The Medium Term Expenditure Framework (MTEF) is a three-year spending plan for all the sectors. This document provides the basis for the annual budget planning; it defines government’s economic, social and development objectives and priorities.
The Federal Executive Council approved and released the recent Medium Term Expenditure Framework and Fiscal Strategy Paper for the next three years- 2017-2019 as required by the Fiscal Responsibility Act.
The Macroeconomic Framework
Unemployment and Underemployment
The unemployment rate is rapidly increasing although, with the new “flexible” foreign exchange regime and fiscal injections, manufacturers should hopefully be able to get industrial inputs, create more jobs and ease off other constraints related to production.
Inter-Bank Exchange Rate
The Government’s Projection of N290/$1 may be difficult to achieve with an increasingly smaller foreign reserves. However, with the budding cash-raising upfront oil deal worth $15bn with India, 22% projected increase in oil production as oil companies begin lifting the force majeure on fields that were shut down as a result of militancy in the Niger Delta, the Naira exchange rate projection of N290/$1 seems realistic in the short term.
The FG plans to spend N6.87tn in 2017, an increase of N806bn from the 2016 figures. 71.8% of the proposed sum is set aside to service recurrent items like salaries, debt servicing and overhead costs while the 28.2% on capital projects such as roads, school buildings, rail etc.
The government does not have its own money. They generate funds from taxes, custom and excise duties, oil receipts and other independent revenue agencies.Basically, the Federal government generates funds from oil and non-oil sources.When government spends more money than it collected as revenue, it must find other ways to raise the balance needed to complete its Budget for the year.
2017 estimated Capital Expenditure sum at N1.77tn suggests that government is ramping up spending, however, for this to have a meaningful impact on the people and work the economy out of recession.The Recurrent Expenditure at N5.1tn in 2017 shows an increment of 13.8% (N5.1tn) from the 2016 figures of N4.48tn. The cost of debt servicing, overhead and personnel cost are fast increasing, the 2017 estimation for overhead costs is projected at N180bn as against the estimated N163bn in 2016.
The 2017-2019 MTEF is incomplete when compare with the previous document, as it omits the Federation targets and a clear classification from revenue lines.The document shows that Nigeria might borrow in order to afford even her recurrent expenditure. This is a worrisome trend, as it shows oil revenue and tax receipts are no longer enough to run the country- pay salaries, run overheads, provide infrastructures and service debts.