With a timely presentation of the 2021 appropriation bill by President Muhammadu Buhari to a joint session of the National Assembly last week, the rescheduled January to December budget cycle might have come to stay, write Adedayo Akinwale and Udora Orizu
Determined to maintain the January-December budget cycle, President Muhammadu Buhari on Thursday, October 8, presented N13.8 trillion 2021 Appropriation Bill to the joint session of the National Assembly for consideration and approval.
The 2021 budget estimate is N211 billion higher than the N10.594 trillion 2020 budget passed by the legislature in December 2019, before it was revised to N10.509 trillion against the backdrop of the Covid-19 pandemic.
The President, in the budget presentation, predicted that the country’s economy might lapse into a second recession in four years, with the projected negative Gross Domestic Product (GDP) growth in the third quarter of this year, but assured Nigerians that his government would do everything possible to get the country out of recession by 2021.
Without mincing words, the President stated categorically that the economy was facing serious challenges, with the macroeconomic environment being significantly disrupted by the Coronavirus pandemic.
Buhari explained that the GDP growth declined by 6.1 per cent in the second quarter of 2020, adding that this ended the three-year trend of positive, but modest GDP growth recorded since the second quarter of 2017.
He said: “I am glad to note that, through our collective efforts, our economy performed relatively better than that of many other developed and emerging economies.”
With the theme, “Budget of Economic Recovery and Resilience”, the 2021 appropriation is designed to further deliver on the goals of Economic Sustainability Plan.
According to the President, “GDP growth is projected to be negative in the third quarter of this year. As such, our economy may lapse into the second recession in four years, with significant adverse consequences.
“However, we are working assiduously to ensure rapid recovery in 2021. We remain committed to implementing programmes to lift 100 million Nigerians out of poverty over the next 10 years.”
He explained that the exchange rate has been fixed at N379 per US dollar while the GDP growth is projected at three per cent and inflation closing at 11.95 per cent. He proposed an aggregate expenditure of N13.08 trillion, including N1.35 trillion spending by Government-Owned Enterprises and Grants and Aid funded expenditures of N354.85 billion.
The President noted that the 2021 budget deficit (inclusive of Government-Owned Enterprises and project-tied loans), is projected at N5.20 trillion, representing 3.64 per cent of the estimated GDP, slightly above the three per cent threshold set by the Fiscal Responsibility Act, 2007.
“It is, however, to be noted that we still face the existential challenge of Coronavirus pandemic and its aftermath,” he said, adding: “I believe that this provides a justification to exceed the threshold as provided for by this law. The deficit will be financed.”
Buhari said based on the foregoing fiscal assumptions and parameters, total federally distributable revenue is estimated at N8.433 trillion in 2021; while total revenue available to fund the 2021 Federal Budget is estimated at N7.886 trillion, adding that this includes grants and aid of N354.85 billion as well as the revenues of 60 Government-Owned Enterprises. He also noted that oil revenue is projected at N2.01 trillion, while non-oil revenue is estimated at N1.49 trillion.
The president explained that the budget deficit would be financed mainly by new borrowings totaling N4.28 trillion, N205.15 billion from privatisation proceeds and N709.69 billion in drawdowns on multilateral and bilateral loans secured for specific projects and programmes.
He stressed further that the sum of N484.49 billion provided for Statutory Transfers in the proposal represent an increase of N56.46 billion (or 13 per cent) over the revised 2020 provision.
The President said statutory transfer provisions are Niger Delta Development Commission – N63.51 billion; North East Development Commission – N29.70 billion; National Judicial Council -N110.00 billion; Universal Basic Education Commission -N70.05 billion; Independent National Electoral Commission -N40 billion; National Assembly -N128.00 billion; Public Complaints Commission -N5.20 billion; Human Rights Commission – N3 billion; and Basic Health Care Provision Fund – N35.03 billion.
In order to enhance national security and human capital development, he said a major part of the 2021 recurrent cost estimate is allocated to paying salaries and overheads in MDAs providing critical public services.
As such, the sum of N227.02 billion was budgeted for the Ministry of Interior; N441.39 billion for the Ministry of Police Affairs; N545.10 billion for Ministry of Education; N840.56 billion for Ministry of Defence; and N380.21 billion for Ministry of Health.
The President revealed that the budget of the Ministry of Education has been increased by 65 per cent to develop the education sector.
