THE FGN BUDGET, MTEF AND ERGP NEXUS

Transcription

1 THE FGN BUDGET, MTEF AND ERGP NEXUS PRESENTED AT THE 2018 FEDERAL GOVERNMENT OF NIGERIA BUDGET PREPARATION NATIONWIDE TRAINING EXERCISE 0

2 OUTLINE 1 Introduction 2 The Budget of the Federal Government of Nigeria 3 The MTEF/ERGP Nexus 4 Recent Developments & Prospects 5 6 Overview of the MTEF The Budget Cycle 7 Conclusion 2018 Budget Training 1

3 INTRODUCTION Budget is a public tool for implementing policy decisions (E.g. Vision 2025, Ruling Party Manifesto, SDG, Sector Policies and Strategies etc) to achieve social, economic and political objectives It is an instrument to mobilize and commit public resources to achieve community priorities and objectives; Budget is a public instrument for accountability of public resources 2

4 THE BUDGET OF THE FGN The Federal Budget is a tool which documents the direction of Federal Government policies and spending over a fiscal year, outlining details of expected revenue and expenditure. The budget also serves as the instrument through which the Federal Government delivers essential public goods and services as articulated in the Economic Agenda to its citizens to meet their social and economic needs. It is the annual statement through which the Government delivers its fiscal policy agenda to the populace. 3

5 FUNDING THE FEDERAL BUDGET The principal sources of government revenues are: TAX REVENUES NON-TAX REVENUES Investment income largely operating surpluses of Government Owned Enterprises (GOEs) GRANTS Project grants Program grants Budget support grants Taxation remains by far the largest and most sustainable source of government revenues 4

6 SOURCES OF FUNDING Sources of Funding (2) Federation Account Distribution Formula Local Governments 20.60% State Governments 26.72% Federal Government 52.68% VAT Pool Distribution Formula Local Governments 35% Federal Government 15% State Governments 50% Federal Government State Governments Local Governments 5

7 EXCESS CRUDE OIL REVENUE (MARKET PRICE) BUDGETED OIL REVENUE 13% DERIVATION FLOW OF REVENUES The Flow of Revenues 7% Cost of Collection NCS Customs &Excise 7% FEDERATION ACCOUNT CIT FIRS 4% Cost of Collection VAT POOL VAT 96% 96% Sale Of Assets 35% of VAT Pool LOCAL GOVT STATE GOVT 50% of VAT Pool Surplus From SOE Dividend From SOE INDEPENDENT REVENUE 20.60% 26.72% 52.68% LOCAL GOVT STATE GOVT FGN 15% of VAT Pool 4.18% of Federation Account CONSOLIDATED REVENUE FUND OF THE FEDERATION SPECIAL FUNDS 1% 1.68% 1% 0.5% 1% NAT. RESOURCES STABILIZATION ECOLOGICAL FCT 14% of VAT Pool 48.5% of Federation Account FEDERAL BUDGET Debt Service MDAs Stat Transfers 2% of CRF UBE NNDC NJC 6

8 MAJOR CLASSES OF EXPENDITURE Spending through the Federal Budget can also be classified into three main categories: 1. Statutory Transfers: These expenditures are mandatory and guided by law. Examples are: i. National Judicial Council (NJC) ii. Niger Delta Development Commission (NDDC) -15% of derivation to oil-producing states. iii. Universal Basic Education Commission (UBEC) 2% of the Consolidated Revenue Fund (CRF) 2. Debt Service The government can finance the budget deficit resulting from spending more than it earns through both domestic and foreign borrowing. The payment of interest and principal on sums borrowed by the FGN is referred to as debt service. 7

9 MAJOR CLASSES OF EXPENDITURE 3. MDA Expenditure These are the funds made available to Ministries, Departments and Agencies (MDAs) of government to provide public goods and services. It is composed of two main elements namely: i. Recurrent expenditure: Personnel; Overheads; Pensions; and Service-Wide Votes ii. Capital expenditure MDA Capital Capital Supplementation 8

10 THE MTFF/ ERGP NEXUS The Medium-Term Fiscal Framework (MTFF) and Fiscal Strategy Paper - outlines FG fiscal policies and macroeconomic projections over a three- year period - Provides the broad framework for annual budget and fiscal management in line with the FRA (2007) The key thrusts of the MTFF/FSP are consistent with the goals of Government s Economic Recovery and Growth Plan (ERGP) - aimed at repositioning the economy on the path of diversified, sustainable and inclusive growth The design of the MTFF is coming on the heels of the Implementation Plan of the ERGP. The MTFF feeds off the ERGP Implementation Plan. 9

