OVERVIEW OF ECONOMIC DEVELOPMENTS
3. The last three and a half years have been challenging both at home and abroad. Commodity prices, both oil and non-oil, have been volatile. Global trends, be it security, trade or politics have also been unpredictable. Here in Nigeria, we have had to cope with disruptions in oil production and exports, security challenges and devastating floods.
4. Through hard work, and by the special grace of God, we have weathered these storms and made progress on many fronts which is why we have cause to be optimistic about the future.
5. The economy has recovered from recession and we have had six quarters of growth since then.
6. We have done more work with less resources in agriculture, infrastructure and social investments. We have built better understanding between the Federal Government and the States on non-partisan lines, in particular, intervening several times to support States to meet their obligations including the payment of salaries and pensions.
7. Sustained development is difficult, if not impossible, in an atmosphere of insecurity and poor governance. We have therefore made strenuous and successful efforts to overcome the insurgency in the North-East and to resolve inter-communal misunderstandings elsewhere.
8. The Federal government and the National Economic Council have been working in a unified and patriotic manner to tackle the underlying causes of tension between pastoralists and sedentary farmers. These conflicts have a long-standing history caused mainly by competition for increasingly scarce resources occasioned by rising population and erratic weather conditions – a product of climate change.
9. I take this opportunity to salute the men and women in our Armed Forces and Security Services for their courage, sacrifice and patriotism in protecting our collective safety and security.
10. The Federal Government has also sustained its efforts to fight grand corruption and improve public financial management, and its efforts to improve public financial management through the comprehensive implementation of the Treasury Single Account, the Government Integrated Financial Management Information System and the Integrated Payroll and Personnel Information System.
11. You will also recall that as part of our commitment to improved governance, we joined the Open Government Partnership in 2016 with the aim of enhancing public service delivery, promoting business opportunity, enhancing government efficiencies, preventing corruption and building trust in government. We remain committed to these, and other institutional reforms that will enhance transparency and accountability in public service delivery.
12. We also recorded several successes in economic management. Real Gross Domestic Product growth stood at 1.81 percent in the third quarter of 2018 compared to 1.17 percent in the third quarter of 2017. We have had a sustained accretion to foreign exchange reserves from a low of $28.57 billion in May 2015 to $42.92 billion by mid-December 2018. This has contributed to exchange rate stability and will provide a buffer against any unanticipated external shocks. Inflation has also declined from a peak of 18.72 percent in January 2017 to 11.28 percent in November this year.
13. In the area of trade, Nigeria has moved from a deficit to surplus in our trade balance. As at the third quarter of 2018, the trade balance was a surplus of N681.27 billionrepresenting a significant improvement from the deficit of N290.1 billion in 2016. This reflects the rebound in crude oil exports, increased non-oil exports and a reduction in the importation of food and items that can be produced locally. Foreign capital inflows including direct and portfolio investments also responded to improved economic management. Capital importation to Nigeria in the third quarter of 2018 stood at $2.86 billion, which is a 56.7 percent increase compared to the corresponding period in 2016.
14. Trading is a significant contributor to our economic development but we must continue to focus on strengthening actual production. From farmers to miners to processors to digital entrepreneurs to players in the entertainment industry, all hands must be on deck to ensure the country succeeds.
15. With regard to the oil and gas sector, crude oil production continues to increase steadily towards budgetary targets and will receive a further boost when the 200,000 barrels per day Egina oil field starts operations.
16. In agriculture, we are seeing increased investment across the entire value chain from agricultural inputs to farming and ultimately, food processing. Barely three years ago, Nigeria was spending $5 million dollars a day on rice importation. Today rice imports have virtually stopped. Indeed, we are on course to achieve food security in major staple foods in the not too distant future
Distinguished Senate President, Right Honourable Speaker
17. Infrastructure development is also another area in which we have made a lot of progress. Our approach was a logical one. We simply prioritised the completion of critical on-going projects over the introduction of new ones.
18. For example, in the Ministry of Water Resources, we identified 116 abandoned or uncompleted projects relating to irrigation, dams, drainage and water supply. To date, we have completed and/or commissioned a number of these projects including;
a. Central Ogbia Regional Water Project, Bayelsa State
b. Northern Ishan Regional Water Supply Project, Edo State
c. Sabke Water Supply Project, Katsina State
d. Takum Water Supply Project, Taraba State
e. Ogwashi – Uku Dam, Delta State
f. Shagari Irrigation Project, Sokoto State
g. Galma Dam, Kaduna State.
h. Mangu Water Supply Project, Plateau State
i. Federal University of Agriculture, Makurdi Water Supply Project, Benue State
19. In the railway sector, we completed and commissioned the Abuja-Kaduna Rail Line and the Abuja Metro-Rail Project. Similarly, the previously abandoned Itakpe-Ajaokuta-Warri Rail Line is undergoing test runs and will soon be commissioned. We are also on track for the Lagos – Kano rail line as significant progress has been made on the Lagos to Ibadan segment of the project.
