Nigeria: Works Gets Lion's Share As Buhari Proposes N10.33 Trillion for 2020

9 October 2019

President Muhammadu Buhari yesterday presented the 2020 budget proposals of N10.33 trillion to a joint session of the National Assembly.

In the proposal, Buhari set aside N2.45 trillion for debt servicing, while Sinking Fund to retire maturing bonds issued to local contractors had N296 billion.

The proposals tagged 'Budget of Sustaining Growth and Job Creation' also included statutory transfers of N556.7 billion and non-debt recurrent expenditure of N4.88 trillion. Buhari said N8.155 trillion was estimated as the total federal government revenue in 2020. This, according to him, included oil revenue (N2.64 trillion); non-oil tax revenues (N1.81 trillion); and other revenues (N3.7 trillion).

He added that the 2020 projection was seven per cent higher than the 2019 comparative estimate of N7.594 trillion, inclusive of the Government Owned Enterprises.

The president, who said budget deficit was projected to be N2.18 trillion in 2020, added that it will be financed by new foreign and domestic borrowings, privatization proceeds, signature bonuses and drawdowns on the loans secured for specific development projects.

He said government had adopted a conservative oil price benchmark of US$57 per barrel, daily oil production estimate of 2.18 mbpd and an exchange rate of N305 per US Dollar for the 2020 budget proposals as the 2020-2022 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) set out the parameters.

From the key capital spending allocations in the 2020 budget, the Ministry of Works and Housing takes the lion's share with N262 billion.

It was followed by Power (N127 billion); Transportation (N123 billion); Universal Basic Education Commission (N112 billion); Defence (N100 billion); Zonal Intervention Projects (N100 billion); Agriculture and Rural Development (N83 billion); Water Resources (N82 billion); and Niger Delta Development Commission (N81 billion).

Education had (N48 billion); Health (N46 billion); Industry, Trade and Investment (N40 billion); North East Development Commission (N38 billion); Interior (N35 billion); Social Investment Programmes (N30 billion); Federal Capital Territory (N28 billion); and Niger Delta Affairs Ministry (N24 billion).

President Buhari, who said in his speech that the main emphasis will be the completion of as many ongoing projects as possible rather than commencing new ones, stated that Ministries, Departments and Agencies (MDAs) were not allowed to admit new projects into their capital budgets for 2020, unless adequate provision had been made for the completion of all ongoing projects.

"Accordingly, we have rolled over capital projects that are not likely to be fully funded by the end of 2019 into the 2020 Budget. We are aware that the National Assembly shares our view that these projects should be prioritised and given adequate funding in the 2020 Appropriation Act.

"Therefore, I will once again commend the 9th National Assembly's firm commitment to stop the unnecessary cycle of delayed annual budgets. I am confident that with our renewed partnership, the deliberations on the 2020 Budget shall be completed before the end of 2019 so that the Appropriation Act will come into effect by the 1st of January," he said.

The sum of N556.7 billion, which was provided for Statutory Transfers in the 2020 Budget, had N125 billion for the National Assembly; N110 billion for the Judiciary; N37.83 billion for the North East Development Commission (NEDC); N44.5 billion for the Basic Health Care Provision Fund (BHCPF); N111.79 billion for the Universal Basic Education Commission (UBEC); and N80.88 billion for the Niger Delta Development Commission (NDDC), which is now being supervised by the Ministry of Niger Delta Affairs.

President Buhari said the federal government had increased the budgetary allocation to the National Human Rights Commission from N1.5 billion to N2.5 billion to enable it perform its functions more effectively.

The president said the non-debt recurrent expenditure includes N3.6 trillion for personnel and pension costs, an increase of N620.28 billion over 2019. He said the increase reflected the new minimum wage as well as proposals to improve remuneration and welfare of the police and armed forces, stating that "You will all agree that good governance, inclusive growth and collective prosperity can only be sustained in an environment of peace and security."

The president said he had directed the stoppage of the salary of any federal government staff that was not captured on the Integrated Payroll and Personnel Information System (IPPIS) platform by the end of October 2019 to sustain efforts in managing personnel costs.

All agencies, he added, must obtain the necessary approvals before embarking on any fresh recruitment and any contraventions of the directives shall attract severe sanctions.

Buhari, who said overhead costs were projected at N426.6 billion in 2020, also stated that additional provisions were made only for the newly created ministries. He said government was committed to improving the implementation of the National Social Investment Programme through the newly created Ministry of Humanitarian Affairs, Disaster Management and Social Development to ensure the equitable sharing of economic prosperity.