The key capital spending allocations include Power – N198 billion (inclusive of N150 billion for the Power Sector Recovery Plan); Ministry of Works and Housing N404 billion; Ministry of Transportation -N256 billion; Defence – N121 billion; Agriculture and Rural Development -N110 billion.
Others are “Ministry of Water Resources: N153 billion; Ministry of Industry, Trade and Investment -N51 billion; Ministry of Education – N127 billion; Universal Basic Education Commission -N70 billion,; Ministry of Health- N132 billion; Zonal Intervention Projects: N100 billion; and Niger Delta Development Commission – N64 billion.”
The President stated further that personnel cost remains the largest single item of expenditure, saying the seven months to July 31, 2020, it accounted for 34 per cent of total federal government spending and is projected at 33 per cent of 2021 expenditure.
He assured that his government remains committed to meeting its debt service obligations.
“A total of N2.183 trillion has been set aside to service domestic debts while N940.89 billion has been provided for foreign debt service. N220 billion is provided for transfers to the Sinking Fund to pay off maturing bonds issued to local contractors and creditors,” he said.
The 2021 budget also saw a 157 per cent increase in the capital allocation to the health sector, Which is to enhance the capacity to deliver healthcare services through the procurement of equipment, vaccines and other facilities. Two centres of excellence, as well as one Accident and Emergency Centre, will be equipped in Federal Teaching Hospitals in each geopolitical zone.
“In addition, numerous Primary Health Care Centres will be equipped and upgraded across the six geopolitical zones. Furthermore, funds have been allocated for the expansion of the Midwives Service Scheme in the six geo-political zones. To enhance occupational safety, funds have been provided for the provision of Personal Protective Equipment for health workers.”
The President, however, urged the National Assembly to expedite action on the passage of the budget.
Responding, President of the Senate, Dr. Ahmad Lawan and the Speaker, House of Representatives, Hon Femi Gbajabiamila, assured the president and the people that the budget would be passed by December.
Lawan, in his remarks, said the fiscal plan would be influenced by the desire to consolidate on the gains, coming from the hard lessons of the pandemic, and on the urgency of sustaining our diversification programmes, not only because of the unpredictable nature of oil revenue but because of recent uncertainties arising from the coronavirus.
‘’The National Assembly is again ready to pass the 2021 Budget before the end of the year. This will continue to enable planning and enhance productivity and efficiency in the management and application of our resources. We can all bear witness to the salubrious effects of the early passage of the Budget on our economy,” he said.
Gbajabiamila, on his part, gave an assurance that the lawmakers will collaborate with the Ministries, Departments and Agencies of the Executive to deliver a budget that meets the needs and matches the ambitions of the Nigerian people.”
Opposition Lawmakers Kick
At the end of the budget presentation, which lasted for less than two hours, some members of the opposition Peoples Democratic Party (PDP) and All Progressives Grand Alliance (APGA) in the House kicked against the provisions of the Appropriation Bill.
A lawmaker representing Ihiala Federal Constituency in the green chamber, Hon. Chudy Momah, (APGA, Anambra) said he has a very terrible view of it.
The reason, according to him, was because if there’s a colossal non-performance, or non-release of the funds for capital projects, the people that suffer it the most is the grassroots.
He said, ‘’The 2020 budget, the project for capital expenditure was about 2.4 trillion and what was released was not up to 380 billion that is less than 40 per cent of it. And the capital project is actually the statistics, the ratio that measures National Development. So, if we have less than 40 percent budget performance in 2020, which is 2.4 trillion, 2021 what are we supposed to expect? Yes it’s easy to say it’s because of Covid-19, coronavirus is a global phenomenon every economy around the globe experienced Covid-19.
“Even in Nigeria, it was during this Covid-19 we spent billions of Naira in the guise of N-power and so on. For me, I just want reality, because when there’s a colossal non-performance, or non-release of these funds for capital projects, the people that suffer it the most is the grassroots and when they suffer it, the nearest people they complain to and put pressure on is the National Assembly members, because of the proximity they have with them.’’
He, however, added that the best way the President and executive could help to make life better is to ensure adequate and timely capital release so that the National Assembly could now exercise its powers of oversight function to ensure compliance to see that it’s used for the projections it was made for.
The lawmaker representing Mbaitolu/ikeduru Federal Constituency, Hon. Henry Nwawuba (PDP Imo), said it was not surprising that the budget has huge deficit.