20. We remain committed to rebuilding and expanding our road network. In 2018, an additional 1,531 kilometers of roads have been constructed and 1,008 kilometers rehabilitated across the country. Priority projects such as the Abuja – Kaduna – Kano highway as well as the Second Niger Bridge are well underway through the Presidential Infrastructure Development Fund.
21. In every State of Nigeria today there is a major Federal road project going on. For instance:
a. In the North Central, long neglected roads like the Ilorin-Jebba Road, a stretch of 93 km that took a number of days to travel has been completed to provide a critical link between the North and South of Nigeria over a few hours. We have awarded the dualization of this road to expand it all the way to Mokwa, as we have done to the Abuja – Keffi-Lafia -Makurdi roads where work recently commenced. Similarly, work has resumed on the Suleja – Minna road after years of inactivity.
b. In the South-South, we have recently completed the 60 km section of Alesi to Ugep in Cross River State, and awarded the 72km section from Odukpani Junction to Ugep which will reduce a journey that used to take 3 days a few years back, to 3 hours. Work has also commenced on the Calabar – Itu – Odukpani Road that links Akwa-Ibom to Cross River State, as we have started work on the long-neglected Bodo – Bonny Bridge to connect these long separated communities.
c. In the South East, a critical section of Umunya linking Awka to Onitsha, a stretch of 18 kilometers, is being constructed now and one side of it should be ready for use before June 2019. Roads like Arochukwu – Ohafia – Bende are also receiving our attention.
d. In the South–West, long neglected and abandoned roads like the Badagry Expressway have been awarded for construction along with the Apapa – Tin Can Island, Mile 2 – Oworonshoki, road to ease the congestion currently being experienced in Lagos, while interstate roads linking Ogun through Ikorodu to Sagamu, and Ipaja to Otta and Abeokuta are being repaired with payment to contractors.
e. In the North-West, we have completed the Sokoto to Tambuwal – Jega Road comprising 135 Km out of the entire Sokoto to Yauri stretch and sections of Kaduna Eastern bypass and Kano Western bypass are also progressing.
f. In the North-East, we have started work on the long-neglected Mayo – Belwa – Jada Road, and the Gombe – Numan – Jalingo Road and recently awarded the reconstruction of bridges damaged by insurgency.
In addition, thanks to the N100 billion Sukuk Bond raised in Nigeria, work is on-going in 25 road projects. Among which are:
a. Construction of the Oju/Loko-Oweto bridge over River Benue
b. Dualisation of section of Abuja-Abaji-Lokoja Road
c. Dualisation of section of Suleja-Minna Road
d. Dualisation of section of Lokoja-Benin Road (Obajana – Okene)
e. Dualisation of section of Kano – Maiduguri Road linking Kano-Jigawa-Bauchi-Yobe
f. Dualisation of section of Kano-Katsina Road
g. Dualisation of section of Kano Western By-Pass
h. Construction of Kaduna Eastern By-Pass
i. Rehabilitation of outstanding section of Onitsha-Enugu Expressway
j. Rehabilitation of Enugu-Port Harcourt Road
k. Dualisation of section of Yenegoa Road Junction
22. In power, we are working on over 90 transmission projects across the country. Major power transmission stations like Mayo Belwa in Adamawa, Ejigbo and Odogunyan in Lagos, Apo in Abuja, Ikot – Ekpene Switching Station Akwa Ibom, Maiduguri in Borno, Damaturu in Yobe have been completed to support electricity transmission.
23. For effective delivery to critical areas, we decided that we had to decentralize power supply leveraging off-grid solutions especially solar based systems. We are pushing more “willing- buyer willing –seller” arrangements. Already, this has brought more reliable off-grid power to markets and economic clusters around the country.
24. The projects being implemented right now include the Ariaria Market in Aba, the Sabon Gari Market in Kano, the Sura Shopping Complex in Lagos to mention a few. Our hope is to roll out such programs to 300 such economic clusters across the country.
25. In addition to economic clusters, we are also looking at rolling out similar off grid solutions to Universities and medical centers across the country.
26. As we develop our infrastructure and power sector, we have not lost sight of the adverse impact climate change has to our economy, food and national security agenda. The recent floods, farmer-herdsmen conflict and aggressive desertification are all effects of climate change. We have seen our forests, lakes, arable land and grazing areas gradually disappear over the decades.
27. As a Government, we took a long term view on tackling the effects of climate change which must be contained and ultimately reversed. We have stepped up our afforestation efforts. In the past two years, we have planted over 2.3 million seedlings in 21 States. We also successfully launched the Green Bond which will focus on developing environmentally friendly projects and other green programs across the country. Nigeria is also actively participating in international efforts to tackle climate change.
28. Furthermore, working with key stakeholders including the National Assembly, State Governments and the private sector, we intensified our drive to remove obstacles, reduce processes and lower costs of doing business. The fact that over the past three years, Nigeria has gained 24 places in the World Bank Ease of Doing Business rankings is a clear indication that we are moving in the right direction.
