Currently before the National Assembly is a revised 2020 budget for necessary approval and passage, report Deji Elumoye and Udora Orizu
For weeks, the Minister of Finance, Budget and National Planning, Zainab Ahmed, was a regular face at Senate committee Room 022 of the National Assembly, holding meetings with the leadership of the legislature over the proposed cut in the 2020 federal budget prompted by the effect of the rampaging COVID-19 pandemic.
Finally, the Executive, last week transmitted the revised 2020 Appropriation Bill to the Legislature. This much was alluded to by the Chairman of the Senate committee on Appropriation, Senator Barau Jibrin, who told reporters last Thursday after another round of meeting with the Finance Minister, that the amended budget was already with the National Assembly.
“Yes, the Appropriation bill is now with the Assembly. The House of Representatives got the budget document on Tuesday while the Senate also received it on Wednesday”.
The Senate and House of Representatives had last Tuesday proceeded on a two-week Sallah break and is to resume plenary on Tuesday, June 2.
President of the Senate, Dr. Ahmad Lawan, and the Speaker, House of Representatives, Hon. Femi Gbajabiamila, in announcing the Sallah break, said they would be ready to consider the revised 2020 budget if it was forwarded by the Executive during the break.
There is the likelihood, therefore, that the two chambers of the Assembly might reconvene before the end of the Sallah break to consider the adjusted 2020 Appropriation bill.
The legislative procedure is for the bill, which has been transmitted from the Executive to the National Assembly leadership to be laid before the two chambers after which the general debate on the bill will be taken before it would be referred to relevant committees of the two chambers.
With Monday and Tuesday already declared by federal government as public holiday to celebrate Sallah, the earliest time the Assembly could reconvene will be Thursday for the bill to be quickly taken and referred to the relevant committees.
The Executive had in March, in the wake of the COVID-19 pandemic, which appeared to have worsened Nigeria’s economic woes and dwindled oil earnings, changed the projections of the 2020 Appropriation Act.
The federal government 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.
This was followed by a meeting between the leadership of National Assembly and the Presidency as represented by 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.
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 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, 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 the global economy.
The meeting, which lasted 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.”
On his part, 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 started 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.”
According to her, 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.
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 months, and how long low oil prices persist.”
In April, the federal government proposed a 20 per cent cut in the capital expenditure across Ministries, Departments and Agencies (MDAs) in the 2020 budget to the tune of N312.820 billion.
The proposal, titled “2020 Capital Revised Adjustment,” was one of the highlights of the presentation of the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, before the leadership of the National Assembly in Abuja.
The budget slash includes 32 expenditure items totaling N158.508 billion and another N154.311 billion cut from specific lines that the minister did not, however, list.
The new allocation for the 2020 capital expenditure items includes N3.84 billion for anniversary celebration; computer software acquisition N3.1 billion; construction and provision for office building – N24.8 billion; construction of residential building – N479.6 million; monitoring and evaluation – N10.8 billion; purchase and acquisition of land – N1.4 billion; purchase of motorcycles – N176.5 million; purchase of buses – N485.7 million; purchase of computer printers – N151.4 million; purchase of computers- N1.9 billion; purchase of motor vehicles – N5.2 billion and purchase of office furniture and fitting – N3.9 billion.
Others include purchase of photocopy machines N131.4 million; purchase of power generating sets – N555.9 million; purchase of residential buildings – N170 million; purchase of residential furniture – N50.3 million; purchase of scanners – N193.7 million; purchase of shredding machines – N1.8 million; purchase of trucks – N134.4 million; purchase of vans – N216.2 million; rehabilitation and repairs of office buildings N49.5 billion; rehabilitation/repairs of residential buildings N1.079 billion; research and development – N45.5 billion; construction and provision of agricultural facilities – N180 million; provision of infrastructure – N756 million; construction of roads – N1.9 billion; provision of water facilities – N650 million; provision of water ways – N650 million; purchase of sporting equipment N100 million; and rehabilitation of public schools – N330 million.
Also, in April, the weekly Federal Executive Council (FEC) meeting cut the 2020 Appropriation from N10.594trillion to N10.523trillion.
