I posted much of this in an earlier post but I thought I create a separate topic for those interested in discussing or reviewing this.

Some background first. The FG has announced the 2016 budget with revenue projections of 3.8 trillion Naira based on, inter alia, $38 per barrel oil. Revenues of 3.8 trillion Naira imply a monthly average of 316bn Naira per month accruing to the FG. A common sense inference is that the FG's capacity to raise that amount of revenue in 2016 can be estimated from its performance today. Anyone paying attention will know that the FG's revenue profile today demonstrates that its 2016 estimates are unlikely to put it mildly.

Let's look at the last 3 monthly data:

The FG received 139.5bn Naira in the last FAAC allocation based on an oil price of $49.5. Note that November's allocation is based on October's oil price and so on and so forth. See here -

Giving the breakdown, Adeosun said the Federal Government received N139.5billion, representing 52.68 per cent; states, N70.7billion, representing 26.72 per cent.She said that the local governments received N54.5billion, amounting to 20.60 per cent of the amount distributed.

Adeosun said the country generated N198.5billion as mineral revenue and N98.8billion as non-mineral revenue.

“Also, there was revenue loss of $19.4million as a result of drop in federation export, even though the average price of crude oil increased from $46.9 per barrel in September to $49.5 per barrel in October’’.

http://leadership.ng/news/485842/faac-fg-states-lgs-share-n369bn-november.

The previous month was 191bn Naira for the FG at $46.9 per barrel, so it was largely due to non-oil revenue -

Giving the breakdown of revenue among the three tiers of government, Adeosun said the Federal Government received N191.9 billion, representing 52.68 per cent; states, N97.3 billion, representing 26.72 per cent. . . . . . "Also, there was revenue loss of 1.3 billion dollars as a result of drop in average price of crude oil from 47.3 per barrel to 46.9 per barrel in Sept. 2015", she said.

http://www.news24.com.ng/Politics/News/fg-states-lgs-share-n4738bn-for-october-20151128.


And before that 151.3bn at $47.3 per barrel: https://www.nairaland.com/2697931/faac-fg-states-lgs-share#39470160.

So you can see from the above that at just below $50 per barrel, FG revenue under Buhari has not gone above 200bn Naira per month. However, at $61 per barrel, FG received 201.1bn Naira in July -

Government received N202.1 billion, representing 52.68 per cent; states, N102.5 billion, representing 26.72 per cent.

http://dailypost.ng/2015/08/27/faac-fg-states-lgs-share-n511-8bn-for-july/. At $67 per barrel, the FG received 218.92bn Naira -

Addressing journalists at the end of the meeting, Mrs. Anastasia Nwaobia, Permanent Secretary of the Federal Ministry of Finance, said the sum of N449.685 billion was shared as statutory allocation, with the Federal Government pocketing N218.928 billion.

http://thenationonlineng.net/fg-states-lgs-share-n518-5bn-for-june-faac/

Hence the likelihood that the FG will raise 3.8 trillion in 2016, averaging 316bn Naira monthly and at $38 per barrel, from mainly revenue collection alone is far-fetched to put it mildly. The last 3 months, the FG averaged 161bn Naira when oil was close to $50 per barrel. The FG needs to more than double current revenue collection just to come close enough to its revenue target.

Hence, never mind borrowing 1.88 trillion Naira (FG says it will recover another 350bn Naira from looters even though it has yet to recover much thus far), for the FG to fully implement its 6.07 trillion Naira budget at current assumptions, it will have to borrow at least 4 trillion Naira!

The FG simply cannot implement its budget in the current form without lots of asset sales and a huge devaluation in Naira but this is not proposed in the budget. My guess is that much of the capital expenditure will not be implemented. I leave you guys to ponder this.

PS: I know there will be some die hard Buhari fans who will proclaim that revenue collection will miraculously improve from 2016. Such feeble-mindedness is not worthy of a response.

OP, have you factor in the loan?

Wuruwuru economist.