11 THE ECONOMIC RECOVERY AND GROWTH PLAN (ERGP) The Economic Recovery and Growth Plan ( ) contains Government s Strategic actions and initiatives for the medium term: - to get the economy out of recession unto a path of diversified, sustained and inclusive growth - and build a more resilient economy that runs on multiple engines of growth 2018 Budget Training 10

12 THE ECONOMIC RECOVERY AND GROWTH PLAN (ERGP) /2 The ERGP is based on 3 strategic objectives supported by enablers and a clear delivery plan Restoring & sustaining growth Investing in our people Building a globally competitive economy Enablers Improving governance and security Delivery Implementation and financing 2018 Budget Training 11

13 THE ECONOMIC RECOVERY AND GROWTH PLAN (ERGP) /3 To achieve the objectives of the ERGP, FGN will focus on 5 Execution Priorities and categories of initiatives to sustain the economic recovery 2018 Budget Training 1 2

14 GLOBAL ECONOMIC OUTLOOK Global growth is expected to rise from 3.5% in 2017 to 3.6% in 2018 Sub-Saharan Africa growth is projected to rise from 2.6% in 2017 to 3.4% in Budget Training 13

15 RECENT DEVELOPMENTS & PROSPECTS Estimate Projections World Output Advanced Economies United States Euro Area Emerging Market & Developing Economies China India China's trade surplus fell to US$38.5 billion in April 2017 from USD billion surplus a year earlier but above market consensus of a US$35.50 billion surplus, as exports rose less than imports The emergence of a new administration in the USA also generated new uncertainties US withdrawal from Trans Pacific Partnership (TPP) and ongoing renegotiation of other trade agreements are threats to the fragile global trade recovery. The British vote to leave the European Union (Brexit) fueled political and economic uncertainty in the global markets in the medium- to long-term On the African continent, the pace of economic growth is generally on the rise, driven by commodity prices, with a few reformist nations leading the pack; Scheduled elections in several African countries raise concerns about stability 2018 Budget Training 14

16 THE NIGERIAN ECONOMY: IMPLICATIONS OF GLOBAL AND DOMESTIC DEVELOPMENT 2018 Budget Training 15

17 THE NIGERIAN ECONOMY: IMPLICATIONS OF GLOBAL AND DOMESTIC DEVELOPMENTS The decline in growth since Q culminated in a recession by Q Softer contraction in Q and Q have signaled economic recovery in 2017 but pace of recovery is fragile. - The economy contracted marginally by -0.52% in Q up from -1.3% in Q as more economic activities are recording growth The oil sector slowed by % (up from % in Q4 2016) The non-oil sector grew by 0.72% in Q (up from -0.33% in Q4 2016) driven largely by growth in agriculture and solid minerals, and recovery in manufacturing, construction and services sectors. Government measures to boost the economy are yielding results. Efforts at minimizing disruptions in the Niger Delta has helped oil production, currently 2.2mbpd (inclusive of 450kbpd condensates) 2018 Budget Training 16

18 KEY ASSUMPTIONS & MACRO-FRAMEWORK OF 2018 BUDGET Oil Production (2.3 mbpd)* $ Oil Price ($45/b) Key Assumptions & Macro Framework 305/ $ Exchange Rate 12.42% Inflation Rate 4.8% GDP Growth Rate N tr Nominal GDP N81.60 tr Nominal Consumption *Including Condensates 2018 Budget Training 17

19 MEDIUM TERM FISCAL POLICIES In line with the goals of the ERGP , the medium term fiscal policies of Government will be directed at: achieving macroeconomic stability; accelerating growth, intensifying economic diversification and promoting inclusiveness; enhancing oil revenues and accelerating non-oil revenues; transition from the traditional JV Cash Call budget to the self-funding mechanism Improved tax and Customs administration, including greater deployment of appropriate technology Tightening of tax exemptions, including duty waivers Possible review of VAT rate, commencing with luxury items; Same for Excise duty Corporate Tax Amnesty already implemented, and ongoing Voluntary Assets Declaration Scheme 2018 Budget Training 18

