The Federal Government said on Tuesday that it had borrowed the sum of N473bn in the past four months to finance this year’s budget.
The Minister of Finance, Dr. Ngozi Okonjo-Iweala, stated this during a media briefing on the budget, which was passed by the National Assembly last week. The Senate had last week Tuesday passed the national budget of N4.493tn for the 2015 fiscal year, about five months after it was presented by Okonjo-Iweala.
The budget, which was passed by the House of Representatives two weeks ago, was N51bn higher than the N4.425tn submitted to both chambers of the National Assembly by the Federal Government. But the minister said despite the fact that the budget had not been signed into law by President Goodluck Jonathan, the constitution allowed the Executive to incur expenditure within the first six months into the fiscal year.
She, however, said the drop in oil revenue, which began in 2014 and lasted up to the first quarter of this year, had impacted negatively on the gross federally collectible revenue. For instance, Okonjo-Iweala said the country experienced 50 per cent cut in revenue owing to drop in oil prices coupled with low revenue receipts from non-oil sources as most companies had yet to file in their tax returns in the first quarter of the year.
This, according to her, made the government to resort to borrowing the sum of N473bn out of the N882bn provided for borrowing in the 2015 budget. The minister said in as much as the government had in the past tried to reduce the level of borrowing, such could not be achieved this year due to cash flow problems. For instance, she said government borrowing was brought down to about N570bn last year, noting that the figure had to go up to about N882bn in order to cushion the negative impact of revenue decline.
According to her, about N380bn of the N882bn is for external borrowing, while the balance is for domestic borrowing. She said, “We have tried to work within the budget. The budget provides for N882bn in borrowing and we have had to increase the borrowing budget this year as compared to last year when we actually brought it down. “If you all recall, we said we would be bringing down borrowing to finance the budget and we have been doing that steadily. “Last year, the borrowing came down to about N570bn; but this year, because of the very difficult cash flow situation, we have provided N882bn in borrowing. “About N380bn of that is external borrowing and the balance of N502bn is for domestic borrowing. So, what we’ve had to do to manage this first half is to front-load the borrowing programme, which is a normal reaction that you have because the cash crunch has been very difficult. “In the budget, we provided for N882bn and all we have borrowed is within the budget. What we have borrowed so far is N473bn; so, we still have more room for borrowing.”
Okonjo-Iweala described the first half of this year as the most difficult time for the government, adding that it would do all within its powers to ensure that the country would not end up bankrupt. According to the minister, the first part of the year usually witnesses low revenue because tax receipts come in from the middle of the year. This, she noted, had compounded the challenges caused by the steep drop in revenues due to the oil price fall.
Okonjo-Iweala stated, “We passed the budget and we’ve been managing since January this year as the financials allow us. Everybody knows that we suffered a 50 per cent cut because of our revenues. The first half of the year is very challenging. In fact, it is the most challenging this year because in addition to the low receipts, we have a 50 per cent cut in oil revenue.
“This has made the cash flow position in the country very difficult and we have been repeating it over and over again that we have a cash flow problem, but that we have been able to manage it month by month, and that since Nigeria is a country regarded as asset rich, we can find ways to go about it. “We’ve tried to manage the first half on a month by month basis and it has been very tight. January, February, March, April and May.”
She said that while the Federal Government had been able to meet its recurrent expenditure despite the cash flow problem, such could not be achieved for capital projects. According to her, the cash crunch has made it practically impossible to release any fund for capital projects since the beginning of the year. Considering the revenue challenge, the minister said the goal of the government now was to ensure that funds were made available to meet recurrent expenditure such as payment of salaries and pensions.
The minister said, “Going forward, it (revenue) will be managed on a month by month basis to be able to manage our expenditure by making sure salaries are paid every month. But we have not been able to expend any money on capital project because the situation has been so difficult. “So, we’ve not released any capital but we’ve kept the recurrent expenditure going.”
Giving a breakdown of the budget, which was passed by the lawmakers, Okonjo-Iweala said the sums of N100bn and N45.52bn were provided for petrol and kerosene subsidies as proposed by the Executive. She said while other components of the non-oil revenue were retained as proposed, independent revenue was raised by N39.294bn to N489.29bn from N450bn.
The minister added that gross federally collectible revenue increased by N169.84bn, from N9.61tn to N9.78tn as a direct result of raising the benchmark price On the expenditure side, she said debt service remained unchanged at N943.62bn, while statutory transfers were increased by N9.34bn, from N366.28bn to N375.62bn
She also pointed out that National Assembly allocation was raised by N5bn, from N115bn to N120bn. For capital expenditure (inclusive of transfers and SURE-P),Okonjo-Iweala said this was increased to N722.20bn from N663.67bn, representing an increase of about N58.57bn.
She said fiscal deficit decreased by N26.11bn from N1.06tn to N1.04tn. Fiscal deficit as a percentage of Gross Domestic Product, according to her, also decreased from 1.11 per cent to 1.09 per cent.