Op

You analysis is truthful and base on facts

This country is on a loooooooooonnnnng tin

I have to say, even asset sales and a major currency devaluation will prove insufficient. I was trying to cut the FG some slack but I can't see either happening given Buhari's inclinations but even if it did happen, it will still be insufficient.

Not way you put it though

This is the breakdown of how the govt intends to generate its revenue,culled from another thread(with permission)
"Oil Related Revenues 820 billion Naira

Non-oil Revenues 1.45 trillion Naira

 Projected Independent Revenues 1.51 trillion Naira

Capital Expenditure 1.8 trillion Naira (30%  of total budget)

I was seriously considering doing a proper response with figure analysis but your last line spoilt the whole show.

Since you've given an indication of the type of responses you want to see, I'd give you one:

OP, you're correct.

The issue is in the projected non oil revenue of #1.51trillion.

It will need practical policies to enable govt generate such amount!

And the way it is going about its #1.8trillion spending is not what you call good.itit is like "see free money and do as you like"

PassingShot:
I was seriously considering doing a proper response with figure analysis but your last line spoilt the whole show.

Since you've given an indication of the type of responses you want to see, I'd give you one:

OP, you're correct.

And what if he is skewed?

MizColiatu:
So, in clear terms, the budget is unrealistic? @4play?

What do you think can be done to remedy such, I mean, in the long run...we all want better prospects for the future, so if you were to proffer advice on the way forward, what'd it be please?

The budget is unrealistic. It cannot be implemented based on its assumptions.

My suggestions will prove unpopular but the goverrnment should have made the tough decisions now by devaluing the currency (the feckless Emefiele will do whatever Buhari signals), privatisation/asset sales, fiscal austerity by reducing spending across the board. In short, it should have sought to reduce the gap between its projected spending and revenues by reducing spending and selling assets to increase revenue.

These decisions will prove unpopular so there is a question as to their political feasibility but I do think it's still doable now. A government's popularity erodes over time so you need to make the tough choices early while you are still popular, though it's debatable whether that window has closed.

In a stagflation environment marked by high inflation and stagnant economic growth, you cannot spend your way to prosperity. Any attempt to increase spending as the FG plans will increase inflation and market interest rates - the latter because FG borrowing will compete with private sector borrowing and interest rates need to increase to cope with the inflationary effects of increased FG spending. I have seen people draw parallels with the US fiscal stimulus package, but the US was facing deflationary pressures (falling inflation rates) and not increased inflation so the capacity to absorb spending existed.

4Play:
I have to say, even asset sales and a major currency devaluation will prove insufficient. I was trying to cut the FG some slack but I can't see either happening given Buhari's inclinations but even if it did happen, it will still be insufficient.

I think the PMB budget proposal of #6.08trn is high rather based on his revenue it is #5.62tr
Based on the plan I believe it is workable if the policies that will necessitate those non oil revenues are put in place.
The "big " negation for his proposal is that PMB has to pay in dollars to satisfy its imports!(this will always ruse the budget plan)
The PMB will need a maximum #20 devaluation of the naira to cushion its pressure(gradually).
The #1.8tr capital has to be properly placed.wrong place and and wrong sector.PMB ends up with wrong results

4Play:


Hence the likelihood that the FG will raise 3.8 trillion in 2016, averaging 316bn Naira monthly and at $38 per barrel, from mainly revenue collection alone is far-fetched to put it mildly. The last 3 months, the FG averaged 161bn Naira when oil was close to $50 per barrel. The FG needs to more than double current revenue collection just to come close enough to its revenue target.

Hence, never mind borrowing 1.88 trillion Naira (FG says it will recover another 350bn Naira from looters even though it has yet to recover much thus far), for the FG to fully implement its 6.07 trillion Naira budget at current assumptions, it will have to borrow at least 4 trillion Naira!

The FG simply cannot implement its budget in the current form without lots of asset sales and a huge devaluation in Naira but this is not proposed in the budget. My guess is that much of the capital expenditure will not be implemented. I leave you guys to ponder this.

