Deji Elumoye, James Emejo, Shola Oyeyipo in Abuja and Nume Ekeghe in Lagos
Hope for the return to the January-December budget cycle rose wednesday as President Muhammadu Buhari submitted the 2020-2022 Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) to the two chambers of the National Assembly for approval.
Legislative approval for the MTEF/FSP documents is a pre-condition for the presentation of the 2020 budget estimates to the National Assembly, which could happen in a matter of weeks.
The leadership of the National Assembly has promised severally to ensure the passage of the budget by December, in order to stabilise the fiscal year, if lawmakers could get the MTEF/FSP by September.
In a swift reaction, analysts described the early submission as a positive development for the economy as it will enhance the country’s return to the January-December cycle, which will also coincide with the business cycles of banks and other large corporates and facilitate robust planning in the economy at large.
Buhari, in a one-page letter entitled: “Submission of 2020-2022 Medium-Term Expenditure Framework And Fiscal Strategy Paper,” addressed to Senate President, Dr. Ahmad Lawan, and House of Representatives Speaker, Hon. Femi Gbajabiamila, canvassed for the early passage of the documents.
The president in the letter dated September 24, the day he addressed the United Nations General Assembly in New York, United States, and read at yesterday’s plenary of the Senate by Lawan, commended the efforts of the lawmakers towards ensuring a cordial working relationship between the legislature and the executive arms of government.
He said: “Given our shared objective of returning the budget to a predictable January – December fiscal year, with effect from 2020, I hereby forward the 2020/2022 FSP to the distinguished Senate and trust that it would be extensively considered in order to facilitate the 2020 MTEF budget preparation.”
“Let me use this medium to express my gratitude for the much improved partnership between the legislative and the executive arms of the federal government in our goal of making the budget process deliver better outcomes for the Nigerian people. In particular I note with further appreciation, the commitment and support that distinguished senators have continued to demonstrate.
“Pursuant to provisions of the Fiscal Responsibility Act 2007,the preparation towards the submission of the 2020 budget to the National Assembly is progressing well. The MTEF/FSP was prepared taking into account, key development of the global and domestic environments. We have endeavoured to ensure that forecasted revenues are realistic, but also reasonably challenging in the face of our significantly constrained fiscal space. Planned spending has been set at prudent and sustainable levels consistent with government’s overall developmental objectives as set out in the Economic Recovery and Growth Plan (ERGP).”
House of Representatives Deputy Speaker, Hon. Idris Wase, who presided in the absence of Gbajabiamila who is presently in Uganda for the Commonwealth Parliamentary Conference (CPC), read a similar letter from the president at wednesday’s plenary.
The MTEF/FSP contains the benchmark upon which the 2020 budget would be predicated.
Highlights of the 35-page 2020-2022 MTEF/FSP documents include pegging of the projected budget profile for 2020 at N9.12trillion as against N8.92 trillion for 2019, and $55 oil price bench mark as against $60 used for the N8.9 trillion 2019 budget.
Oil production is fixed at 2.1m barrel per day as against 2.30m barrels per day approved for the 2019 budget; the official exchange rate of N305 per dollar used for 2019 budget was retained while inflation rate is projected at 10.81 per cent as against 9.98 per cent for 2019.
A further breakdown of the 2020 budget proposal of N9.12 trillion, including N36.38 billion from grants and donor funding, shows that interest payment on debts is estimated at N2.45 trillion; provision for Sinking Fund to retire maturing bonds to local contractors is N296 billion; personnel and pension costs to gulp N2.67 trillion and N536.72 billion respectively; N40.71 billion earmarked for Basic Health Care Provision Fund; N22.73 billion for GAVI/Routine immunisation in the service-wide votes (SWV) and N89.44 billion for the power sector reform programme.
Others include N1.01 billion (exclusive of capital in statutory transfers) for Ministries, Departments and Agencies (MDAs) capital expenditure with the total capital expenditure standing at N2.17 trillion.
The federal government had earlier this month unveiled the draft 2020-2022 MTEF and FSP with a projected total budget of N9,789,243.466 for 2020.
It had also expressed concern that the country faced significant medium term fiscal challenges, especially with respect to revenue generation and rapid growth in personnel costs.
