The federal government has said it is depending largely on revenues from the non-oil sectors of the economy to fund the 2016 budget of N6.08 trillion.
The minister of budget and national planning, Senator Udoma Udo Udoma, stated this during a meeting with members of the Senate Committee on National Planning and Economic Affairs.
Also, the minister of finance, Mrs Kemi Adeosun, yesterday gave further clarifications on the strategy for foreign loans being explored to fund the 2016 budget, which is currently undergoing approval by the National Assembly.
The Senate committee led by its chairman, Senator Rabiu Kwankwaso, was on a familiarisation visit to the ministry.
Giving a breakdown, Udoma said that N1.45 trillion of the 2016 budget would be financed from non-oil revenues, N1.51 trillion from independent revenues, only N820 billion from crude oil receipts, while the balance would be funded from government borrowings.
Since coming into office, President Muhammadu Buhari has expressed the need to diversify the nation’s economy through different sectors.
Nigeria, a top oil producer, is reeling from the fall in crude revenues, the source of 95 per cent of foreign earnings.
The minister called the fall in oil price ‘a blessing in disguise’ as it affords the country the freedom to fund its recurrent budget entirely from non-oil revenues.
Udo Udoma maintained that a shift away from crude in favour of locally generated resources from agencies of government is a no brainer.
“This is what we have started doing. The 2016 budget is in fact not funded principally from crude oil receipt,” he stated.
According to him, the achievement of the set goal is a function of a robust and working collaboration with the National Planning Committees of the Senate and the House of Representatives.
The minister also expressed federal government readiness to make a shift from the old ways of sourcing funds for government, stating that ministers of various ministries had been mandated to look inwards and generate funds through public-private partnership to fund some of the infrastructural projects.
He said the ministry would work closely with the National Assembly to ensure that all the programmes of government are achieved to the benefit of the people.
He said, “We should look at a situation where we can fund our recurrent budget from non-oil revenue. Crude oil proceeds should be used to fund just capital projects.
“This is what we want to start doing and we are beginning with the 2016 budget. Over the next three to four years, we want to have a shift from the way we fund budget to locally generated sources and I believe this is achievable.
“To do this, we have to work with the National Assembly. This is the challenge and I think it is a challenge that we must meet.”
When asked if there are plans to reduce the budget benchmark downwards in view of the drop in oil prices, the minister explained that the year was still early to make such decisions.
He said the $38 per barrel benchmark price for the budget was an assumption made for the whole year, noting that a mid-year review would be done by government to look at budget performance.
He said, “We are in February and the price that we projected was for the whole of 2016 and it’s too early to say it will be realised or not.
“We did say we will have a mid-term review of the budget. We are looking at creative ways of funding the items in the budget.”
Meanwhile, speaking on government borrowing, the finance minister, Kemi Adeosun said in a statement that the overall objective is to provide the lowest possible cost of funds to finance capital projects proposed under the government’s plan to stimulate the economy. These capital projects include power, transport, road, housing, etc.
In the statement issued by special adviser to the minister on media matters, Mr Festus Akanbi, the finance minister explained that options with multi-lateral agencies, including the World Bank and African Development Bank (AfDB), are being explored.
Multilateral agencies provide loans on concessional terms, which include low interest, moratorium before repayment and long tenor. The second funding option being explored includes Export Credit Agencies such as China Exim Bank. These funds are also concessional and are tied to specific capital projects.
She reaffirmed the need to invest in infrastructure to stimulate the economy, adding that the long-term payback period of capital projects demands that the lowest cost of funds be obtained.
Mrs Adeosun revealed that the balance of foreign borrowing required will be raised in the Eurobond market at commercial rates of interest.
She explained that by blending these different sources of funding, the overall cost of funds will be maintained at the lowest possible level. She further stated, “As far as possible, our foreign borrowing will be tied to specific capital projects. A number of these projects are revenue generating which will be used to fund the loan repayments.
”The strategy of pursuing increased foreign borrowing is designed to ensure that the federal government does not “crowd out” the private sector in the domestic market.”
The federal government presented to the National Assembly a budget of N6.08 trillion with a N2.2 trillion deficit and a N1.8 trillion borrowing requirement.
Also speaking earlier, minister of state, Budget and National Planning, Hajiya Zainab Ahmed, told the committee members that the ministry is planning to update the vision 2020 plan to enable the country align with the Sustainable Development Goals 2016-2030.
She called on the National Assembly to expedite action on two of the ministry’s outstanding bills which, according to her, had passed second reading.
The bills are Development Planning and Project Continuity Bill and the National Council on Management Development Amendment Act.
Kwankwaso, in his response, assured both ministers of the support of the committee in view of the ministry’s strategic importance to the country.
“We are aware of the two bills you mentioned and we will ensure they are passed at the Senate. We are doing some few things on the bills currently,” he said.