President Muhammadu Buhari yesterday presented the 2021 budget proposal to a joint session of the National Assembly, where he expressed hope that even though the country may be heading for another recession, there will be windows for rapid recovery.
Buhari, who addressed the joint session of federal lawmakers at about 11.23am, unveiled a budget of N13.08trillion for the 2021 fiscal year with a projected deficit of N5.20trillion. Critical sectors such as health, education and the National Assembly (NASS) got higher allocations than in previous budgets.
In the same manner, Works and Housing received higher capital votes.
The president who was accompanied by some members of the Federal Executive Council (FEC) to the event, said that while the country was heading for a second recession in four years, the government has put in place plans to ensure rapid recovery in 2021.
He said that the government was working round the clock to ensure speedy recovery of the economy next year even as he affirmed his administration's commitment to lifting 100million Nigerians out of poverty.
The budget deficit represents 3.64 per cent of estimated Gross Domestic Product (GDP), slightly above the three per cent threshold set by the Fiscal Responsibility Act, 2007 but for the threats of the COVID-19 pandemic.
Buhari, however, said that the deficit would be financed mainly by new borrowings totalling N4.28trillion, N205.15billion from privatisation proceeds and N709.69billion in drawdowns on multilateral and bilateral loans secured for specific projects and programmes.
LEADERSHIP Friday recalled that FEC proposed the same budget size for 2021 last on Wednesday last week ahead of the formal presentation of the estimates to the National Assembly.
The proposed 2021 budget is based on parameters earlier approved by the National Assembly as contained in the 2021-2023 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).
The parameters include a daily crude oil production of 1.86mbpd inclusive of condensates of 300,000 to 400,000 barrels per day, $40 per barrel as oil price benchmark, and an exchange rate of N379 to the US dollar.
Inflation growth rate is projected at 11.95 per cent while Gross Domestic Product (GDP) growth rate is fixed at three per cent, among other assumptions.
The aggregate N13.08trillion expenditure include non-debt recurrent costs of N5.65 trillion, personnel costs of N3.76 trillion, pensions, gratuities and retirees' benefits of N501.19billion, overheads of N625.50 billion, debt service of N3.124 trillion, statutory transfers of N484.49 billion, and sinking fund of N220 billion.
Based on the above fiscal assumptions and parameters, total federally-distributable revenue is estimated at N8.433trillion in 2021 while total revenue available to fund the 2021 federal budget is estimated at N7.886 trillion.
Also, oil revenue is projected at N2.01trillion while non-oil revenue is estimated at N1.49trillion.
The sum of N484.49 billion provided for statutory transfers in the 2021 budget represents an increase of N56.46 billion (13per cent) over the revised 2020 budget.
The statutory transfers provisions are Niger Delta Development Commission (NDDC) - N63.51billion; North East Development Commission (NEDC) - N29.70billion; National Judicial Council (NJC) - N110.00billion; Universal Basic Education Commission (UBEC) - N70.05billion; Independent National Electoral Commission (INEC) - N40billion.
Others are National Assembly - N128billion with an increase of N3billion; Public Complaints Commission - N5.20billion; National Human Rights Commission - N3billion; and Basic Health Care Provision Fund - N35.03billion.
The sectoral allocations in the budget are Power - N198 billion (inclusive of N150 billion for the Power Sector Recovery Plan); Works and Housing - N404 billion; Transportation - N256 billion; Defence -N121 billion; Agriculture and Rural Development - N110 billion.
Others are Water Resources - N153billion; Industry, Trade and Investment - N51billion; Education - N127billion; Health - N132billion; Zonal Intervention Projects - N100billion; Niger Delta Development Commission - N64billion; and Amnesty Programme = N65billion, among others.
"The 157 percent increase in the capital allocation to the health sector 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.
"The Ministry of Education's capital allocation has been increased by 65 percent to improve the education of our children. Funds have been provided for the provision of scholarship awards to Nigerian students at home and abroad," Buhari said.
The Nigerian economy like many others around the world had been hit hard by the COVID-19 pandemic, which drastically cut the demand for crude oil, the country's main revenue earner.
LEADERSHIP Friday recalls that before the outbreak of the pandemic, the country was on a three-year trend of modest but positive GDP growth.
While assuring of speedy recovery, President Buhari said: "The 2021 Budget was prepared amidst a challenging global and domestic environment due to the persistent headwinds from the coronavirus pandemic. The resulting global economic recession, low oil prices and heightened global economic uncertainty have had important implications for our economy.
"The Nigerian economy is currently facing serious challenges, with the macroeconomic environment being significantly disrupted by the coronavirus pandemic. Real Gross Domestic Product (GDP) growth declined by 6.1 percent in the second quarter of 2020. This ended the three-year trend of positive, but modest, real GDP growth recorded since the second quarter of 2017.
"I am glad to note that, through our collective efforts, our economy performed relatively better than that of many other developed and emerging economies.
"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 a rapid recovery in 2021. We remain committed to implementing programmes to lift 100 million Nigerians out of poverty over the next 10 years," Buhari said.
