Fiscal Policy in 2016 - 2016 Budget of “Change” 

The proposed 2016 Budget has a total expenditure of N6.08trillion, comprising of N1.8trillion Capital expenditure (N557 billion in 2015) and non-debt recurrent spending of N2.65trillion.  Basic assumptions of the budget as proposed are an optimistic $38pb crude oil price, 2.2mbpd oil output and a 4.4% GDP growth.  The budget is to be financed through N820 billion oil revenues, N1.45 trillion non oil revenues, N1.51 trillion from independent revenues, a domestic borrowing of N984 billion,
and foreign borrowing of N900 billion.  Fiscal policy in 2016 will be largely expansionary as the government seeks to stimulate economic activities and generate employment. Focus on Infrastructure Capital expenditure of N1.8trillion in the 2016 Budget is expected to focus on infrastructural development to deliver inclusive growth, while fostering further progress in industry, commerce and investment. While the N635billion allocated to transport; works, power and housing ministries can be considered as “seed capital”, public-private partnership initiatives are expected to dominate governments’ infrastructure initiatives. There is however a deliberate attempt to focus on infrastructural developments that will transform agriculture, solid minerals and key job creating sectors of the economy. Fiscal Discipline and a Larger Tax Base Full implementation of the Treasury Single Account is expected to yield significant improvements in the collection and remittance of independent revenues to government coffers. Greater oversight is to be directed at the Ministries, Departments and Agencies (MDAs) to ensure that their budget and remittances are in compliance with the Fiscal Responsibility Act. In addition , the government intends to broaden the country’s tax base and improve the effectiveness of revenue collecting agencies in a bid to grow non-oil revenues. Further, subsidies will come in the form of lower tax rates for smaller businesses as well as subsidized funding for priority sectors such as agriculture and solid minerals. 2016 Priorities 2016 budget largely focus on infrastructure development and non-oil revenue particularly from agriculture and solid minerals. Further, the proposed recurrent spending for 2016 prioritized education, defense and health sectors. The adoption of a zero based budgeting approach should ensure that resources are aligned with government’s priorities and allocated efficiently. This is a right step in the right direction. Reccurrent Expenditure (N'tn) 2.65 Capital Expenditure (N'tn) 1.85 Projected Revenue (N'tn) 3.86 Fiscal Deficit (N'tn) 2.20 Fiscal Deficit (% of GDP) 2.20 Debt Service (N'tn) 1.36 The 2016 Proposed Budget Key Parameters Recurrent (N' bn) Capital (N' bn) Education 369.6 Works, Power and Housing 433.4 Defence 294.5 Transport 202.0 Health 221.7 Special Interventions 200.0