Briefing journalists after the virtual FEC meeting presided over by President Buhari, the finance minister said, the council approved the recommendations with key parameters like the price of crude oil, which was pegged at $25 per barrel, crude oil production at 1.94 million barrels per day and an exchange rate of N360 to $1.
She said the revised budget was now a total sum of N10.523 trillion, a difference of about N71.5 billion, when compared to the approved budget.
Ahmed explained that this was, because as they cut down the size of the budget, they also have to bring in new expenditure previously not budgeted, to enable us adequately respond to the COVID-19 pandemic.
“The federal government in this budget will have direct revenue of funding the budget of N5.158 billion. The deficit to this budget is N5.365 trillion and this will be financed both by domestic and foreign borrowing. The foreign borrowing we are doing for 2020 are all concessionary loans from the IMF which have already been approved and have crystallized, from the World Bank, Islamic Development as well as Afro EXIM bank.”
“There will also be some drawdown of previously committed loans for major ongoing projects that we will be drawing from both existing facilities as well as some special accounts, with the approval of Mr. President and the National Assembly, and also revenue that we are expecting to realise from privatization.
“So, the borrowing, the multilateral loans drawdown coming from special accounts and coming from the privatization will fund the fiscal deficit of N5.365 trillion that we have in the proposed amendment of the 2020 budget.”
The Federal Executive Council had in October, 2019 proposed N10.007 trillion for the financial year but the figure was increased to N10.33 trillion by the National Assembly.
The President said the 2020 budget was designed to be a budget of Fiscal consolidation to strengthen our macroeconomic environment; Investing in critical infrastructure, human capital development and enabling institutions, especially, in key job creating sectors.’
According to him, the total federal government revenue in 2020 is N8.155trillion comprising oil revenue of N2.64 trillion, non-oil tax revenues of N1.81 trillion and other revenue of N3.7trillion. This is seven per cent higher than the 2019 comparative estimate of N7.594 trillion inclusive of the Government Owned Enterprises.
“Non-debt recurrent expenditure include N3.6 trillion for personnel and pension costs, an increase of N620.28 over the 2019 fiscal year figure. This increase reflects the new minimum wage as well as our proposals to improve remuneration and welfare of our police and armed forces.”
He disclosed that N2.46 trillion was earmarked for capital projects, inclusive of N318.06 billion in statutory transfers.
Other estimates are N556.7 billion for statutory transfers; N2.45 trillion for debt servicing and provision of N296 billion as sinking fund. He stressed that the sinking fund would be used to “retire maturing bonds to local contractors” and the 2020 budget is based on an oil production estimate of 2.18 million barrels per day, oil price benchmark of 57 dollars per barrel and an exchange rate of N305 to a dollar.
Following that, the National Assembly leadership in December 2019 passed the 2020 budget, approving N10.59 trillion as aggregate expenditure.
The approved figure was N263.946 billion higher than the N10.330 trillion presented to the National Assembly for consideration and approval by Buhari in October.
A breakdown of the budget figure as approved by the Senate indicates N560.4 billion for statutory transfers, N4.84 trillion for recurrent expenditure, capital expenditure provision of N2.46 trillion and N2.72 trillion for debt servicing. The fiscal deficit of the budget is N2.28 trillion while the deficit to Gross Domestic Product (GDP) ratio is 1.52 per cent.
Presenting a report to the Senate that day, Jibrin disclosed that his panel worked harmoniously with the executive arm of government in the processing of the Bill, “which ensured the collaboration of the two arms in the utilisation of additional revenue projections to fund/improve the funding of some critical projects, which could not be adequately funded in the budget proposals submitted by Mr. President due to constraints.”
The House of Representatives also passed the 2020 budget to the tune of N10, 594,362, 364,830 trillion. The decision followed the adoption of the report of the appropriation committee submitted by the chairman, Mr. Muktar Betara, at the plenary.
A breakdown of the Bill shows that N560.47 billion is for statutory transfers, N2.72trillion is for debt service, N4.84 trillion is for recurrent (non-debt) expenditure while N2.46trillion is for contribution to the development fund for capital expenditure for the period starting 1st of January to 31st of December 2020. To this end, formalities in respect of the 2020 budget were concluded before the end of 2019, returning the cycle to a January to December tradition.