According to the president, the proposed budget, which is themed: "Budget of Economic Recovery and Resilience", was designed to further deliver on the goals of the Economic Sustainability Plan (ESP) and "accelerate the pace of our economic recovery, promote economic diversification, enhance competitiveness and ensure social inclusion."
He added: "This plan provides a clear roadmap for our post-coronavirus economic recovery as a transitional plan to take us from the Economic Recovery and Growth Plan (2017-2020) to the successor Medium-Term National Development Plan (2021-2025).
"In view of the many challenges confronting us, we must accelerate our economic recovery process, promote social inclusion and strengthen the resilience of the economy."
President Buhari further said that a major part of the 2021 recurrent expenditure is allocated to paying salaries and overheads in MDAs providing critical public services in order to enhance national security and human capital development.
The ministries are Ministry of Interior - N227.02billion; Ministry of Police Affairs - N441.39billion; Ministry of Education - N545.10billion; Ministry of Defence - N840.56 billion; and Ministry of Health - N380.21billion.
On personnel cost, which is the largest single expenditure item, the president said that only federal personnel that have been captured on the Integrated Personnel Payroll Information System (IPPIS) platform will receive salaries to check the incidence of payments to ghost workers and unauthorised allowances.
Finance Bill Underway To Aid Budget Implementation
President Buhari said that he had directed the minister of Finance, Budget and National Planning, Zainab Ahmed, to finalise the Finance Bill 2020, which will be forwarded to the National Assembly shortly for consideration and passage into law.
"The Finance Bill is to support the realisation of our 2021 revenue projections, adopt appropriate counter-cyclical fiscal policies and enhance the efficiency of fiscal incentives," he added.
Lawan, Gbajabiamila Promise Speedy Passage Of Appropriation Bill
Earlier in his speech, the Senate President, Senator Ahmad Lawan, asked the executive arm of government to implement the Economic Sustainability Plan approved by the National Assembly so as to strengthen the economy in view of the impact occasioned by the COVID-19 pandemic.
Lawan gave the charge in a welcome address he delivered during the presentation of the 2021 budget estimates by President Buhari at a joint session of the National Assembly.
He said that there was urgent need for the government to sustain programmes aimed at economic diversification, not only because of the unpredictable nature of oil revenue, but due to the recent uncertainties arising from the coronavirus.
He added that sufficient injection of funds into such programmes would boost the nation's economy.
"Mr. President, the implementation of the 2020 Budget has shown a remarkable improvement over the previous years. Certainly, the injection of funds for the various programmes and projects had helped our economy. We expect that before the end of this fiscal year, the 2020 Budget would have been implemented 100 percent. This will be a historic feat.
"The impact of the COVID-19 pandemic is a global affliction that every country needs to address through various measures. The National Assembly approved the Nigerian Economic Sustainability Plan (NESP), a plan of the federal government, to address the economic challenges of today.
"All efforts should be made to implement the plan, as a number of schemes are designed to keep our Micro Small and Medium Enterprises (MSMEs) afloat.
"Mr. President, it is our hope that the 2021 Budget will be targeted at the consolidation of gains made by the 2020 Budget. The 2020 Budget was targeted at sustaining growth and jobs. We need to not only protect jobs but create more. The COVID-19 pandemic has revealed the ultimate vulnerability of our economy, as a monolithic, oil dependent economy.
"The sudden crash in the price of crude in the world market, and the consequent impact on our economy, should spur us into genuine search for the diversification of our economy, for other revenue sources," he said.
The Senate president who pledged the National Assembly's readiness to pass the 2021 budget before the end of the year, said that doing so "will continue to enable planning and enhance productivity and efficiency in the management and application of our resources."
He, however, lamented that the federal government had resorted to borrowing to fund critical projects in the budget due to inadequate revenue at its disposal.
Lawan blamed government's low revenue profile owing to leakages on the inefficiency of revenue generating agencies.
"Mr. President, as our revenues plummeted, we have resorted to borrowing to fund the development of some critical infrastructure. Our revenue generation, collection and remittances need to be critically examined. Recent interactions between our Committees on Finance and National Planning and Economic Matters, with over 200 revenue generating and collection agencies have revealed so much inefficiencies in their systems.
"It was revealed that government loses so much money as a result. Similarly, there are so much leakages of moneys that could have easily been available for national development."
"Due to inadequate revenue, government has to borrow in order to finance its projects. It is equally important that we should diversify our sources of funding of our programmes and projects.
"We need to encourage and promote more private sector participation in developing some of our physical infrastructure. We could explore the Public Private Partnership (PPP), Build Operate Transfer (BOT), and many other funding options. This is with a view to reducing our level of borrowing," said.
On his part, the Speaker of the House of Representatives, Hon. Femi Gbajabiamila, said that the National Assembly would give thorough and speedy consideration to the 2021 budget estimates.
Gbajabiamila said that the promise that members of the 9th Assembly made to return the country's annual budget to the January to December cycle, which they achieved last year, remains unchanged, hence the resolve to ensure a thorough job on the budget at hand.
