REMARKS BY HIS EXCELLENCY, SENATOR (DR.) ABUBAKAR BUKOLA SARAKI, PRESIDENT OF THE SENATE, FEDERAL REPUBLIC OF NIGERIA ON THE 2018-2020 MEDIUM TERM EXPENDITURE FRAMEWORK AND FISCAL STRATEGY PAPE – 23 NOVEMBER, 2017
Distinguished Colleagues,
As you are aware, we postponed the debate on the 2018 Budget estimates so as to focus on approving the 2018-2020 MTEF and FSP submitted last month by His Excellency, President Muhammadu Buhari, GCFR, for our consideration and approval.
Notwithstanding the delay in the submission of the 2018-2020 MTEF & FSP beyond the time indicated in the Fiscal Responsibility Act and the revision of the 2018 Fiscal Framework, we have chosen to work objectively and more collaboratively with the Executive to ensure that we pass a credible MTEF and FSP – one that is realistic, with sound policy objectives and achievable targets. This will provide the basis for considering the 2018 Budget proposals.
Therefore, I would like to thank you all, and especially, the joint committee on Finance, Appropriations, and National Planning for working within tight timelines to provide an in-depth review and interrogation of the MTEF and FSP, particularly the underlying assumptions.
The report of the joint committee on MTEF and FSP indicates that the macro-fiscal plan is achievable as it clearly articulates strategy for attaining the revised 3.5% growth in 2018. We must however remain realistic in setting our revenue targets considering where we are in our growth recovery and historical performance.
Yes, the economy is rebounding and we expect revenues to move in the direction of growth in gross domestic product (GDP). However, we cannot overlook observed shortfalls in revenue performance, particularly, non-oil revenues, which can be attributed to a number of reasons such as revenue leakages, collection inefficiency and policy inconsistency.
For instance, VAT and CIT have been less than projections by 47% and 33% respectively as at 3rd Quarter 2017, while independent revenue performance, which was short by 74% as at 3rd Quarter 2017, has been under 50% in previous years.
It has therefore become crucial to do certain things differently and rightly to ensure that revenue projections are met. It is for this reason that we are setting aside a day next week during the debate of the 2018 budget estimates to consider the budget of Government-Owned Enterprises especially the build-up of their operating surplus.
One critical finding in the review of the 2017 Budget of Corporations is the fact that most Government Enterprises spend as much revenue as they generate leaving no surplus to be remitted to Treasury. This cannot be allowed to pass if government must adequately fund its budget.
In addition, we are leaving no room for slippages in non-oil tax performance. The 2018-2020 Fiscal Framework proposes some revenues from surcharge on luxury items as well as additional revenues from excise duties. We need to know the details of these luxury items, the applicable surcharge, and how it all translates to the financial projections. This is why a 2018 Finance Bill is expedient. It will show how government’s fiscal policies match its financial projections. We want to create a flexible but predictable fiscal system that can be tweaked to accommodate the changing dynamics in the economy without compromising productive activities.
As for oil revenues, despite increases in the international price of crude oil above the budget benchmark oil price we have not posted any accretion to the excess crude account. This raises more questions about the credibility of oil production volumes.
We will continue to support the exit of JV Cashcall arrangements as well as the proposed restructuring of government’s equity in all the Joint Venture oil assets. However, we will be working with the Executive to ensure that the process is transparent. To this end, there is need for the legislature to be fully aware of the planned JV oil assets restructuring including government’s current equity, proposed equity reduction and expected proceeds.
Furthermore, the Forward Sale Arrangement of government’s share of future oil production should be such that is fair and also in the best interest of the country not only in terms of shoring up the external reserves but the cost of servicing the forward sale must be fair.
We acknowledge Nigeria’s huge infrastructure deficit, and thus, understand the need to expand expenditure especially on development-related capital projects. The safest way to go about this will be to free up resources used to service our debt by growing our revenues and narrowing new borrowings. This cannot be overemphasized! We need to take advantage of the fiscal space the rebound in oil price provides to create opportunities for infrastructure spending that will create jobs and long-term sustainable growth. It is crucial that this underpins framework of the Budget.
To this end, Distinguished Colleagues, we do approve the 2018-2020 MTEF and FSP subject to the recommendation of the joint committee on MTEF and FSP.
Once again, I commend us all for working hard to ensure we bring this task to an early completion.
PRESIDENT OF THE SENATE
