Download EFU-FSP-BPS Executive Summary Wazobia 2016

Executive Summary of EFU-FSP-BPS 2016 -2018 - Wazobia State Government
1.A
Economic Update
1.
Global Economy - The start to 2015 has been dominated by the continuing slide in the global price of
oil which started towards the end of 2014. This has been driven by both supply (increase) and demand
(reduction) side factors.
2.
While global growth increased broadly as expected to 3¾ percent in the third quarter of 2014, up from
3¼ percent in the second quarter, this marked growth diverges among major economies. Specifically,
the recovery in the United States was stronger than expected, while economic performance in all other
major economies-most notably Japan-fell short of expectations. The weaker-than-expected growth in
these economies is largely seen as reflecting ongoing, protracted adjustment to diminished expectations
regarding medium-term growth prospects. Interest rates and risk spreads have risen in many emerging
market economies, notably commodity exporters, and risk spreads on high-yield bonds and other
products exposed to energy prices have also widened. Long-term government bond yields have
declined further in major advanced economies, reflecting safe haven effects and weaker activity in
some, while global equity indices in national currency have remained broadly unchanged since the end
of 2014.
3.
Nigerian Economic and Mineral Sector - Nigeria is in a somewhat vulnerable macroeconomic
position, with much depending on the performance of the oil sector and commodity prices. A negative
shock to oil revenues could adversely affect the expectations of portfolio investors, with further short
term balance of payments implications.
4.
On the positive side, in addition to the perceived resolve of the Government and Central Bank to
maintain a prudent macroeconomic policy stance, the strong reserve and debt positions of the Nigerian
Government imply still significant space. Slower assessed growth in agriculture in the newly re-based
GDP figures is consistent with apparently slow recent progress in poverty reduction in rural areas.
5.
The petroleum sector still accounts for a strong majority of exports and budgetary revenues in Nigeria,
and is therefore critical to macroeconomic and budgetary stability. The oil sector has faced a number of
challenges in recent years in slower output growth, vandalism and theft, an uncertain regulatory
environment, and low levels of investment. The result has been a sharp decline in global oil prices over
the second half of 2014 from a high of $114 per barrel in June to $63 per barrel in December (Bonny
Light), and further declines in January 2015 (which as at January 20th was $49.80 per barrel).
Table 1: Nigeria Key Macroeconomic and Mineral Indicators
Indicator
2011
2012
2013
2014
5.3
4.2
5.5
7.4
57883.3
64925.8
72620.0
83100.0
10.3
12.0
8.0
7.5
158
157
158
159
Unemployment
21.1%
23.9%
NA
NA
Balance of Payments (% of GDP)
0.13%
4.31%
NA
NA
Oil Price ($ Average)
114
113
111
100
Oil Price Benchmark
75
70
79
79
2.08
2.32
2.2
2.2
GDP Growth
GDP (Billion Naira)
Inflation (%)
Exchange Rate (NGN:USD FX Rate)
Oil Production (Average mbpd)
Source: (Economic Outlook) National Bureau of Statistics, IMF WEO APR-2015; CBN, FAAC
6.
Wazobia State Economy - Wazobia State has enjoyed impressive GDP performance over the years,
although not quite as high as the national average since Wazobia does not benefit directly from the
mineral sector. The Wazobia state economy from the perspective of the GDP is unbalanced. It is
heavily tilted on agriculture production. Under the business environment in Nigeria, 2010, Wazobia
Niger State ranked 18th out of the 36 States of the Federation and the FCT.
7.
Wazobia is proud to be able to produce its own state level GDP and Inflation statistics.
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Executive Summary of EFU-FSP-BPS 2016 -2018 - Wazobia State Government
8.
Section 2.A of the main report provides more detail on global, national and state economic
performance.
1.B
Fiscal Update
Figure 1: Revenue and Expenditure Performance
Fiscal Performance Summary: 2009 - 2014
90,000
120.00%
80,000
100.00%
70,000
80.00%
Value (NGN Million)
60,000
60.00%
50,000
40,000
40.00%
30,000
20.00%
20,000
0.00%
10,000
0
-20.00%
2009
2010
2011
2012
2013
2014
Revenue
43,341,487,841
53,802,773,307
64,249,026,984
75,913,160,243
85,382,662,129
79,854,058,479
Rec. Exp.
23,726,931,622
28,124,021,063
28,897,632,307
33,558,415,264
37,194,836,745
50,958,582,358
Cap. Exp.
18,757,768,430
24,728,752,244
34,106,394,672
40,897,991,979
46,681,072,384
27,316,800,831
72.71%
101.19%
95.40%
98.28%
94.83%
84.15%
24.14%
19.42%
18.15%
12.47%
-6.48%
Performance
Growth
Year
9.
Revenue Performance – Recurrent revenue performance increases have been driven by federal
transfers which have risen every year from 2009 to 2013 but dropped in 2014 due to the global oil price
decline. On the whole, budgeting for federal transfers has been accurate, except 2014, where there
was an unexpected downturn. Internally Generated Revenue (IGR) has been growing steadily. Capital
receipts have been variable, and often over budgeted or underreported.
10.
