Economist decries huge allocation to debts servicing in 2016 budget
Budget
An economist, Prof. Sheriffadeen Tella of the Department of Economics, Olabisi Onabanjo University, Ago-Iwoye, has expressed concern over the N1.48 trillion approved for debts servicing in the 2016 budget.
Tella told the News Agency of Nigeria (NAN) in Lagos on Friday that the amount was huge considering the situation of the nation’s economy.
Tella said that spending such an amount on debts servicing was not desirable.
“We should have used our circumstances to request for moratorium on debts servicing, and then use that money to pay principal thereby reduce the debt itself,’’ he said.
The economist said that the budget was still on the high side given the weakness of the economy, noting that it was passed earlier than the previous ones .
Tella said that the previous budgets were not passed earlier when compared with the 2016 budget.
According to him, the amount given to education and health were not enough to adequately care for the sectors.
NAN reports that N221.7 billion was earmarked for the health sector and N369.6 billion was set aside for education.
The Senate and the House of Representatives had on March 23 passed the 2016 budget of N6.06 trillion.
The figure showed a reduction of about N17 billion from the adjusted figure of N6.08 trillion, which President Muhammadu Buhari presented to the National Assembly.
The National Assembly retained 38 dollars as the benchmark oil price for the budget in spite of the instability in the price of crude oil.
NAN reports that crude oil production for the nation was pegged at 2.2 million barrels per day and the exchange rate of N197 per a dollar.
Both chambers approved N1.59 trillion as the capital expenditure and N2.65 trillion for recurrent expenditure in the budget.
They also approved N351.37 billion for statutory transfers, N1.48 trillion for debt servicing, and N2.2 trillion for fiscal deficit.
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4 Comments
Dear Professor, your caveats are prudential. But given the beginning change attitude, we have to test discipline in this initial moves. What we should be concerned about now is to-the-letter execution of this Budget. Then we score the effectiveness to trudge to next year’s. Did you notice that there might be a N2.2 trillion revenue shortfall? If that obtains, there is more borrowing to do. There is a greater burden in failing on our Debt servicing obligations this era of credit reporting. Moratorium, may be, but the overhang might be drowning and dangerous as more financing in the Budget rears its ugly head. So the Debt servicing accommodation for now, makes great sense. The budget allocations are prudent all we have to worry specifically is strict implementation. May be we do not have to worry much about these things as the Nation’s children are stricken with contrition returning stolen wealth to the National coffers even posthumously if I may say. The payments are better paid now than down the road with great pain.
Debt servicing means paying the interest and maybe a small amount toward the principal. This is not something that you stop and start when you feel like. The key solution is to reduce your expenses, so you have more revenue to pay the principal down, which reduces your debt servicing. This budget doesn’t reflect Nigeria reality. it is a budget that is still filled with abuse, waste, fraud and avenue for corruption. For a country that its revenue was cut by over 50%, the 2016 budget doesn’t reflect that at all. our capital expenditure needs to be focus on capital project that would generate revenue for the government and help grow the economy.
Its a debilitating and overwhelming baggage to any economy
I still don’t understand why the government should get N197 for each dollar budgeted, instead of N320 which is the current market rate, Is this is not short changing Nigerians? Is it not fraudulent and another type of corruption? What is the rationale? Our main source of Income for the Budget is on dollar proceeds from oil sales in the open market.The expenditure is in Naira. Why can’t the dollar proceeds be sold in the open market as our oil is like Russia does? This will yield an extra 62% in Naira to fund the Budget and pay down internal debts like salary, gratuity and pension arrears. This in turn will translate into more consumption, a plus for the economy. Can someone tell me what I am missing in simple plain and practical English, not economic theories and jargon.
We will review and take appropriate action.