Nigeria: As COVID-19 Threatens Over N9 Trillion Budgets - States Stop Projects, Cut Overheads

13 April 2020

Abuja, Kaduna, Gombe, Jos, Maiduguri, Ilorin, Lafia, Lokoja, Port Harcourt, Yenagoa, Umuahia, Benin, Minna, Katsina, Bauchi — Borno, Kogi, Niger, others mull budget review

Gombe, Adamawa shelve minimum wage

Allocation to states dropped by 10% in Feb

Experts recommend priority for health, SMEs

Many of the 36 state governments are planning to reduce their 2020 budgets while others have suspended on-going capital projects as part of measures to mitigate the economic impact of the COVID-19 pandemic, Daily Trust investigation reveals.

Findings reveal that different measures are being adopted by state governments following a drastic reduction in their statutory allocations and Internally Generated Revenue (IGR). Thirty-five states of the federation excluding Bayelsa had budgeted over N9 trillion for the 2020 fiscal year and there are indications most of them would go back to the drawing board.

This is in line with current challenges of low income occasioned by the COVID-19 pandemic that has so far claimed thousands of lives and crippled economic activities around the world. The federal government last week cut down the 2020 budget by over N320 billion and proposed a new budget of N10.27 trillion against the N10.59 trillion passed by the National Assembly.

It was however not clear at press time as what percentage of their budgets the states would reduce. But ahead of the budget cut which must be approved by various the Houses of Assembly, many governors have taken series of measures, including changing their priorities to mitigate the effect of the COVID-19 on their finances.

Kaduna stops recruitments, foreign trips

The Kaduna State government in March suspended recruitments and foreign trips as part of belt-tightening measures.

This followed the submission of an interim report by the state's economic crisis response committee which projected that the state's gross annual revenues could fall by N17bn if crude oil prices remained around $30 a barrel while it could further fall by N24bn in 2020 if the price of crude drops to $20 per barrel.

Governor Nasir el-Rufai's Special Adviser on Media and Communication, Muyiwa Adekeye, told Daily Trust that the report was debated at a meeting between the governor and other senior appointees.

"Government will cut overhead expenses by 50 per cent and centralise expenses like buying of fuel and stationery. The government will also introduce debit cards as the sole mechanism for funding overhead expenses of MDAs. This will promote transparency and limit expenses," he said.

Gombe, Adamawa suspend minimum wage

In Gombe, the state government has announced the suspension of the N30,000 new minimum wage and cut the salaries of all political office holders by 25 per cent. The situation is the same in Adamawa State where the government stopped paying minimum wage for workers.

The Special Adviser to Governor Muhammad Inuwa Yahaya on Public Communications and Strategy, Anas Ibrahim Kubalu, said the measures were taken to cushion the effect of COVID-19 on the state economy.

Kubalu said the state government had also reduced all unnecessary expenditures and focused priority on human capital development, including upgrading facilities in health centres and provision of palliatives to vulnerable members of the society. On his part, the state Commissioner of Finance and Economic Development, Muhammad Gambo Magaji, said some quick-fix measures were being taken to strengthen the state's internally generated revenue base.

Cost of governance reduced by 50 per cent in Plateau

In Plateau State, the Commissioner for Information and Communication, Dan Manjang, said the coronavirus pandemic has affected the economy of the state in many respects, adding that the monthly allocations to the state had been reduced by almost 70 per cent.

He stressed that because of the situation that the state has found itself, the minimum wage and some capital projects have been put on hold.

"The effect has significantly affected government expenditure. The government had to cut down the cost of governance by 40 per cent and political appointees' allowances by 50 per cent to support other activities of governance," he said.

Borno, Kogi, Niger review budget

Borno State government said it has set machinery in motion to increase the state's internally generated revenue to meet increasing challenges.

Governor Babagana Zulum also announced that the state executive council would review the 2020 budget considering the fall in oil price which could make projected revenue from the federation account potentially impossible. The governor had tasked the team led by his Economic Adviser, Alhaji Mustapha Bulu, to increase the state's IGR through innovations, fiscal discipline, blocking of leakages and priority funding.

In Kogi State, the Commissioner for Finance, Budget and Economic Planning, Asiwaju Idris, observed that the fact that the federal allocation released on March 23 fell short of government expectations pointed to the urgent need to put new fiscal measures in place.

He said the state had swiftly reviewed the 2020 budget with a view to stimulating growth by prioritising key projects, protecting pro-poor expenditures and ensuring adequate provision for health and education.

Idris noted that the drop in federal allocation was instrumental to the delay in the payment of January and February salaries. He said the government was looking inward to boosting internally generated revenue to enable it to meet its salary obligations and take care of other needs. Similarly, Niger State government said it has started working on a number of measures to mitigate the effect the COVID-19 pandemic may have on the economy of the state.

The Commissioner for Budget and Planning, Musa Mamman, in a telephone interview with our correspondent, said the ministry had gotten approval from Governor Abubakar Sani Bello for a downward review of the 2020 budget as a result of fall in statutory allocation from the federal government which the state largely depends on.