Expenditure Performance – CRF and Personnel expenditure have grown steadily since 2009, with
relatively significant increases in Personnel expenditure in 2010 and 2013 (almost 30%). Budgeting has
been relatively accurate. Overheads have been fluctuating around N10 billion until 2014 when there was
an almost 100% increase. 2015 budget anticipates this was a one off and they will drop back to the
previous trend. Capital expenditure grew annually until 2014 when it dropped, likely due to the federal
revenues down-turn
11.
Section 2.B.1 of the main EFU-FSP-BPS document provides more detailed analysis of fiscal performance.
12.
Debt position – Wazobia’s public debt is a little over N30 billion, which is reasonable in terms of
sustainability and liquidity compared to the accepted ratios, although the IGR based ratios are high
since IGR collection is relatively low still. Further debt draw down should be accompanied by increased
IGR effort. Section 2.B.2 of the main EFU-FSP-BPS document provides more detailed analysis of the
current debt position.
1.C
Macro-Fiscal Strategy and Key Assumptions
13.
Macro-economic and Mineral Assumptions – The Macroeconomic framework is based on IMF
national real GDP growth and inflation forecasts from the October 2014 World Economic Outlook
document, and mineral benchmarks (oil price, production and NGN:USD exchange rate) from the 20152017 Federal Fiscal Framework. The state real GDP growth is based on 65% of the national level,
inflation is as per the national level.
14.
Section 3.A.1 of the main EFU-FSP-BPS document provides more detailed analysis.
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Executive Summary of EFU-FSP-BPS 2016 -2018 - Wazobia State Government
Figure 2: Macro-Fiscal Framework
Macro-Economic Framework
Item
National Inflation
National Real GDP Growth
State Inflation
State Real GDP Growth
State GDP Actual
Oil Production Benchmark
Oil Price Benchmark
NGN:USD Exchange Rate
Fiscal Framework
Recurrent Revenue
Statutory Allocation
VAT
IGR
Excess Crude / Other Revenue
Total Recurrent Revenue
2015
2016
2017
2018
43,824,638,196
46,657,912,416
54,058,092,882
58,581,966,006
11,619,913,362
13,041,868,436
14,541,710,234
16,200,222,197
4,410,972,147
4,799,042,603
5,227,617,085
5,688,505,718
5,614,503,969
5,614,503,969
5,614,503,969
5,614,503,969
65,470,027,673 70,113,327,423 79,441,924,170 86,085,197,890
Recurrent Expenditure
CRF Charges
Personnel
Overheads
Total
1,618,142,172
1,658,595,727
1,700,060,620
1,742,562,135
34,867,417,533
39,973,730,735
45,796,842,493
52,397,815,436
21,128,207,444
21,128,207,444
21,128,207,444
21,128,207,444
57,613,767,149 62,760,533,905 68,625,110,557 75,268,585,015
Transfer to Capital Account
Capital Receipts
Grants
Other Capital Receipts
Total
Reserves
Contingency Reserve
Planning Reserve
Total Reserves
Capital Expenditure
Discretional Funds
Non-Discretional Funds
Net Financing
Total Budget Size
Ratios
Growth in Recurrent Revenue
Grwoth in Recurrent Expenditure
Capital Expenditure Rate
Deficit to Total Expenditure
2015
8.30%
7.20%
8.30%
4.68%
667,890,000,000
2.3271
59
165
7,856,260,524
2016
8.30%
7.20%
8.30%
4.68%
757,176,473,916
2.3271
59
165
2017
7.90%
7.10%
7.90%
4.62%
854,697,661,474
2.4067
65
165
7,352,793,518 10,816,813,613 10,816,612,875
8,500,000,000
8,500,000,000
9,250,000,000
1,500,000,000
1,500,000,000
1,500,000,000
10,000,000,000 10,000,000,000 10,750,000,000
1,636,750,692
1,636,750,692
3,273,501,384
2018
7.50%
7.00%
7.50%
4.55%
960,605,385,451
2.4067
65
165
1,752,833,186
1,752,833,186
3,505,666,371
1,986,048,104
1,986,048,104
3,972,096,209
7,000,000,000
1,500,000,000
8,500,000,000
2,152,129,947
2,152,129,947
4,304,259,895
22,356,260,524 21,852,793,518 26,066,813,613 23,816,612,875
13,856,260,524
13,352,793,518
16,816,813,613
16,816,612,875
8,500,000,000
8,500,000,000
9,250,000,000
7,000,000,000
4,500,000,000
4,500,000,000
4,500,000,000
4,500,000,000
79,970,027,673 84,613,327,423 94,691,924,170 99,085,197,890
-7.01%
9.66%
27.96%
5.63%
7.09%
8.93%
25.83%
5.32%
13.31%
9.34%
27.53%
4.75%
8.36%
9.68%
24.04%
4.54%
15.
Revenue Assumptions – statutory allocation and VAT are based on elasticity forecasts whilst moving
average estimate has been used for IGR. Excess Crude is based on 2014 receipts (constant). Grants
and Misc. Capital Receipts are consistent with current levels and prudent, loans are based on DPO draw
down only.
16.
