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S’West, entire North favoured in 2020 budget on no new projects—Findings

Fresh angle of urgent national importance has been smoked out from the just presented 2020 national budget estimates by President Muhammadu Buhari indicating that the South West and entire North will be more favoured in terms of capital expenditure.

This is based on the fact that most of the deep pockets capital projects running on the 2018 and 2019 budgets which the President said must be pursued in 2020 are located in the regions.

Some of them include the ongoing power projects at Mambila, National Livestock Transformation Plan (NLTP), standard rail network from Lagos to Ibadan, Minna, Kaduna, Kano, Katsina and terminating in a commercial town in Niger Republic.

In terms of federal highway under reconstruction, more are scattered within the regions with less in South East and South-South except few roads, second Niger Bridge and East West highway connecting the entire South-South.

Pointer to this is the latest Chinese loan deal of $3.9bn sealed to deliver rail from Abuja to the north.

President Buhari had in his address while presenting the budget at the National Assembly made it clear that “The main emphasis will be the completion of as many ongoing projects as possible, rather than commencing new ones. MDAs have not been allowed to admit new projects into their capital budget for 2020, unless adequate provision has been made for the completion of ALL ongoing projects.”

Continuing, he averred that “We have rolled over capital projects that are not likely to be fully funded by the end of 2019 into the 2020 Budget. We are aware that the National Assembly shares our view that these projects should be prioritised and given adequate funding in the 2020 Appropriation Act.”

However, analysts have started raising issues of funding inadequacy that may frustrate the 2020 budget ahead of surgical operations that should be visited on the estimates by the National Assembly.

On optimistic revenue assumptions, experts say “To start with, expected oil revenue was set at NGN2.60 trillion – 32.4% of the total revenue –, with the underlying assumption of crude oil price of USD57.00 per barrel and production of 2.18 million barrels per day. Given weaker global economic growth expectations, amidst heightened trade tensions, the supply and demand dynamics of crude oil are currently at disequilibrium, with supply running faster than demand, which has caused prices to trend lower.

Whereas indications are clear that recurrent expenditure will dominate capital spending, pundits at Codros Capital say “Amidst the infrastructure deficit in Nigeria and low Foreign Direct Investment (FDI) into Nigeria, the case for increased capital expenditure should have been stronger. However, the reverse is the case here, as the proposed capital expenditure of NGN2.14 trillion is 26.9% below the 2019 budget. Similarly, average capital expenditure-to-total expenditure over the last 10 years is 19.5%.”

“Whilst the breakdown of how the government intends to finance its deficit has not yet been disclosed, we expect the usual trend of tripartite financing (Domestic, foreign and CBN ways & means). The level of domestic borrowings has been lower than expected in recent years, as the government has utilized the CBN ways and means facility. We highlight a significant jump (+ 29.6% YTD to NGN7.28 trillion) in August 2019, which signals that the government has continued that mean, in a bid to keep a lid on financing cost.