According to your figures, the federal government presently gets an average allocation of N161billion monthly. To finance the 2016 budget, they need to generate N316billion monthly. So, we have a deficit of N155billion and your question is, how do we finance this deficit.

1, The 2016 budget shows a total deficit of N2.2trillion. By implication, N2.2trillion will be borrowed and not N1.8trillion. Capital expenditure would gulp N1.8trillion of the loan while the remaining N400billion will go into recurrent expenditure. If we divide N400billion by 12, we have N33billion monthly.

2, Federal government also intends to generate N350billion from loot recovery. I Am not part of those who compiled the budget but I am very sure that they have their reasons to believe that they can recover that much from corrupt official. Also, don't forget that the loot recoveries is not limited to corrupt officials of the last regime. It also includes projected recoveries from the Abacha loot. USA and other friendly countries are working with the PMB government in this regards. So, I think the N350billion projected recovery is very feasible. On monthly basis, that translates to N29billion.

3, Allocation from the federation account is not the only source of revenue that accrues into the consolidated revenue fund. Federal government through her MDA's generate revenue that belongs strictly to the federal government. This revenues goes directly into the CRF without passing through the federation account. In fact, the essence of the TSA is to ensure that all revenues generated by these agencies are fully remitted into federal government coffers. Over a trillion naira will be generated by these agencies. So, in addition to borrowings and recovered loot, revenues from MDA's should balance up the deficit you highlighted.

Its implementation is possible if the government is serious.

But we all know that nigerian "leaders" are always useless, so that single factor may make its implementation not likely.

Couple with this government is wicked, a government that can kill so many innocent people just like that. One should not expect so much from it.

baralatie:

I think the PMB budget proposal of #6.08trn is high rather based on his revenue it is #5.62tr
Based on the plan I believe it is workable if the policies that will necessitate those non oil revenues are put in place.
The "big " negation for his proposal is that PMB has to pay in dollars to satisfy its imports!(this will always ruse the budget plan)
The PMB will need a maximum #20 devaluation of the naira to cushion its pressure(gradually).
The #1.8tr capital has to be properly placed.wrong place and and wrong sector.PMB ends up with wrong results

Why devaluation does not help much is that the gap between projected spending and likely revenue is so large that devaluation cannot bridge that gap to any significant degree. The way devaluation helps is if you are, for instance, anticipating oil dollar revenues of $10bn translating to 1.97 trillion Naira at the official rate, by devaluing to 260 Naira for instance, that would translate to 2.6 trillion Naira.

It's unlikely that devaluation will make much of a difference, nor would asset sales as you would be looking at $10bn worth of sales at least. There is no indication that the government is looking at major asset sales.

I tend to be wary of delving into the ethnic dynamics of Nigerian politics but it's somewhat relevant here in relation to asset sales and deregulation in general. A government headed by a Northerner is less likely to be keen on taking assets into private hands as the South and Southerners have an edge - possessing a larger cadre of skilled and educated private sector human resources. There are some other ways in which deregulation produces unequal outcomes - deregulation of the downstream petroleum sector would mean higher fuel prices in the North for instance. Thus, a Buhari government will try to plough on with as few asset sales as possible even if the likes of Fayemi or Adeosun may think it's good policy.

4Play:


Why devaluation does not help much is that the gap between projected spending and likely revenue is so large that devaluation cannot bridge that gap to any significant degree. The way devaluation helps is if you are, for instance, anticipating oil dollar revenues of $10bn translating to 1.97 trillion Naira at the official rate, by devaluing to 260 Naira for instance, that would translate to 2.6 trillion Naira.

It's unlikely that devaluation will make much of a difference, nor would asset sales as you would be looking at $10bn worth of sales at least. There is no indication that the government is looking at major asset sales.