He also explained that the review will affect capital expenditure while recurrent expenditure will get more. The state, according to the commissioner, had also sent circular to ministries, departments and agencies to cut down allowances.

Nasarawa cuts costs by 60 per cent

The Nasarawa State government has announced plans to cut down the cost of governance by 60 per cent.

Chairman of the COVID-19 Committee and Deputy Governor of the state, Dr Emmanuel Akabe, said after careful study by the budget sub-committee on COVID-19, the government resolved to cut down the cost of governance by 60 per cent, with effect from this month.

He said it also became necessary for the state to look inward by cutting down its budget. "We are facing hard times and we must cut down the cost of governance if Nasarawa State must survive," he stated.

Looted funds to the rescue in Kwara

The Kwara State government said it was able to fund its projects and meet the needs that arose following the outbreak of COVID -19 pandemic with recovered looted funds.

Governor AbdulRahman AbdulRazaq said the recovered funds had been useful in the face of dwindling allocations arising from the global oil crisis, adding that the Economic and Financial Crime Commission (EFCC) had helped the state to recover looted funds which were channelled for vital projects including addressing the new COVID-19 challenges.

"The recovered funds strengthened Kwara's ability to put in place necessary facilities among other counter-COVID-19 efforts", he said, adding, however, that despite the sit-at-home order, state workers would get their salaries.

Rivers falls back to 'contingency fund'

Governor Nyesom Wike of Rivers State said they would rely on the contingent fund approved by the Rivers State House of Assembly to continue to fund their projects and tackle other financial obligations.

"Contingency means nobody knows what will happen. Yes, we have passed our budget for 2020. But now we have a situation that falls under contingency; you have to go into the contingency budget and take funds and solve these problems," he said.

Poor revenue threatening salaries in Bayelsa but...

Despite the effects of the coronavirus disease on the economy of states, officials of Bayelsa State government insist that they will continue with the capital projects earmarked by Governor Douye Diri.

An aide of the governor who prefers anonymity told Daily Trust that, "There is a possibility that allocation will drop due to the fall in the price of crude oil. But the governor has prioritised the welfare of civil servants and will ensure their salaries are paid monthly regardless of any anticipated dwindling of the state's allocation," he said.

In Katsina, the Commissioner for Finance, Kasim Abdulmutallib, said the state was closely monitoring and observing the federal government's fiscal policies as events unfolded following the pandemic.

He said the state was so far meeting its financial obligations and will continue to do so.

"For now this is all I can say but we hope to hold another meeting this week to further deliberate. Our obligations to contractors and workers are going on smoothly," he said. A source in Yobe State said Governor Mai Mala Buni had also prioritized projects and took measures on overheads in order to save cost.

Give preference to viable sectors - Experts

Some experts who spoke on the dwindling revenues at the national and state levels said budgetary expenditures must target economically impacting sectors to boost productivity and the wellbeing of the citizens.

An economist, Professor Nazifi Abdullahi Darma, said all available resources must be prioritised.

"It is logical at this material time to undertake fiscal measures that would reflate the economy and boost production with its attendant positive impact on employment and income creation," he said.

Also reacting, Dr Chidi Ejiofor said states must revisit their budgets and prune down non-salary related expenditures.

Dr Ejiofor, an economist and industrialist said a good place for state governments to start should be the "usually inflated" recurrent expenditures especially overheads.

"Eliminate inconsequential provisions for purchase of vehicles, furniture, computers, vague office equipment, unnecessary sitting allowances, travel allowances, training and refreshments," he said.

The Provost of BEST Centre of Abuja Chamber of Commerce and Industry (ACCI), Professor Adesoji Adesugba, made a case for judicious and transparent utilisation of borrowed funds.

"There is nothing wrong in borrowing as long as the money borrowed is judiciously used for the purpose it is meant and it creates adequate commensurate value," he said.

"Any serious government will use this opportunity to revamp its health sector," he added.

Why states are reviewing expenditures

An analysis of the Federation Account Allocation Committee (FAAC) showed that disbursements to states and the Federal Capital Territory (FCT) in February 2020 from revenues generated in January 2020 had dropped by10.19 per cent or N21 billion. This was from the N206.76 billion shared in January from revenues generated in December 2019 to N185.7 billion in February from revenues generated in January 2020. The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, had cautioned that states and local government councils should get ready for tough times ahead.

Speaking recently on the government's fiscal stimulus measures in response to the COVID-19 pandemic and the oil price fiscal shock, Mrs Ahmed said due to the significant drop in international oil prices, FAAC monthly disbursements had declined in recent months to N716.3bn in January and N647.4bn in February 2020.

Fidelis Mac-Leva, Francis Arinze Iloani, Lami Sadiq, Haruna Gimba Yaya, Ado Abubakar Musa, Uthman Abubakar, Ismail Adebayo, Ibraheem Hamza Muhammad, Ahmed Tahir Ajobe, Victor Edozie, Bassey Willie, Linus Effiong, Usman A. Bello, Romoke W. Ahmad, Habibu Umar Aminu, & Hassan Ibrahim 

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