along the road to the busy Apapa sea ports causing some of which he identified as traffic gridlock and a likelihood of serious fire incidents.
Against this backdrop, Mr. Alban Igwe, Deputy National President, Chartered Institute of Logistics and Transport (CILT), lamented that the budget was silent on the port access roads.
He expressed concern on the port access roads, saying that the amount may look or sound big, but in percentage terms, it is too insignificant to meet the needs of Nigerians.
Igwe observed that the port access road is critical to the economic development, arguing that the distribution of goods and service starts from the nation’s ports as infrastructure is key to national development.
On the ability of the Federal Government to fully implement the budget, Mr.Dolapo Oni
the Head of Energy Research at Ecobank Transnational Corporation (ETI), expressed worries that the budget might be unable to achieve much this year.
He explained that, as the budget benchmark is predicated on $44.5 per barrel, the fact that oil prices had assumed a downward trend below $50 again, may likely put pressure on the budget implementation due to its attendant revenue shortfall to government.
On the budget production forecast of 2.2 million barrels per day (bpd),he said there is no cause for alarm because the Forcados pipeline earlier shutdown has come back on stream to eventually shore up oil production target. He added that the worry now is whether oil prices would remain above our budget benchmark or below it.
According to him, if oil prices slides below the budget benchmark, then the budget will definitely suffer setback because its funding will be put to question.
On the other side, he said the low budgetary allocation of about N6.79 billion to the Ministry of Petroleum Resources and N533,713,857,113 to the Ministry of Power, Works and Housing was because the Federal Government was trying to encourage more private sector participation in those sectors.
He explained that government wants more private sectors funding for the turnaround of the refineries, hence the low allocation to the refineries.
On power, he said there is still much to be done, worrying that the power sector was more likely to gulp a larger chunk of the allocation to the Ministry because there are debts to be paid to the sector on behalf of the Federal Government, while there are projects that need to be funded as well.
Though, he admitted that a couple of the projects in the power sector would equally be funded by the private sector in line with the aspiration of the Federal Government to attract more private sector investment.
‘‘ I wish government could do more. But unfortunately, even the funds that have been allocated to the MDAs may likely suffer setback as a result of revenue shortfall.”
Oni said another challenge is the inability of the non- oil sector to contribute more in a bid to fund the budget.
He disclosed that the non-oil sector is still stagnated as collection of taxes is yet to peak, while there are still a lot of people outside the tax net, adding that the revenue performance of the non-oil sector for 2016,is not up to 80 percent.
He said there would definitely be a lot of borrowings this year in a bid to fund the budget, stressing that Nigerians should expect budget deficit.
Already, he said government has borrowed about N11 trillion and to continue to borrow more will mean putting the country’s future in jeopardy
On moves to return the budget implementation to January to December fiscal year, Mr. Rislanudeen Muhammad, a Lead Fellow, Institute of Fiscal Studies of Nigeria and former Managing Director of Unity Bank Plc, advised the various arms of government to collaborate and insulate the budget document from unnecessary political tussle as it takes a negative toll on the economy.
Muhammad, in a telephone chat with Daily Sun, said there is a need for the executive to submit the Medium Term Expenditure Framework on time to the National Assembly to ensure that budget was signed in January of every year.
Meanwhile, Mr Okoi Obono-Obla, Senior Special Assistant to President Muhammadu Buhari on Prosecutions, has said that part of the 2017 budget would be financed by the recovered looted funds.
His words: “About 20 per cent of this year`s budget will be financed from our recovery effort,’’ he said.
He added that the Federal Government would, however, liaise with the National Assembly for permission before the funds would be used.


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