Deji Elumoye, Chuks Okocha and Udora Orizu in Abuja
The National Assembly leadership wednesday met with the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed; Minister of State for Petroleum Resources, Chief Sylva Timipre; Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele; and other top government officials on the state of the economy and the planned review of 2020 Budget.
THISDAY learnt that following yesterday’s meeting in Abuja, the National Assembly, which had adjourned plenary for two weeks on Tuesday to curb the spread of the COVID-19 pandemic in the legislative complex, may reconvene next week to consider a downward review of the budget in view of the downward slide of the international oil market.
Analysts have, however, advised the federal government to disclose sectors and line items to be affected by the planned N1.5 trillion budget cut.
Sources told THISDAY that the leadership of both the Senate and the House of Representatives were under pressure to reconvene next week to review the 2020 Appropriation Act.
The presidency was said to have prepared a supplementary budget, which it intends to present to the two chambers through Ahmed.
The proposed budget review is said to have been based on oil benchmark of $30 per barrel unlike the $57 benchmark used for the 2020 budget passed by the National Assembly last December.
The federal government recently announced its decision to reduce the N10.59 trillion 2020 budget by N1.5 trillion, due to the drastic fall in the price of crude oil in the international market caused by the outbreak of COVID-19 and trade war between Russia and Saudi Arabia.
In a telephone conversation with THISDAY yesterday, Chairman of the House Committee on Media and Public Affairs, Hon. Benjamin Kalu, said the review of the 2020 budget was one of the urgent national issues and the lawmakers might reconvene if necessary.
“Like it was pointed out in the speaker’s remarks, the two-week break is not a holiday and members will be asked to reconvene if there is any national issue in need of a quick legislative intervention.
“The review of the 2020 budget in view of the current state of the global economic realities necessitated by the coronavirus pandemic, to me appears like one of those urgent national issues. Though I am yet to be formally briefed by the leadership on whether or not we will be back by next week, most of the members are in town and will reconvene if called upon.”
The need for the legislators to reconvene was said to have informed why the leadership of the National Assembly yesterday met with some ministers and heads of agencies from the executive arm of government to brainstorm on the impact of the pandemic on the economy.
The meeting touched on the planned review of the 2020 budget and the Medium Term Expenditure Framework and Fiscal Strategy Paper passed late last year by the National Assembly.
President of the Senate, who also doubles as the Chairman of the National Assembly, Dr. Ahmad Lawan, who presided over the meeting, said an immediate review of the 2020 budget and Medium Term Expenditure Framework was imperative, particularly against the backdrop of the impact of coronavirus on global economy.
The meeting, which lasted for about four hours, according to Lawan, was summoned to “discuss the proposed review of the 2020 budget and the Medium Term Expenditure Framework.”
“If we have to review the budget itself, we have to consider the MTEF/FSP. Even in sickness, we need government to provide services. The impact of COVID-19 is well known to all of us in terms of health and the economy.
“Here, we will be talking of revenues that we estimated to fund the budget 2020. Because the oil price has gone so low due to the impact of COVID-19, the Minister of State (Petroleum Resources) should be able to tell us where we will be in the next six months or so.
“We should have concepts that can deliver fast and are sustainable. Anything that we do that cannot provide succour and relief to our people will lead to catastrophe,” the Senate President stated.
On his part, the Speaker of the House of Representatives, Hon. Femi Gbajabiamila, described the meeting as timely.
“Taking a cursory look at some of the papers (presentations), I think this meeting is actually very timely and very important because we live in very unusual time and it’s time we start thinking outside the box to see how we can stabilise our economy and the direction it’s going to take,” the speaker said.
Earlier, Ahmed had explained that “prior to COVID-19 and oil price decline, the Nigerian economy was already fragile and vulnerable.”
According to her, due to the global economic downturn precipitated by the impact of the coronavirus, international oil prices plunged as low as $22 per barrel on the international market.
She added that the impact of the pandemic, which resulted in international crisis, created a disruption in travel and trade and put “increasing pressure on the naira and foreign reserves as the crude oil sales receipts decline and the country’s micro-economic outlook worsens.”
She said in view of Nigeria’s economic realities, the Crisis Management Committee constituted by President Muhammadu Buhari in response to the COVID-19 and Oil Price Decline Crisis expressed concern that “the decline in international oil prices or domestic production may be magnified if a severe outbreak of the pandemic occurs in Nigeria.”
She, therefore, proposed a review of the 2020 budget using a $30 per barrel price benchmark as against the $57 initially passed in December by the National Assembly, to prepare for the worst case scenario, as well as insulate the Nigeria economy against any form of unexpected crisis.