Expenditure Assumptions – CRF charges are forecast to grow by 2.5% annually based on Salaries
and debt servicing. Overheads have zero increment and should be encouraged to fall still further.
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Executive Summary of EFU-FSP-BPS 2016 -2018 - Wazobia State Government
Personnel expenditure, which is dependent on salary increases and net movements into the Civil
Service, is based on a state level elasticity forecast (using inflation and GDP). Capital is based on the
recurrent account surplus plus capital receipts and is low compared to previous years.
17.
Section 3.B of the main EFU-FSP-BPS document provides more detailed analysis.
1.D
Sector Allocations (3 Year)
Figure 3: Expenditure Ceilings by Sector
Sectoral Recurrent Expenditure
No. Sector
1 Water
2 Agriculture
3 Industry, Commerce
4 Environment
5 Infrastucture
6 ICT
7 Transport
8 Health
9 Education
10 Security
11 Governance
12 Culture and Value Re.
13 Women, Youth, SPC
14 Rural and Community
Total
% 2016
31.76%
28.80%
0.98%
1.97%
8.86%
22.13%
0.99%
1.26%
0.82%
0.44%
0.36%
0.82%
0.44%
0.36%
100.00%
2016 Allocation
19,403,629,953
17,599,242,603
598,512,256
1,205,875,095
5,414,353,347
13,522,974,318
607,457,819
770,922,090
504,084,150
266,837,941
218,563,259
504,084,150
266,837,941
218,563,259
61,101,938,179
% 2017
31.76%
28.80%
0.98%
1.97%
8.86%
22.13%
0.99%
1.26%
0.82%
0.44%
0.36%
0.82%
0.44%
0.36%
100.00%
2017 Allocation
23,349,042,312
21,177,762,160
720,209,982
1,451,070,170
6,515,273,983
16,272,651,060
730,974,480
927,676,551
606,581,458
321,095,093
263,004,541
606,581,458
321,095,093
263,004,541
73,526,022,880
% 2018
31.76%
28.80%
0.98%
1.97%
8.86%
22.13%
0.99%
1.26%
0.82%
0.44%
0.36%
0.82%
0.44%
0.36%
100.00%
2018 Allocation
6,709,507,604
6,085,575,346
206,957,283
416,974,975
1,872,208,707
4,676,057,997
210,050,535
266,574,226
174,305,346
92,268,879
75,576,160
174,305,346
92,268,879
75,576,160
21,128,207,444
Sectoral Capital Expenditure
No. Sector
1 Water
2 Agriculture
3 Industry, Commerce
4 Environment
5 Infrastucture
6 ICT
7 Transport
8 Health
9 Education
10 Security
11 Governance
12 Culture and Value Re.
13 Women, Youth, SPC
14 Rural and Community
Total
% 2016
3.00%
5.00%
2.00%
2.00%
50.00%
0.75%
2.00%
5.00%
10.00%
1.00%
15.00%
0.50%
0.75%
3.00%
100.00%
2016 Allocation
655,583,806
1,092,639,676
437,055,870
437,055,870
10,926,396,759
163,895,951
437,055,870
1,092,639,676
2,185,279,352
218,527,935
3,277,919,028
109,263,968
163,895,951
655,583,806
21,852,793,518
% 2017
3.00%
5.00%
2.00%
2.00%
40.00%
0.75%
2.25%
10.00%
15.00%
0.75%
15.00%
0.50%
0.75%
3.00%
100.00%
2017 Allocation
782,004,408
1,303,340,681
521,336,272
521,336,272
10,426,725,445
195,501,102
586,503,306
2,606,681,361
3,910,022,042
195,501,102
3,910,022,042
130,334,068
195,501,102
782,004,408
26,066,813,613
% 2018
3.00%
5.00%
2.00%
2.00%
30.00%
0.75%
2.50%
15.00%
20.00%
0.50%
15.00%
0.50%
0.75%
3.00%
100.00%
2018 Allocation
714,498,386
1,190,830,644
476,332,257
476,332,257
7,144,983,862
178,624,597
595,415,322
3,572,491,931
4,763,322,575
119,083,064
3,572,491,931
119,083,064
178,624,597
714,498,386
23,816,612,875
18.
Envelopes are provided for Recurrent and Capital Expenditure – recurrent is consistent with the prior
actual levels of expenditure by sectors (average 2011-2014), capital is rebalanced to provide focus on
health and education and reduced investment in infrastructure. It is consistent with the state
development plan.
19.
Section 4 of the main EFU-FSP-BPS document provides more detailed information on envelopes.
1.E
Major Fiscal Risks and Other Considerations
20.
Major risks are around security (affecting both the state and wider Nigerian economy), elections and
also the state’s reliance on federal transfers which are highly dependent on the global crude oil market.
21.
With a relatively small Capital Development Fund (CDF), priority must be given to completing ongoing
projects, and there should be an attempt to economise on overheads to ensure they return to pre-2014
levels. Potential grant funding should also be sort by all MDA’s to supplement the state’s own resources
to boast the CDF.
22.
Sections 3.D and 5 of the main EFU-FSP-BPS document provides more detailed analysis on risks and
recommendations.
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