29. We are confident that improvements arising from on-going work will result in another quantum leap in the 2019 rankings. The States have also keyed into efforts to improve the business environment, and the sub-national Doing Business Report for Nigeria showed that 32 out of 36 states recorded overall improvement.
30. In line with our commitment to creating a fairer and more inclusive society, I am pleased to update you on our efforts in this regard. Specifically,
a. Through the N-Power scheme, 500,000 graduates have been employed to date;
b. The National Home-Grown School Feeding program is feeding 9,300,892 pupils in 49, 837 schools in 24 states across Nigeria, and empowering 96,972 cooks;
c. The Government Enterprise and Empowerment Program has seen to the disbursement of 1,378,804 loans to small businesses and farmers in all states including the FCT. These are interest free loans that will be paid back;
d. 297,973 households in 26 states across the country are benefitting from the Conditional Cash Transfer program.
Distinguished Senate President, Right Honourable Speaker
31. Whilst we are most encouraged by the improved performance of the economy since we started implementing our Economic Recovery and Growth Plan, there is an area that continues to be a cause of concern. That has to do with our unsatisfactory revenue performance.
32. Although we have sustained efforts at boosting tax revenues, our progress has been constrained by the relatively low level of growth, having just emerged from recession. This has restrained our tax revenue drive.
33. Furthermore, the volatility in oil prices, and disruptions in oil production, delayed our plans to recover past due oil license and royalty charges as well as restructuring of the Joint Venture Oil Assets.
34. As we have returned to the path of growth, I have directed that action on all our revenue initiatives be expedited. I have already issued a number of Presidential directives on the disposal of recovered assets, deployment of the National Trade Window as well as the immediate recovery of past-due oil royalties including by crude seizures, if necessary.
35. On asset recovery, in order to put to use for the benefit of all Nigerians monies and assets stolen from the public treasury, we have since the 2016 Budget created a revenue line in the budget for stolen and recovered funds.
36. Thus every government project today benefits in one way or the other from recovered looted funds. I have also directed all the relevant authorities to liquidate all recovered, unencumbered assets, such as landed properties, buildings and vehicles, so that these funds can be available to help in the funding of the Budget, particularly the important infrastructure projects.
2018 BUDGET PERFORMANCE
37. Now to the 2018 Budget performance. The 2018 Budget was based on a benchmark oil price of $51/b, oil production of 2.3 million barrels per day and an exchange rate of N305 to the dollar. Based on these, the Federal Government’s aggregate revenue of N7.17 trillion was projected to contribute to the 2018 Budget of N9.12 trillion. The projected deficit of N1.95 trillion (or 1.73 percent of GDP) was to be financed mainly by borrowing.
38. In 2018, average oil production up to end of the third quarter was 1.95 mbpd, as against the estimated 2.3 mbpd for the entire year. However, average market price of Bonny Light crude oil was higher (an average of $74 per barrel as at October) than the benchmark price of $51.
39. As at the end of the third quarter, Federal Government’s actual aggregate revenue was N2.84 trillion, which is 40 percent higher than 2017 revenue. The overall revenue performance is only 53 percent of the target in the 2018 Budget largely because some one-off items are yet to be actualized. We have now rolled this revenue item over to 2019.
40. Of the total appropriation of N9.12 trillion, N4.59 trillion had been spent by 30th September, 2018 against the prorated expenditure target of N6.84 trillion. This represents 67 percent performance. Debt service and the implementation of non-debt recurrent expenditure, notably payment of workers’ salaries and pensions are on track. Despite the delay in the passage of the 2018 Budget on 20th June 2018, the sum of N820.57 billion had been released for capital projects as at 14th December, 2018. We have carried over capital projects that were not likely to be fully funded by year-end 2018 to the 2019 Budget.
PRIORITIES FOR THE 2019 BUDGET
41. The 2019 Budget Proposal is intended to further place the economy on the path of inclusive, diversified and sustainable growth in order to continue to lift significant numbers of our citizens out of poverty. The underlying drivers of the 2019 revenue projections have been adjusted to reflect current realities. On the expenditure side, allocations to Ministries, Departments and Agencies of Government were guided by the 3 objectives of the ERGP, which are, (i) Restoring and Sustaining Growth; (ii) Investing in our People and (iii) Building a Globally Competitive Economy.
2019 KEY BUDGET ASSUMPTIONS
42. The 2019 Budget proposal is based on the following assumptions:
a. Oil price benchmark of $60 per barrel;
b. Oil production estimate of 2.3 million barrels per day, including condensates;
c. Exchange rate of N305/$;
d. Real GDP growth of 3.01 percent; and
e. Inflation Rate of 9.98 percent.
43. Notwithstanding the recent softening in international oil prices, the considered view of most reputable analysts is that the downward trend in oil prices in recent months is not necessarily reflective of the outlook for 2019. However, as a responsible Administration, we will continue to monitor the situation and will respond to any changes in the international oil price outlook for 2019.
44. With regard to oil production, I have directed the NPPC to take all possible measures to achieve the targeted oil production of 2.3 million barrels per day.