In the light of the usual extended recess during the forthcoming Id el Kabir and the Christmas/New Year celebrations, the Legislature may have, possibly less than two months within which to consider and approve the 2013 budget, which President Jonathan laid before the National Assembly last week.  

Instructively, in successful economies elsewhere, budgets would traditionally be laid before parliament at least four months before the New Year, to ensure that minute details and implications of budget proposals would have been thoroughly assessed without the burden of time pressure.  However, the National Assembly’s current insistence on full implementation of the 2012 budget before its approval of the 2013 projections may suggest that, as in the past, legislative endorsement may not come until sometime in the first quarter of 2013.  

Incidentally, the proposal submitted by President Jonathan makes no apparent provision for the payment of controversial fuel subsidy; indeed, there is no indication that contrasting subsidy figures from critical government agencies on subsidy values have been resolved.  In other words, in view of subsidy payments of over N2tn in 2012, we may assume that Mr. President may have adroitly subsumed subsidy payments as a first line charge on the total revenue projection of N10.84tn in 2013.  

Indeed, it is not clear how the Executive arrived at the projected total revenue figure of N10.84tn, as indications of revenue inflows from government income streams suggest that the 2013 revenue projections may be grossly understated.  In the first place, oil revenue traditionally contributes over 80% of totally collected federal revenue each year; that is about N8.64 trillion of 2013 total projected revenue.  In other words, other sources of internally generated revenue may account for the balance of about N2.2tn.  

This relatively paltry figure would appear to be a contradiction of the vastly improved performance of the Federal Inland Revenue Service (FIRS), which reports suggest may actually surpass the N5tn threshold this year.  Incidentally, FIRS confirmed actual revenue collection of about N4tn by third quarter of 2012; so, a 2013 projection of N5tn total revenue should be quite feasible.  In addition, from available reports, the Customs Service revenue collection has also exceeded N400bn as at August 2012.  This may suggest that all things being equal, we may also confidently expect up to N500bn revenue contribution from Customs Service in 2013.

In summary, therefore, total revenue projection for 2013 should be over N14tn, made up of N8.6tn (about $50bn) from crude oil sales, N5tn internally generated revenue and N500bn customs duties and levies. 

Indeed, NNPC’s reports of crude output often in excess of 2.5 million barrels with crude prices hovering  at an average of $100 per barrel in spite of world economic downturn in 2012 may suggest that the above revenue projection of N8.6tn may not be an overstatement.

In any event, even if we accept President Jonathan’s total projected 2013 federal revenue of N10.84tn as fairly accurate, the component of N3.89tn total revenue available for the federal government budget would also seem to be a gross understatement.  The constitutional revenue sharing formula of 52% for federal, 26% state and 22% local governments would suggest that federal allocations should be a minimum of about N5.5tn, instead of N3.89tn indicated in the 2013 budget statement.

Thus, in the event that total federal expenditure projection is only N4.92tn for 2013, we may, in fact, actually have a budget surplus of over N500bn instead of the apparent deficit of almost a trillion naira in Mr. President’s budget 2013 statement.  In the light of the average cost of about 15% for such government borrowings, this would reduce the debt burden, and also reduce debt service charges by over N150bn! 

Incidentally, the allocation of N591.76bn for debt service accounts for over 12% of the 2013 expenditure budget, and remains the highest sectoral allocation well above the N426bn allocated for education, N279bn for health, and the paltry N81bn for rural development and agriculture (which presumably also includes provision for water resources).

Paradoxically, government’s heavy borrowings have not brought any commendable  improvement to the welfare of Nigerians; that notwithstanding, the commercial banks, who appear to be government’s favourite children, now post enviable profit figures, which, according to Aig Imokhuede, Managing Director of Access Bank, may exceed 10% of the compounded profit figures of all European banks this year.

In the light, however, of the apparent reluctance of the banks to provide low-cost funds to the real sector, Nigerians may wonder about the source of these huge bank profits.  The answer to this, of course, is not far-fetched; why, for example, would anyone expect banks to abandon the juicy yields of between 12 and 17% for government’s risk-free borrowings for the sake of the huge challenges of the real sector?