GOVERNMENT SLASHES CAPITAL VOTE BY 43 PERCENT IN 2015 BUDGET

The Federal Government may find it difficult to implement key infrastructure projects next year going by the details of the 2015 budget proposal, which was presented to the National Assembly on Wednesday, findings have shown.

This came just as the Federal Government had said the proposed austerity measures would not affect its key infrastructure projects in 2015, which according to her, is critical to economic growth, development and job creation.
The 2015 budget proposal, however, showed that the government had slashed capital expenditure by about 43 per cent to N634bn, compared to about N1.1tn spent in 2014.
This is expected to significantly affect government’s ability to executive major capital projects in the coming year.
According to the document, the share of capital vote to total expenditure has also reduced to 14.6 per cent, up from 23.8 per cent recorded in the 2014 fiscal year.
Also, the non-debt recurrent expenditure for 2015 is proposed to increase by 6.6 per cent to N2.6tn, down from N2.4tn in the current year.
Analysts said the development was contrary to government’s plan to cut unnecessary expenses in the public service.
Analysts at Afrinvest, a research and investment advisory firm, noted that the dwindling crude oil prices had led to 7.2 per cent reduction in the 2015 budget proposal, compared to 2014 fiscal year.
They, however, said the proposed reduction in the fiscal expenditure was not broad-based, pointing out that “the cut in total expenditure will only be majorly effected in the capital expenditure component of the budget, while the recurrent is expected to increase.
“With the pressure on existing infrastructure persist, we are of the view that the allocation to the capital expenditure is relatively low, hence it will hamper growth and development in 2015.”
The firm agreed with the government on the 1.8 per cent increase in the defence and security component of the budget proposal, citing the need to tackle the security challenges in the North East.
It however, said, “The controversial component of the proposed 2015 budget may likely be the decision of the fiscal authorities to stick to the crude oil benchmark assumption of $65 per barrel despite the persistent slide in the price of crude which is already below the budget benchmark. With a new floor yet to be established, the possibility of crude oil prices further declining is imminent.
“This will pose budget performance challenges on fiscal authorities in fiscal 2015. In the scenario that oil prices do not recover to a minimum of $65 per barrel, we anticipate that the federal government may overshoot the proposed budget deficit of N755.”
The Head, Research and Intelligence, BGL Plc, Mr. Femi Ademola, said, “I am not sure how much reliability we place on the budget since the current oil price is already lower than the budget benchmark. The cut in capital budget by about half is not very apt. I am also not sure how successful the bridging policies would be in covering the gap in revenue loss.”