He stated, “We need to do a thorough job on it; we need to make sure that it will indeed deliver on its promises. It has a very huge deficit component. It’s not surprising, because in the entire world, the global system has crashed after the Covid-19 pandemic. We will do this work and try to connect this budget with the realities on ground in Nigeria.
“For example, Nigeria still has one of the highest out of school children in the world. We need to see this budget to ensure that we start to reduce this numbers. So, the budget will be committed to the various committees. I know that my committee which is the committee on Niger Delta, there’s a proposal of about 23 billion for capital and 65 billion for presidential amnesty program. We will commence oversight to see what happened in the 2020, ask the right question; supervise. We will do what we need to do as a parliament to bring this budget home and it resonates positively with Nigerians.’’
Hon. Bamidele Salam (PDP/Osun), said his first impression was the size of the budget, which he said was the highest in the nation’s history, adding that there was need to assess this size of the budget in comparison to the international benchmark of global currencies.
Salam stated: “As of this time last year, it was about N360 to a dollar, today it is about N500. So, even though the size appears big, comparatively, it is not. Again, like I always say, it is not the size of a budget that actually matters; it is not also the beautiful plans and projections we have that matter; it is the discipline that matters. This is October, for example.
“Yes, we all agree that coronavirus (pandemic) affected the implementation of the 2020 budget. But I want to tell you that even as of now – in October – there are so many of the capital components of the 2020 budget that have not taken off, because most MDAs have not adhered properly to the procurement law. They have not exercised adequate discipline in the implementation of the budget.”
Also speaking, Hon. Ben Igbakpa (PDP Ethiope Federal Constituency Delta state) expressed worry about borrowing to service the country’s debt, adding that he saw no reason why government would be pumping money into power sector after it has been unbundled.
He said, “I am worried again about why we should continue to fund the power sector, when it had been unbundled; given to private companies? I think that is one area that we want to look at. In the coming weeks we will look at it. We will do the needful. Mr. President has fulfilled his own part of Section 81; it is left for us to fulfill our own part as lawmakers in Section 4 of the same Constitution.
“Budgets naturally are statements of intentions. We will look at it. He has not said it is realisable 100 per cent. He showed us areas of worry. We are still talking about budget deficit; the borrowing part of it – the debt servicing – which is where I seem to have a lot of worry.”
What Economic Experts Think
A Professor of Economics at the Akwa Ibom State University, Prof. Akpan Ekpo, said the recession would affect both the demand and supply sides of the economy and that the traditional Keynesian demand solution alone would not work.
Ekpo said it would be important for the government to increase its capital and recurrent expenditures, because of the need to stimulate consumers’ aggregate demand during the recession by enabling them to have money to spend.
He said: “Public spending must be increased. But there should be more proportionate increase in capital expenditure than the recurrent expenditure. This will take care of the demand side. So, it is time for stimulus and not time for austerity. Government has to pump money into the economy to reflate it.
“But on the supply side, we need to have in place policies that will attract investors to come into the economy. And, first of all, the government must deal with the issue of insecurity. No matter how much-interested investors are in the country, they will not go to where they will not be secured.”
Also, the Chief Executive Officer of BIC Consultancy Services Limited, Dr. Boniface Chizea, said the right way for the government to address the coming recession is to roll out palliatives and implement the programmes it has designed like the Economic Sustainability Plan (ESP) diligently.
“There are already programmes to create 1,000 jobs in 774 local governments and if you go back to the Economic Sustainability Plan and implement them and the Central Bank of Nigeria (CBN) comes in with its package, then, we can avoid much of the problems.
“The major thing is for the government to implement the plans it already has. The problem we have is always poor implementation. We have never come short of having programmes and plans but our problem is that we put them down and never implement them. There is no other magic bullet that we will be looking for other than the committed implementation of policies,” Chizea said.
Professor of Finance and Capital Markets at the Nasarawa State University, Uche Uwaleke said: “I think the real GDP growth rate projected at three per cent is a little ambitious in view of the impact of COVID-19 on the economy expected to linger till next year. This is why the recent Fitch report on Nigeria projects a GDP growth rate of 1.3 per cent for the country in 2021.”
With the budget performance of the 2020 budget still unknown, and the huge budget deficit in the 2021 budget which would be financed mainly by new borrowings totaling N4.28 trillion, N205.15 billion from privatisation proceeds and N709.69 billion, it may be right to remain skeptical about how well the 2012 budget will perform at the end of the day.