Dipo Olowookere
By Dipo Olowookere
Renowned global rating agency, Moody’s Investors Services Limited, has disclosed that the capital expenditure part of the 2018 budget signed into law last month by President Muhammadu Buhari cannot be fully implemented by federal government.
In November 2017, Mr Buhari submitted a budget of N8.6 trillion to the National Assembly. However, when it was passed by the parliament in May 2018, it was raised to N9.1 trillion.
This did not augur well with the President, who told Nigerians that he reluctantly signed by the budget into law because he did not want it to delay any longer.
In a chat with Thisday, Moody’s Senior Analytical Advisor for Africa, Mr Aurélien Mali, stressed that only about 50 percent of the capital expenditure can be implemented by government.
The 2018 budget provides N2.01 trillion for debt service, N3.51 trillion for recurrent expenditure and N2.87 trillion for capital expenditure, up from N2.36 trillion in 2017.
The capital spending accounted for 31.5 percent of total federal government expenditure in 2018.
According to Mr Mali, the perennial delays in passing the country’s budget for three years in a row was a demonstration of the institutional weakness in the country.
He said, “Budget is very important for allocation of resources and infrastructure development in the economy. So, delays to such an extent, three years in a row, is very unfortunate.
“To be perfectly clear, it was a large budget, but everybody knows that even though in nominal terms the capital expenditure increased, it is going to be under-realised and around 50 percent mostly.
“So, the numbers are big, but the reality is that the budget objective is going to be lower than expected in terms of revenue. So, that mechanism is not efficient enough to drive development in Nigeria.”
According to him, for the budget to be used as a tool for stimulating economic growth, implementation of capital expenditure has to be at about 90 percent.
Commenting on a recent Brookings Institution report that revealed that Nigeria had overtaken India as the country with the highest number of extremely poor persons in the world, Mr Mali said alleviating poverty in Nigeria would be very difficult as long as the country’s Gross Domestic Product (GDP) remains below its demographic trend.
He said, “As long as Nigeria continues to grow below six per cent, the poverty level is not going to change, and the standard of living is not going to improve.
“So, you will continue to have income inequality that will continue to increase and overall it is going to be difficult to improve GDP per capita. There is still fragility in Nigeria’s economic recovery.
“While in Nigeria it seems the situation has stabilised, the reliance on hydrocarbon in the country would still pose challenges over the medium term if some reforms are not implemented.
“The revenue generation capacity will still be a weakness because the non-oil revenue remains weak in Nigeria.”
