Nigeria’s 2018 budget unrealistic, says Moody’s

Leading global rating agency, Moody’s investors Services Limited, has stated that the capital expenditure portion of Nigeria’s 2018 fiscal budget is unrealizable.

Nigeria’s 2018 Appropriation Act of N9.12 trillion was signed into law about three weeks ago. It 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 per cent of total federal government expenditure in 2018.

Commenting on the workability of the budget, Moody’s Senior Analytical Advisor for Africa and the institution’s leading analyst for the region, Aurélien Mali, pointed out that at most, only about 50 per cent of the capital expenditure could be implemented.

He said 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 per cent 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 per cent.

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, 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.”