I tend to be wary of delving into the ethnic dynamics of Nigerian politics but it's somewhat relevant here in relation to asset sales and deregulation in general. A government headed by a Northerner is less likely to be keen on taking assets into private hands as the South and Southerners have an edge - possessing a larger cadre of skilled and educated private sector human resources. There are some other ways in which deregulation produces unequal outcomes - deregulation of the downstream petroleum sector would mean higher fuel prices in the North for instance. Thus, a Buhari government will try to plough on with as few asset sales as possible even if the likes of Fayemi or Adeosun may think it's good policy.

A 260 devaluation is a rather to high right now as it will give a problem to his non oil receipts.
The issue of downstream deregulation is the way but if he is wary of unequal development.he next option is to borrow(which is what he has proposed) and cut back on spendings!

Even with what is on ground! If PMB pursue the deregulation of the solid mineral sector,it is the north that will benefit as from 2017(so what is he afraid of).

His problem and Nigeria problem in that budget is the dollar for its imports.
It will be straight in his face!!

baralatie:

Even with what is on ground! If PMB pursue the deregulation of the solid mineral sector,it is the north that will benefit as from 2017(so what is he afraid of).

The problem here is that there is an asymmetry between the parties that stand to lose and those who might gain from deregulation and privatization: the former are already benefiting from the status quo, so they are much more likely to put up a stiff fight than those whose gains are only speculative. It's the same reason why there's so much more "grassroots" support for keeping the fuel subsidy in place, even though the funds squandered on it could be used to the benefit of many more people.

seunmsg:

According to your figures, the federal government presently gets an average allocation of N161billion monthly. To finance the 2016 budget, they need to generate N316billion monthly. So, we have a deficit of N155billion and your question is, how do we finance this deficit.

1, The 2016 budget shows a total deficit of N2.2trillion. By implication, N2.2trillion will be borrowed and not N1.8trillion. Capital expenditure would gulp N1.8trillion of the loan while the remaining N400billion will go into recurrent expenditure. If we divide N400billion by 12, we have N33billion monthly.

2, Federal government also intends to generate N350billion from loot recovery. I Am not part of those who compiled the budget but I am very sure that they have their reasons to believe that they can recover that much from corrupt official. Also, don't forget that the loot recoveries is not limited to corrupt officials of the last regime. It also includes projected recoveries from the Abacha loot. USA and other friendly countries are working with the PMB government in this regards. So, I think the N350billion projected recovery is very feasible. On monthly basis, that translates to N29billion.

3, Allocation from the federation account is not the only source of revenue that accrues into the consolidated revenue fund. Federal government through her MDA's generate revenue that belongs strictly to the federal government. This revenues goes directly into the CRF without passing through the federation account. In fact, the essence of the TSA is to ensure that all revenues generated by these agencies are fully remitted into federal government coffers. Over a trillion naira will be generated by these agencies. So, in addition to borrowings and recovered loot, revenues from MDA's should balance up the deficit you highlighted.

You have a valid point in respect of the third point, though I am uncertain as to how much exclusive revenue the FG can retain, but I have to ask what is the revenue of MDAs in the post-GEJ era? 1 trillion Naira equates to 250 billion Naira every 3 months or 83 billion naira each month. Our MDAs do not generate revenues, additional to the amounts in the FAAC allocation, that are remotely close to those figures.

As for the 350bn Naira to be generated from looters. How is the FG going to generate this in the next 12 months when it has not generated anything of that magnitude in the last 7 months? A lot of these revenue projections are based on wishful thinking, it's like those Pentecostal posters - 2016 is our Miracle Year!

Even the 161bn Naira I mentioned refers to monthly average at a time of $48 oil which is 20% higher than the budget estimate of $38 and is, therefore, quite optimistic. At the $48 price FG monthly average, which was 200bn when oil was $64, has fallen to 161bn Naira. At $38 oil, God forbid it falls lower, achieving that 161bn figure is a huge mountain to climb.

I think we have to be realistic and not let our desire or wish for success blind us to realities. No point in asserting that revenues will be generated in the coming 12 months when the evidence from the last few months suggest to the contrary. Another thing you will notice is that the trend revenue figure is one of decline going into 2016. We are expected to believe that this decline will be suddenly reversed in 2016 and that revenues will suddenly accelerate higher despite lower presumed lower oil prices.

