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FMPWH Gets Lion’s Share as 2018 Capital Spending Hits N1.9tn

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budget
  • FMPWH Gets Lion’s Share as 2018 Capital Spending Hits N1.9tn

The Ministry of Power, Works, and Housing has got N347.52bn, which is the highest amount so far released to any ministry as the 2018 capital spending hit N1.9tn, reports Ifeanyi Onuba

Between June 20, 2018, when the 2018 budget was signed into law by President Muhammadu Buhari and March 29, 2019, the Federal Government has released a total of N1.9tn to finance the capital components of the 2018 budget.

The details of the amount which was released to Ministries, Departments and Agencies of government was contained in a document submitted by the Ministry of Finance to the National Assembly.

A copy of the document was obtained by our correspondent on Sunday in Abuja.

The 2018 budget, signed by President Muhammadu Buhari on June 20 last year, had total spending of N9.1tn.

The capital expenditure was to gulp 31.5 per cent of the total expenditure at N2.87tn, while recurrent non-debt spending was put at N3.51tn.

There was also a provision of N2.01tn for debt servicing which is 21 per cent of the total budget while a provision of N177bn to retire maturing bond to local contractors was made by the government.

The Ministry of Power, Works and Housing had the highest allocation with N715bn for both recurrent and capital expenditure, the Ministry of Interior was to get N577bn while N576bn was allocated to the Ministry of Defence.

The Ministry of Education was allocated N542bn; Health, N356bn; Transportation, N267bn; and Agriculture, N203bn.

In the document submitted to the lawmakers, the ministry stated that the N1.9tn included the N277bn which was released to agencies of government at the end of March, 2019.

The government stated that capital spending had been prioritised in favour of critical ongoing infrastructure projects in the power, roads, rail and agriculture sectors of the economy.

The Federal Government, according to the document, stated that the implementation of the capital component of the 2018 budget would continue until the 2019 budget was eventually passed into law by the National Assembly.

The 2019 budget, which is still undergoing legislative scrutiny, has an estimate of N8.83tn made up of N4.04tn for recurrent expenditure, N2.03tn for capital expenditure and N2.14tn for debt servicing, among others.

The document stated, “Of the total appropriation of N9.12tn, N6.99tn had been spent by December 31, 2018. This represents 77 per cent performance.

“Debt service and the implementation of non-debt recurrent expenditure, notably payment of workers’ salaries and pensions, were on track.

“Capital releases only commenced after the signing of the 2018 budget on June 20, 2018. As of March 29, 2019, a total of N1.91tn had been released for capital projects which include N277bn just released at the end of March.

“Spending on capital projects has been prioritised in favour of critical ongoing infrastructure projects in the power, roads, rail and agriculture sectors.

“Implementation of the 2018 capital budget will continue into 2019 until the 2019 budget is passed into law.”

A breakdown of the N1.91tn released for capital projects showed that the ministry of Power, Works and Housing got the highest amount of N347.52bn.

This is about 42.95 per cent of the N809.05bn which was allocated to the ministry in the 2018 budget.

This is followed by defence and security which got N205.89bn. The amount received by the sector is about 66.85 per cent of its N308bn allocation in 2018.

The document put the amount released to the agriculture and water resources sector at N152.5bn which is about 51.45 per cent of its N296.39bn allocation

In the same vein, out of the N251.42bn allocated to the transportation sector in the 2018 budget, about N127.68bn which is 50.79 per cent of the sector’s budget had been released.

For the health and education sectors, the document stated that N115.43bn had been released out of the N189.39bn allocated to the sector in the 2018 budget.

It said the sum of N186.05bn out of N323.3bn allocated to other sectors had been released by the Ministry of Finance.

Further analysis of the document showed that about N70bn out of the N100bn allocated for zonal intervention projects had been released by the Ministry of Finance.

In the same vein, N456.5bn which is 86.07 per cent of the N530.42bn allocated for statutory transfers had been released by the government.

The document also stated that the sum of N254.27bn had been released for capital supplementation. This is about 33.54 per cent of the N758.12bn allocated for the expenditure sub-head in the 2018 budget.

Some finance and economic experts said that there was a need for the Federal Government to put in place mechanisms that would help check the delay in the passage of the budget as it was affecting the rate of capital projects execution.

They said that at a time when the government was working on how to sustain the growth momentum in the economy, it was critical for funds to be released for capital projects on time.

The Lead Director, Centre for Social Justice, Eze Onyekpere, stated that the practice where the annual Federal Government budget was signed into law in the second quarter of each year was inimical to its effective implementation.

He called on the Federal Government to commence the process of enacting a new Public Finance Management Act to address the incessant delays that had characterised the country’s budget process.

The new law, according to him, would also define the framework for the engagement of stakeholders in the budget preparation as well as approval processes.

He said, “Lessons need to be learnt from this budget fiasco and this challenge will now be converted into an opportunity.

“There is a need for effective legislative collaboration in the preparation and approval of the budget, which may necessitate the amendment of section 81 of the 1999 Constitution, enactment of a new public finance management Act which sets the rules for budgeting time frames.

“In the legislature, it is also imperative that the ground rules for the approval of budgets be streamlined and modified so that no set of members of the National Assembly should be in a position to alter the consensus of the majority.”

In his comment, a Developmental Economist, Odilim Enwagbara, said there was the need for the review of the Fiscal Responsibility Act to make it define properly the timeline for the preparation of the budget.

He said with well-defined timelines for the budget process which must stipulate penalties in case of default, both the executive and the legislature would be forced to work assiduously to meet with such deadlines.

He said the delay in the passage of the budget had serious negative implications for the economy as it would affect both fiscal and monetary policies.

For instance, he said in the area of fiscal policy, the government could not release funds for the implementation of capital projects, adding that with a huge infrastructure deficit of $350bn, it would be difficult to address such infrastructure gap with a delayed budget.