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, who unveiled the documents in Abuja, had stated that the 2020 budget would be predicated on a lower oil production of 2.18 million barrels per day (mbpd) and lower benchmark oil price of $55 per barrel.
Early MTEF Submission Positive for Economy, Say Analysts
Meanwhile, economic analysts have welcomed the early submission of the MTEF/FSP and also commended the recent assurances from the legislature on its willingness to pass the budget on record time and revert to the January-December cycle.
Speaking in an interview with THISDAY, Chief Executive, Global Analytics Company, Mr. Tope Fasua, stated that the development would be positive for the economy.
He said: “Early submission of the MTEF is good for the economy and may see the country returning to the January-December cycle, which will also coincide with the business cycles of banks and other large corporates and enable robust planning in the economy at large. Already there is a mismatch and some ministers have been heard saying at least six months’ worth of this year’s budget will be rolled over into next year as a result of late passage.
“This means that most of the catalytic effect of the budget is lost on the rest of the economy and the people suffer because after taking care of top politicians and paying salaries and allowances of civil servants, nothing else gets done.
“A return to the normal cycle and a new seriousness around the budget will result in a reduction in poverty rates and a boost in national productivity.”
On his part, an economist and Senior Lecturer at the Lagos Business School, Dr. Bongo Adi, commended the president, saying the move showed the willingness and determination by the federal government to meet its obligations on projects and as well as ensuring a sustainable growth in the economy.
“It shows the intent on planning and on seeing that the projects they have started are duly completed; but then, one would be interested in knowing how it connects with the Economic Recovery and Growth Plan (ERGP),” Adi added.
On the benefits of an early passage of the budget, he said: “Perhaps this Medium Term Expenditure Framework and the Fiscal Strategy Paper would be an opportunity for government to improve on the ERGP and perhaps put in place some lasting and more sustainable impetus towards growing the economy.”
In his contribution, the Head of Research, United Capital, Mr. Wale Olusi, said the development would help in directing the capital markets on how to position products to attract investments needed to fund the budget.
“What we are planning is to spend over N10 trillion in 2020 and then fund it with about 70 revenue and that is why you will be seeing the VAT increase going forward as well as other initiatives the government would be putting together to ramp up government revenue because oil revenue alone wouldn’t be able to balance the budget and we need to diversify our revenues,” he stated.
On the benefits of its early submission, he said: “For the economy, you know where the government is going and you know the plan of the government for the next three years and you know which sector they would be spending money.
“For us, who are in the capital market, what it simply means is that there is still going to be a lot of borrowing and then we can position our products along that line.”
To the Head of Research, Agusto & Co, Mr. Jimi Ogbobine, the MTEF was an indication that the assumption for the average exchange rate would be N305 to a dollar.
“The MTEF 2020 – 2022 also reflects the borrowing plans of the Federal Government (FG) over the three-year span of the plan. The FGN intends to maintain its current strategy of borrowing internationally and locally on a 50-50 basis in a bid to mitigate the crowding-out effects of local borrowings. However, an area of concern will be the Proceeds of Oil Assets Ownership Restructuring. Contrary to the initial guidance that the federal government may seek to finance the deficit by restructuring its oil assets, the MTEF makes no provision for proceeds of this line,” he added.
Similarly, economist and former Director General, Abuja Chamber of Commerce and Industry (ACCI), Dr. Chijioke Ekechukwu, also pointed out that after a disappointing budget cycle over the past years, an early passage could position the country as a serious entity both locally and internationally.
“Nigerians have been expecting a January to December budget cycle for many years. And Nigerians have been so disappointed for the years gone by because having a cycle that cannot be determined and projected on had been distorting economic activity.
“In fact, it portrays the country as an unserious country because you cannot say you are budgeting and nobody knows when your budget time starts and when it ends.”
“If we are going to have that going forward, the first thing it does is to show us as a serious minded country. But whether the budget will be implemented or not or half implemented or not will not actually be determined by whether the cycle will start in January and end in December. But what the cycle does is to show us as a serious country.
“And then, we have to take the implementation very seriously. And what it also does is that it can make all kinds of financial planning possible so that everybody will key into the budget cycle of the country and in order for them to finish at a specific,” he added.