Ahmed added that the revenue collection target for the Nigeria Customs Service has been reduced from N1.5 trillion to N943 billion “due to anticipated reduction in trade volumes; and privatisation proceeds to be cut by 50 per cent, based on the adverse economic outlook on sales of the Independent Power Projects (IPPs) and other assets.”
The federal government would also cut revenue-related expenditures for the Nigerian National Petroleum Corporation (NNPC) for several projects included in the 2020 Appropriation Act.
Ahmed said: “The federal government is working on Fiscal Stimulus Measures to provide fiscal relief for taxpayers and key economic sectors; incentivise employers to retain and recruit staff during the economic downturn; stimulate investment in critical infrastructure; review non-essential tax waivers to optimise revenues and compliment monetary and trade interventions to respond to the crisis.”
In addition, the federal government has made provision for health sector interventions by introducing import duty waivers for essential input for pharmaceutical firms; tax waivers on new equipment and deferment of tax to increase production.
Ahmed added that the federal government would release N6.5 billion in two tranches (N1.5 billion and N5 billion) to the Nigeria Centre for Disease Control (NCDC) as intervention to assist in the fight against the spread of COVID-19.
She stated that Lagos State Government would receive N10 billion support from the federal government to combat coronavirus spread in the state.
In addition, she informed the lawmakers that Nigeria had received a grant of $18.2 million from Japan towards strengthening seven NCDC centres across the country.
Also, N1 billion would be released by government to pharmaceutical firms in the country to stimulate production.
In his presentation, Emefiele said “while we would expect to see a decline in our expected growth projection for 2020 relative to 2019, the exact impact will be dependent on how well the coronavirus is contained over the next few month, and how long low oil prices persist.”
Analysts Seek Details of Budget Cut
Meanwhile, analysts have advised the federal government to disclose sectors and line items to be affected by the planned N1.5 trillion cut in the 2020 budget.
While backing the proposed reduction in the fiscal plan following the global impact of COVID-19 pandemic, they also advised the government to lay emphasis on cutting administrative capital while boosting developmental capital.
In separate interviews with THISDAY, a former CBN Deputy Governor, Dr. Obadiah Mailafia and the Lead Director, Centre for Social Justice (CSJ), Eze Onyekpere, said the planned budget cut was inevitable, but urged the federal government to reveal sectors the budget cut would affect.
The Federal Executive Council (FEC) recently approved a 20 per cent cut in capital expenditure in the 2020 budget as well as a 25 per cent reduction in recurrent expenditure.
The drop in crude oil price from the $57 budget benchmark to about $25 per barrel also compelled the FEC to lower the benchmark to $30 per barrel.
Reacting to the decisions, Mailafia said: “I believe these are realistic measures. But it would have been good to know the sectors that are being affected by the budget cuts.
“There are notorious areas of consumption that I think must not be our priorities. On the other hand, social programmes that focus on the poor and vital infrastructure projects ought to be a priority.”
On the recent alarm raised by the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, that Nigerians should brace up for at least three months of tough times following the plunge in oil price and lack of demand for the Nigerian crude, Mailafia stated that “he who wears the shoes knows where it pinches.”
He stated: “If the NNPC Group Managing Director raised such alarm, who are we not to cry wolf with him? The GMD was lamenting the fact that hundreds of oil tankers from our shores are wandering aimlessly in the Atlantic Ocean, with nowhere to go.
“Some of the biggest buyers in Europe and Asia are in a complete economic lockdown. Europe has closed its borders. When societies face life-and-death choices, business often has to take a back seat. This is the drama that is unfolding at present.”
Onyekpere also told THISDAY that the decision to cut capital expenditure in the 2020 budget was inevitable considering the plunge in oil revenue.
He said: “The drop in crude oil price from the $57 budget benchmark to about $25 per was not anticipated by the crafters of the 2020 federal budget. But this should not be the situation.
“The crafters of the budget have consistently failed, refused and neglected to accompany the budget with a Fiscal Risk Appendix as provided in section 19 (f) of the Fiscal Responsibility Act (FRA). Apriori, the Fiscal Risk Appendix evaluates the fiscal and other related risks to the annual budget (including the revenue framework) and specifies measures to be taken to offset the occurrence of such risks as well as measures to be taken when the risks crystallise.
“Thus, this decision made in a rather knee-jerk manner should have been subjected to empirical simulations, projects and analysis at the design stage of the budget.”
Onyekpere, a leading analyst on fiscal matters, advised that the federal government’s proposed budget cut should concentrate on administrative capital while boosting developmental capital.
He described the administrative capital as capital investments to enhance the bureaucracy and the smooth running of government, while developmental capital refers to investments that impact on the overall quality of life, and ease of doing business, among others, of the majority of Nigerians.
He identified these to include construction of roads, hospitals, education facilities, and power sector investments, among others.