He also assured that members of the National Assembly would hold themselves to the highest standards of integrity on the budget process.
The speaker promised that they would work with relevant government agencies to ensure that the budget meets the yearnings and aspirations of the Nigerian people.
"We have once again just experienced the beauty and majesty of our democracy - the laying of the budget proposals before the legislature for consideration and approval. I believe I speak on behalf of the entire National Assembly, in assuring you that this proposal will receive thorough and speedy consideration.
"We will collaborate with the Ministries, Departments and Agencies (MDAs) of the executive to deliver a budget that meets the needs and matches the ambitions of the Nigerian people.
"And we will hold ourselves in the legislature to the highest standards of integrity so that our deliberations and contributions to this process are motivated only by considerations of the best interests of the Nigerian people."
He said: "When just over a year ago, we gathered in this chamber to receive the budget proposal and begin the appropriation process, we made specific commitments to the Nigerian people. We promised that we would pass the budget promptly, free of the rancour that had bedevilled the process in time past. We delivered on that promise. I thank my colleagues in the National Assembly for the dedication and commitment they showed last year during the appropriation process.
"Senators and members of the House of Representatives toiled night and day, sometimes through the night and into the wee hours of the morning, to ensure that we achieved our commitment to return to the January to December budget cycle as envisaged by the constitution.
"I do not doubt that we will exhibit the same commitment to nation-building and deliver a good budget on time. We cannot afford a return to the old practices, and we must do everything in our power to avoid such an outcome.
"We also promised to pass a budget that reflected our priorities - healthcare, education, public infrastructure and the development of an economy that is less dependent on fossil fuels and gives to all Nigerians, the ability to achieve their dreams equal to their effort and commitment.
"We kept that promise too. We recognise that more needs to be done, and I assure all the Nigerian people that we will continue in this regard," he said.
He thanked the president, Vice President Yemi Osinbajo, the secretary to the government of the federation (SGF), Mr Boss Mustapha, the Budget Office, ministers and all those who have laboured to develop the budget proposal.
It's An Ambitious Budget - LCCI
And following the presentation of the 2021 budget by President Buhari, the Lagos Chamber of Commerce and Industry (LCCI) has described the appropriation bill as an ambitious one.
The director-general of LCCI, Dr Muda Yusuf, who commented on the budget, noted that, though the budget is ambitious, revenue will continue to be a challenge that the government must tackle.
He stressed the need to utilise revenue to reduce the deficit and the debt burden. According to him, "generally the budget looks a bit ambitious in my view given the prevailing economic situation and given the fact that it will take some time for the economy to fully recover from the pandemic.
"All of this will depend on how we progress with the economy, how we are able to create an enabling environment for investors for businesses to be able to prosper and be able to support government in terms of revenue. Revenue is very key and very central to the budget.
"Revenue is a major issue. If you look at the last three years there has been large variances, large negative finances in the revenue targets and it is not likely that what we have in the 2021 budget will be any significantly different."
Also reacting, a professor of capital market at the Nasarawa State University, Keffi and a fellow of the Institute of Chartered Accountants of Nigeria, Uche Uwaleke, opined that the sum of slightly above N2 trillion allocated to capital expenditure out of the total budget size of N13.08 trillion is quite disproportionate.
Uwaleke argued that if the projected budget deficit is over N4 trillion against a capital spending of about N2 trillion, it meant that part of the money to be borrowed to finance the deficit is going into consumption.
"This is worrisome and so I expect the National Assembly to take a close look at these critical budget areas with a view to ensuring that the developmental aspects of the budget receive priority attention," he said.
Uwaleke believes the projected Exchange rate figure rate of N379 per US Dollar may not stand due to the on-going process of unifying Exchange rates across all forex windows by the Central Bank of Nigeria (CBN) consistent with the IMF prescription.
Like many industry watchers, Uwaleke however believes that some of the assumptions in the 2021 projections are realisable. "I think the assumptions and budget parameters are realistic," he said.
"I also think the real GDP growth rate projected at three percent 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.
"I wish to note that the budget proposal seems to have set the right priorities with the bulk of capital spending going to Works and Housing, Power and Transport. For the first time in many years, the capital allocation to Education and Health are above that of defence.
"I must add, however, that new borrowings of over N4 trillion to part finance a deficit of over N5 trillion is worrisome given the already huge amount of over N3 trillion allocated to debt servicing alone," he said.
COVID-19 notwithstanding, experts say the deficit to GDP should have been kept within the three percent threshold stipulated in the Fiscal Responsibility Act 2007.
"I hope the National Assembly will consider any amendment within the budget envelope of N13.08 trillion and not end up jerking up the figure," he added.
We're Studying Budget Bill - Labour
When contacted, organised labour in the country said that they were still studying the 2021 budget presented by President Buhari.
President of the Trade Union Congress (TUC), Comrade Quadri Olaleye, told our correspondent that labour was still studying the budget and would react appropriately.