What would have been easier is for the government to defer the increased spending to 2017 and demonstrate first that it can collect those revenues it is claiming - Show us you can collect those revenues in the first place before committing yourself to spending all that money.

Either way,fg has to borrow or massively cut back heavily on its spendings

Just an update on this: The FG's projected borrowing has gone from $11bn to $15bn -

Nigeria expects a budget deficit of 3 trillion naira in 2016, which is equivalent to $15 billion up from 2.2 trillion naira, or $11 billion, that had been previously estimated.

http://www.africanews.com/2016/02/05/nigeria-s-world-bank-support-to-fund-budget-deficit-welcomed/

FG's share of January 2016's FAAC allocation was 137.5bn Naira -

The January allocation shows a decrease of N17.4 billion.

Giving the breakdown of revenue among the three tiers of government, Ms. Adeosun said the Federal Government received N137.5 billion, representing 52.68 per cent, while states got N69.7 billion, representing 26.72 per cent.

http://www.premiumtimesng.com/business/business-news/198937-faac-fg-states-lg-share-n370-4b-january.html. This was based on $39 oil.

This is what I said in the initial post:

Hence the likelihood that the FG will raise 3.8 trillion in 2016, averaging 316bn Naira monthly and at $38 per barrel, from mainly revenue collection alone is far-fetched to put it mildly. The last 3 months, the FG averaged 161bn Naira when oil was close to $50 per barrel. The FG needs to more than double current revenue collection just to come close enough to its revenue target.

Hence, never mind borrowing 1.88 trillion Naira (FG says it will recover another 350bn Naira from looters even though it has yet to recover much thus far), for the FG to fully implement its 6.07 trillion Naira budget at current assumptions, it will have to borrow at least 4 trillion Naira!

$15bn takes us to 3 trillion Naira in borrowing using the official exchange rate. I suspect they would still need to borrow a further 1 trillion Naira or $5bn unless they massively devalue, which Buhari has ruled out, or simply forgo much of the budgeted spending.

An update on this:

FG's share for January 2016 (as noted above) was N137.5bn, February 2016 was N127.2bn and March 2016 N109.11bn. See the following 2 links for February and March 2016:

http://www.premiumtimesng.com/news/top-news/200668-faac-fg-states-lgs-share-n345bn-february-revenue.html

http://leadership.ng/news/520354/faac-fg-states-lgs-share-n299-7bn-march-revenue-drops-n39bn

4Play:
An update on this:

FG's share for January 2016 (as noted above) was N137.5bn, February 2016 was N127.2bn and March 2016 N109.11bn. See the following 2 links for February and March 2016:

http://www.premiumtimesng.com/news/top-news/200668-faac-fg-states-lgs-share-n345bn-february-revenue.html

http://leadership.ng/news/520354/faac-fg-states-lgs-share-n299-7bn-march-revenue-drops-n39bn

This thread is prophetic

Too clumsy, can't reek my brain for what u postulate up there.

Heat dey scatter me 4 here, no light no fuel..

Another update:

FG's share for April is N101.2bn
[url]
http://www.pmnewsnigeria.com/2016/05/26/faac-fg-states-lgs-share-n281-5billion/[/url]

The finance minister has now hinted at what should have been apparent when I started this thread, implementation is not certain given revenue generation - http://punchng.com/cant-guarantee-full-budget-implementation-finance-minister/

In all, it's actually a good thing if the budget is not implemented in full as the borrowing required would have caused interest rate rises (crowding out effect) and the injection of cash into the economy will fuel inflation and Naira depreciation.

Who would have thought that the 2016 budget made no sense? The reason I did this thread in December 2015 was that the budget struck me as an audacious exercise of wishful thinking.

Many criticised the 2016 budget on the basis that the oil price benchmark - $38 per barrel - may prove too high. But as I noted then, the problem was that the revenue estimates overall was built on fantasy. This budget, with its bold faced amateurity, made me realise Nigeria was in serious trouble.