The president, who stressed the need to review the fiscal terms for deep offshore oil fields to reflect the current realities and for more revenue to accrue to the government, said the Deep Offshore and Inland Basin Production Sharing Contract (Amendment) Bill 2018 submitted to the 8th National Assembly in June 2018 but not passed into law would also be re-forwarded.

While urging the lawmakers to pass it into law, he said, "We estimate that this effort can generate at least 500 million US dollars additional revenue for the federal government in 2020, and over one billion dollars from 2021."

Buhari, who said the 2020 Budget Proposal was accompanied by a Finance Bill for consideration and passage into law, said the draft proposed an increase of the VAT rate from 5% to 7.5%.

Buhari, while lauding the 9th National Assembly for what he called "the patriotic resolve" to collaborate with the executive in the effort to deliver inclusive growth and enhance the welfare or people, assured them of the strong commitment of the executive to deepen the relationship.

Defend your budget before end of Oct

Senate President Ahmed Lawan and Speaker Femi Gbajabiamila of the House of Representatives, in their separate remarks, expressed readiness of the National Assembly to work with the Executive toward the passage and implementation of the budget.

Lawan said only this October was set aside for all government agencies to defend their 2020 budget estimates to enable the passage of the document in December.

"We have earmarked the month of October to be the sole window for all budget defence activities this year by all MDAs.

"In this regard, our committees will be expected to conclude their work on budget defence within October, this year.

"The subsequent necessary legislative work will be carried out in November and December, leading to eventual passage before the end of this year," Lawan said.

'Only realizable revenue will make budget work' - Francis Arinze Iloani

A member of the Daily Trust Board of Economists, Dr. Aminu Usman, says the budget proposed for 2020 fiscal year can positively impact the economy if the revenue projection of N8.16 trillion is realised.

The economist, who is a senior lecturer at the Department of Economics of Kaduna State University, however, expressed doubt over the possibility of the federal government meeting the revenue projection.

Describing the budget as "ambitious," Dr. Usman said the revenue target was based on the proposed earnings from the 2.5 per cent increment from Value Added Tax from 5 per cent to 7.5 per cent.

The don said VAT, being an Act of the parliament, would have to go through a legislative process before the proposed increase of N2.5 per cent would be considered for implementation in 2020.

He said if the National Assembly rejects the VAT increment, the basis upon which the revenue projection in the budget was arrived at would be demolished.

The economist said for the budget to have significant impact on the economy, there should be prompt capital releases to boost spending.

He decried the budget deficit and the proposed borrowing, adding that the World Bank has warned that Nigeria is spending 60 per cent of the country's revenues in debt service.

He however commended the federal government for presenting the budget to the National Assembly in October, signifying that the country may return to the January-December budget cycle.

More experts speak

From Abdullateef Aliyu, Sunday Michael Ogwu (Lagos), Chris Agabi, Latifat Opoola & Simon Echewofun Sunday (Abuja)

Dr. Austin Nweze: Is an economist and lecturer at the Pan Atlantic University (PAU), Lagos. In his opinion, the budget will not induce much development considering that the recurrent was 50 per cent more than the capital.

"We are still the way we are. There won't be any improvement," he said.

"What develops a nation is the ratio of capital to recurrent and with high debt profile, you can't undertake any project because you have to service your debt before thinking of any other project," he added.

He said the growth in infrastructure was not reflective of the high debt profile, adding that only reduction in the debt profile could stir up meaningful development in the economy.

According to him, the money borrowed was not channelled into ventures that would generate sufficient revenue to pay the debt.

Bayo Rotimi: Is the CEO of Quest Advisory. He queried the jacking up of the Medium- term expenditures framework by about N700bn.

"Members of the National Assembly are just optimistic in large budget outlook and the budget has been put under pressure to perform at all means.

"They would have left the budget as proposed, if it performs beyond that, then its fine," he said.

He also added that the increased budget benchmark from $55 per barrel to $57 per barrel was unnecessary.

Rotimi also said for the budget to perform optimally, revenue collection mechanisms for the Nigeria Customs Service and the Federal Inland Revenue Service must be enhanced as dependence on oil revenue was now a thing of the past.

Prof Mohammed Yelwa: He teaches at the University of Abuja.

Explaining the implications of increased borrowing and rise in debt servicing, he decried that the economy was operating in a deficit, stating that it was a signal that Nigeria was not performing.

While noting that it was good to borrow when it was aimed at growing the economy to close the gap on deficit, Yelwa said the country was notorious for borrowing to build bridges and roads.

See What Everyone is Watching

More From: Daily Trust

Don't Miss

AllAfrica publishes around 700 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.