He said, “To delay budget is to delay investments. If you don’t have a new budget ready to take off, how do you spend for capital projects and pay salaries and even run the government?”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Finance

FG Borrowed $5.9B To Fight COVID-19 and Implement Budget – Minister of Finance

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Zainab Ahmed

The federal government borrowed about $5.9 billion in 2020, to tackle the COVID-19 pandemic and implement its budget. The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, revealed this yesterday.

A statement issued by her Special Adviser, Media and Communications, Mr. Yunusa Abdullahi, yesterday, indicated that the minister told the Collaborative Africa Budget Reform Initiative (CABRI) General Assembly during a webinar, that the federal government had to move quickly to save the economy.

Speaking on Nigeria’s fiscal response – short term interventions and impact on public finances, as an immediate fiscal response, Mrs. Ahmed said: “We did the following: Procured a $3.4 billion loan from the International Monetary Fund (IMF) and about $2.5 billion in local currency from the domestic capital market to support the 2020 budget implementation), among others.”

She noted that the government then packaged a N500 billion for COVID-19 Crisis Intervention Fund in the 2020 revised budget, as part of a N2.3 trillion Economic Sustainability Plan.

Mrs. Ahmed said that the government had begun the process of moving the economy away from its primary dependence on oil for revenues and foreign exchange, and making steady gains in addressing infrastructure and human capital challenges before the pandemic hit the global economy.

With COVID-19, Nigeria’s Bonny Light crude oil price fell from a peak of US$72.2 per barrel on January 7, 2020 to below US$20 by April 2020.

She said, “In effect, the US$57 crude oil price benchmark approved in the 2020 budget became unrealistic triggering the need to adjust the following variables: reduction of crude oil benchmark price from US$57 per barrel to US$28 per barrel; reduction of daily crude oil production benchmark from 2.18 million barrels per day (mbpd) to 1.9 mbpd; adjustment of the official exchange rate to N360/US$1 from N305/$.”

Mrs. Ahmed revealed that part of the federal government Supplementary Budget on COVID-19 would be spent on the procurement of 29. 588 million doses of the Johnson & Johnson vaccine.

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Banking Sector

Union Bank CEO, Godson Chukwuemeka Okonkwo Acquires 2.4 Million Shares in the Bank Ahead of Acquisition

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Union bank - Investors King

The Chief Executive Officer, Union Bank Plc, Godson Chukwuemeka Okonkwo, has purchased 2,431,917 ordinary shares of the bank, according to the latest disclosure filing from the lender.

The CEO acquired the 2,431,917 shares of Union Bank at N4.90 per share on Thursday 6th May 2021 from the floor of the Nigerian Exchange Ltd.

Okonkwo’s N11.916 million investment was after Investors King reported a possible acquisition of the bank by Zenith Bank or Access Bank following sources cited by Bloomberg.

Bloomberg said, “Atlas Mara Limited, the London Stock Exchange-listed pan-African banking group started by Mr. Bob Diamond has received a number of approaches for its 49.97 per cent holding in Lagos-based Union Bank of Nigeria.”

It also stated that Atlas Mara received interests from Nigerian and Middle Eastern lenders for its remaining assets on the continent, according to Bloomberg sources.

The sources claimed the banks in talks with Atlas Mara asked not to be identified as talks are private. But they mentioned Nigeria’s Zenith Bank Plc, Access Bank Plc and Morocco’s Attijariwafa Bank as some of the banks that have so far expressed interests in acquiring Union Bank.

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Banking Sector

Zenith Bank, Access Bank, Others Express Interest in Acquiring Union Bank

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Atlas Mara - Investors King

Zenith Bank and Access Bank are some of the financial institutions in talks to acquire Atlas Mara Ltd.’s 49.97 percent stake in Union Bank Plc.

Bloomberg said, “Atlas Mara Limited, the London Stock Exchange-listed pan-African banking group started by Mr. Bob Diamond has received a number of approaches for its 49.97 per cent holding in Lagos-based Union Bank of Nigeria.”

It also stated that Atlas Mara received interests from Nigerian and Middle Eastern lenders for its remaining assets on the continent, according to Bloomberg sources.

The sources claimed the banks in talks with Atlas Mara asked not to be identified as talks are private. But they mentioned Nigeria’s Zenith Bank Plc, Access Bank Plc and Morocco’s Attijariwafa Bank as some of the banks that have so far expressed interests in acquiring Union Bank.

Middle Eastern banks and private equity suitors have also shown interest, according to the people. Some potential buyers have indicated they may acquire all of Atlas Mara’s remaining assets in Africa, which would include its Zimbabwe unit, the people said.

Atlas Mara has been working with Rothschild & Co. to consider options for its Union Bank stake. No final decisions have been made, and there’s no certainty the deliberations will lead to a transaction, the people said.

Representatives for Atlas Mara and Zenith Bank didn’t immediately respond to requests for comment. Attijariwafa Bank Managing Director Ismail Douiri and a representative for Access Bank declined to comment.

Speaking on the matter, Frontier and Sub-saharan Africa Banks’ Analyst, Renaissance Capital, Adesoji Solanke, on Thursday said this is good for Atlas Mara.

He said “Good for Atlas Mara if they’re able to exit successfully, as they’ve been selling a bunch of assets over the past year, to KCB and Access Bank respectively across different markets. Whether they get a good valuation for Union Bank is another thing.

“We don’t think it’ll be a transformational deal for Access or Zenith (Return-on-Equity dilutive for both), but could be a good way for the Middle Eastern banks to get a decent foothold in the market. We suspect getting the other private equity investor block to sell will be critical as we wouldn’t expect a strategic bank investor to desire a minority shareholding.”

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