Can the 2020 Budget Go the Distance?

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PRESIDENT MUHAMMADU BUHARI PRESENTS HIS 2020 NATIONAL BUDGET TO A JOINT SESSION OF THE NATIONAL ASSEMBLY. PHOTO; SUNDAY AGHAEZE

The 2020 Budget Proposal by President Muhammadu Buhari appears overambitious especially, given its revenue targets, writes Obinna Chima
President Muhammadu Buhari, last Tuesday, presented the 2020 Appropriation Bill to a joint session of the National Assembly.

While commentators have commended the President over the early presentation of the budget proposal, saying it signaled the return to the January-December budget cycle, which could give enough time for budget implementation, they, however argued that the fiscal plan does not have what it takes to propel economic growth in the medium term.

According to details of the proposed budget, the federal government estimated an aggregate expenditure of N10.33 trillion.
The expenditure estimate includes statutory transfers of N556.7 billion, non-debt recurrent expenditure of N4.88 trillion and N2.14 trillion of capital expenditure (excluding the capital component of statutory transfers).

Debt service was estimated at N2.45 trillion, and provision for Sinking Fund to retire maturing bonds issued to local contractors is N296 billion.
It showed that the sum of N8.155 trillion was estimated as the total federal government revenue target in 2020. This comprises oil revenue N2.64 trillion, non-oil tax revenues of N1.81 trillion and other revenues of N3.7 trillion.

Accordingly, an aggregate sum of N2.46 trillion (inclusive of N318.06 billion in statutory transfers) was proposed for capital projects in 2020. Although the 2020 capital budget was N721.33 billion or 23 per cent lower than the 2019 budget provision of N3.18 trillion, it was still higher than the actual and projected capital expenditure outturns for both the 2018 and 2019 fiscal years, respectively.
Interestingly, the federal government was silent on the controversial issue of fuel subsidy, which obviously is the elephant in the room.
But some analysts as well as members of the National Assembly have faulted some estimates in the Appropriation Bill christened: ‘Budget of Sustaining Growth and Job Creation.’

For instance, as at June 2019, the federal government’s actual aggregate revenue for 2019 was N2.04 trillion. This was only 58 per cent of the 2019 budget’s target and its poor performance was attributed to the underperformance of both oil and non-oil revenue sources.
Owing to these, commentators wonder how the federal government intends to achieve its projection for next year.
No doubt, Nigeria’s low revenue generation capabilities as well as the country’s ever-rising recurrent expenditure and debt servicing have been enduring challenges to the presentgovernment.

This clearly manifested in the 2018 budget, whereby the federal government’s recurrent expenditure (including statutory transfers) stood at N5.85 trillion, while total revenue earned same year was N3.86 trillion.

In same year, N2.09 trillion was spent on debt service, up from N1.63 trillion in 2017.
In his assessment of the 2020 budget proposal, the immediate past Director General of the West African Institute for Financial and Economic Management (WAIFEM), Prof. Akpan Ekpo, advised the federal government to move away from always basing the budget on expected oil revenue.
“We need to start thinking of a budget that is not oil-driven. The revenue projection to me is too ambitious. Last year, we were off-target completely in terms of revenue generation; this year we are not performing better, with the year almost over.

“Now, we are projecting something higher. It is too ambitious. We need to be very careful how we go about this and not over burden the masses with multiplicity of tax,” he said
Also, the Director General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, pointed out that the 2020 budget numbers underscored the need to be more innovative in boosting revenue, reducing leakages and ensuring that revenue generating agencies of government remit what is due to government.

“We need to do things differently if we must get a different result,” he stressed.
On his part, the Managing Director of Afrinvest Securities Limited, Mr. Ayodeji Ebo, said the early presentation of the budget proposal sent the signal that the government was trying to do something differently.

According to him, “They are trying to see how we can return to the one-year budget cycle. However, the elephant in the room is still how the government would really realise the budgeted revenue.
“Looking at past budgets in terms of achievement and revenue, it has been very poor. So, the main issue is how will the government fund this budget that it would not rely on the Central Bank of Nigeria’s support through ways and means?

“Even this N10 trillion budget cannot solve our problem. What can they do to partner and provide comfort for foreign direct investors as well as domestic investors? These are the issues that the government should focus on. In terms of business climate, the government must make it conducive so that we can attract much investments to reduce the infrastructure gaps.”
A former President of the Nigerian Bar Association (NBA), Dr. Olisa Agbakoba, argued that the N10 trillion budget proposal would not take Nigerians out of poverty.

“The starting point with this budget is a diagnosis of our condition. I would diagnose that Nigeria is afflicted with malignant metabolic economic syndrome complicated by high inflation, high-interest rates, mass unemployment, weak infrastructure, slow growth, unclear borrowing policy, unaccountable subsidy among others.

“On the basis of a gross domestic product of $400 billion, the baseline annual budget should be 20 per cent, which approximates N20 to 30 trillion annual spend rather than the miserly N10 trillion budget.
“Our annual spend is weak, and we have to infuse large money into it. For monetary policy, we need urgent quantitative easing, which is easing of all interest rates in particular to slack the heavy burden of high-interest rates on lending afflicting long-suffering Nigerians. We must be very proactive to look for new funds,” he said.

Chairman, Senate Committee on Public Accounts, Senator Mathew Urhoghide, advised that poor revenue generation, which has been the bane of effective implementation of yearly budgetary proposals, must be tackled by blocking all the loopholes if 2020 budget is to succeed.
“We must put our mouth where our money is, meaning that, as parliamentarians, more thorough oversight functions must be carried out on all revenue generating agencies,” he said. From the foregoing, for the federal government to deliver on its targeting of job creation and stimulating economic activities, which it said are the focus of its 2020 budget proposal, it has to be decisive on the issue of fuel subsidy.
It must muster the courage to eliminate the fuel subsidy policy, which gulps a major part of its expenditure.
In addition, the federal government must cut down on the cost of governance, which has remained high and also remove wastages in the system.