Nigeria presents 2018 Budget

Transcription

1 9 November 2017 Global Tax Alert Nigeria presents 2018 Budget EY Global Tax Alert Library Access both online and pdf versions of all EY Global Tax Alerts. Copy into your web browser: Executive summary On 7 November 2017, Nigerian President Muhammadu Buhari formally presented the 2018 Budget proposal (the budget) to the joint session of the National Assembly for approval. The NGN8.6 trillion budget, titled The Budget of Consolidation is anticipated to be higher than the 2017 budget by about 16%, with the President stating that the budget is expected to consolidate on the gains of the 2017 budget, noting that it will help to implement the economic recovery and growth plan of this administration aimed at progressively reducing deficit and borrowings. The budget is projected at a crude oil benchmark price of US$45 per barrel at an exchange rate of NGN305 to a dollar and an estimated 2.3 million barrels per day as against US$44 per barrel under the 2017 budget. This Alert summarizes the key budget provisions.

2 2 Global Tax Alert Detailed discussion Highlights Budget parameters Variance Oil production (mbpd) % Price per barrel (US$) % Projected GDP growth (%) % Average exchange rate (NGN/US$) Revenue (NGN Trillion) % Aggregate revenue % Oil revenue % Non-oil revenue % Independent revenue % Expenditure (NGN Trillion) Aggregate expenditure % Capital expenditure % Non-debt recurrent expenditure % Budget deficit % Fiscal deficit (% of GDP) % External borrowings % Internal borrowings % Fiscal balance The projected fiscal deficit for 2018 is put at 1.77% of Gross Domestic Product (GDP). This deficit, resulting in a proposed cumulative amount of NGN2.005 trillion, is expected to be financed by domestic borrowing of NGN8.49 billion and NGN8.49 billion from external sources. Tax revenue Tax revenue from non-oil is anticipated to increase from NGN1.37 trillion in 2017 to NGN3.32 trillion in However, tax revenue from oil is expected to increase from NGN1.99 trillion in 2017 to NGN2.44 trillion in The Government intends to continue to pursue its goal of revenue diversification by allocating a larger share of the total revenue to non-oil revenue. Infrastructural development Capital expenditures are expected to be financed by a budget of NGN2.43 trillion in This reflects an 8% increase over the 2017 figure. The Government intends to continue its focus on the rapid development of infrastructure especially rail, roads and power. The Government has also planned to increase investments in agriculture to attain food security and reduce importation. Road and Rail Work is scheduled to continue on key strategic roads with the Federal Government able to construct or rehabilitate about 776-kilometer roads in The construction of the Abuja metro line had attained 98% completion and work has commenced on the Ajaouta-Itakpe rail line which is expected to be concluded by September Key projects to be implemented in the sector in 2018 include: a. NGN10 billion for the second Niger Bridge b. NGN300 billion for the construction and rehabilitation of strategic roads Power The country s power sector is expected to witness several reforms targeted at improving power generation, transmission and distribution. Additional steps are being taken to reform the power sector with the Federal Government sourcing for alternative means of power. Agreements have been signed by the Government with solar companies in a bid to promote green energy. The first African Sovereign Green Bond, proposed by the Government, is expected to be used to finance renewable energy projects. Key projects to be implemented in the sector in 2018 include: a. NGN9.8 billion for the Mambilla hydro power project in Taraba state, including NGN8.5 billion as counterpart funding b. NGN12 billion counterpart funding for earmarked transmission lines and substations

3 Global Tax Alert 3 Agriculture To develop infrastructure for the production and processing of crops in the agricultural sector, the Federal Government plans to increase investment in agriculture by establishing six crop processing zones in Consolidating on the Social Intervention Program A NGN500 billion allocation for the Social Intervention Program has been retained, with NGN100 billion from the allocation set aside for the Social Housing Program. This is to demonstrate the Federal Government s commitment to pursue a gender-sensitive, pro-poor and inclusive growth catering to the most vulnerable. Regional spending priorities for Peace, Security and Development To maintain peace and security in the Niger Delta, in order for economic and social activities to thrive, NGN65 billion has been retained in the 2018 Budget for the Presidential Amnesty Program. Furthermore, capital provision for the Ministry of Niger Delta has been increased from the NGN34.20 billion provided in 2017 to NGN53.89 billion. Implications Based on certain parameters in the proposals, it is evident that the 2018 budget is centered on the reinforcement of the gains of the 2017 budget which was aimed at reducing the country s dependence on oil revenue and imports. It is projected that by shifting the country s dependence to non-oil revenue, Nigeria s economy will be steered to the path of steady growth. To achieve this, the Government has proposed its plans to continue to: Develop infrastructure Increase investments in agriculture to attain food security and reduce importation Identify alternative means of funding new projects by continuing to pursue public private partnership Increase power generation with the Government s focus on alternative sources of energy, thereby ending the nation s longstanding dependence on oil revenues

4 4 Global Tax Alert For additional information with respect to this Alert, please contact the following: Ernst & Young Nigeria, Lagos Abass Adeniji Akinbiyi Abudu Temitope Samagbeyi Chinyere Ike Oluwatumininu Familusi Louisa Abumere Ernst & Young Advisory Services (Pty) Ltd., Africa ITS Leader, Johannesburg Justin Liebenberg Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London Rendani Neluvhalani Byron Thomas Ernst & Young LLP, Pan African Tax Desk, New York Silke Mattern Dele A. Olaogun Jacob Shipalane Ernst & Young LLP, Pan African Tax Desk, Houston Elvis Ngwa

5 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com EYGM Limited. All Rights Reserved. EYG no Gbl NY ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com