20 MEDIUM TERM FISCAL POLICIES /2 addressing recurrent and capital spending imbalance; Government will continue to allocate at least 30% of its budgeted expenditure to capital projects improving efficiency and quality of public spending; Proper costing of activities/projects, competitive bidding in public procurement, and continuous audit of MDAs operations Improved/tighter expenditure management Determination of allowable expenditures and limits thereof designed to eliminate wastage maintaining deficit/debts within sustainable limits; Debt financing will be restructured gradually in favour of foreign financing as part of strategy to lower debt service burden and free up more fiscal space for the private sector 2018 Budget Training 19

21 KEY ASSUMPTIONS & MACRO-FRAMEWORK OVER THE MEDIUM TERM ( ) No Description 2017 B 2018 Proj Proj.2020 Proj 1 Oil Production V olume* (mbpd) Exchange Rate (N/USD) Inflation** (%) 15.74% 12.42% 13.39% 9.90% 4 Nominal GDP (N bn) 116, , , ,136 5 GDP Growth Rate (%) 2.2% 4.8% 4.5% 7.0% 6 Non-Oil GDP (N bn) 99, , , ,174 7 Oil GDP (N bn) 16,799 29,323 49,101 63,972 *Includes Condensates; Oil Production Jan June 2017 is 1.9mbpd ** Inflation as of June % 2018 Budget Training 20

22 POLICY STRATEGY BUDGET LINKAGE /1 ERGP-IP is derived from ERGP; and Annual Budget is expected to derive from ERGP-IP The goal is to ensure that the budget is policy-based. Expected linkage demonstrated on next slide ERGP Economic Recovery & Growth Plan ERGP Implementation ERGPI Plan P Budget Annual Budget Only moderate linkage observed in the past! A few examples shortly will illustrate this 21

23 POLICY STRATEGY BUDGET LINKAGE.../2 ERGP Policy Government Policy Thrusts & Priorities Sector s Results Framework ERGP-IP Process Strategy Objectives Programmes Outcomes Outcome Indicators Baselines Outcome Targets Govt s Priority Programmes Sector s Projects Projects Scoring & Prioritisation Scoring Criteria Selected Projects ZB B Budget 22

24 THE BUDGET CYCLE STAGE 1 MEDIUM TERM REVENUE FRAMEWORK (MTRF) OIL REVENUE & NON- OIL REVENUE INDEPENDENT REVENUE STAGE 2 MEDIUM TERM EXPENDITURE FRAMEWORK (MTEF) AGGREGATE SPENDING MAJOR HEADS (MDAs, DEBT, TRANSFERS) DEFICIT STAGE 3 MEDIUM TERM SECTOR STRATEGIES (MTSS) TENTATIVE MDA CEILING SHARED STAKEHOLDER PARTICIPATION STAGE 4 STAKEHOLDER CONSULTATION ON MTSS & MTEF OPS & CSOs MDAs NASS Governors Forum STAGE 5 MTEF/FSP REVENUE & EXPENDITURE FRAMEWORK PRIORITY FOCUS FINAL MDA STAGE 6 FEC APPROVAL OF MTEF & FISCAL STRATEGY PLAN IN LINE WITH FRA

25 THE BUDGET CYCLE /2 STAGE 7 STAGE 8 STAGE 9 MTEF & FISCAL STRATEGY PAPER SUBMITTED TO NASS FOR APPROVAL IN LINE WITH FRA 2007 BOF ISSUES BUDGET CALL CIRCULAR INSTRUCTIONS MDA RESOURCE BUDGET PROPOSAL SUBMISSIONS BY MDAs STAGE 10 EVALUATION & CONSOLIDATION OF SUBMISSION BY BOP, PREPARATION OF DRAFT BUDGET STAGE 11 PRESENTATION OF DRAFT BUDGET TO MR PRESIDENT & APPROVAL OF DRAFT BUDGET STAGE 12 TRANSMISSION OF BUDGET BY MR. PRESIDENT TO NASS 24

26 THE BUDGET CYCLE /3 STAGE 13 STAGE 14 NASS APPROVES AND PASSES APPROPRIATION BILL MR. PRESIDENT ASSENTS 25

27 PEOPLE, PROCESS & TECHNOLOGY LINKAGES eople, Process, Technology Linkages Source: 26

28 END THANK YOU! 27