Wednesday, 11 September 2019 05:50

Federal Govt proposes N9.789tr budget for 2020

 
 

The Federal Government has proposed a budget estimate of N9.789 trillion for next year.

Finance Minister Mrs. Zainab Ahmed, who dropped the hint on Tuesday, reeled out the figures (N10, 110, 193, 322, 738) for 2021 and (N10, 418, 391, 196, 907) 2022.

She announced the proposals while presenting the draft of the 2020 to 2022 Medium Term Expenditure Framework and Fiscal Strategy Paper in Abuja.

According to her, the government would start the deduction of the N614 billion budget support facility from state government accounts this month.

 

She said the states, except Lagos, would start getting direct debit notifications from their monthly Federation Account Allocation Committee (FAAC) disbursements.

“The recovery process for us is to deduct from the FAAC allocation to the states and then we remit to the CBN and we are going to start this remittances by the next FAAC” which will hold in two weeks’ time.

“There will be no requirement for us to consider the FSP implementation. We do that as a matter of wanting the states to stay on the path of fiscal sustainability but it will not be a condition for the deduction. We will deduct direct at source and remit to the CBN.

“The N614 billion bailout funds to states is not going to form part of the revenue for funding the budget, it was a loan which was advanced by the CBN and the repayment will be made to the CBN.”

Last month, the Federal Government announced the setting up of a committee to facilitate the recovery of N614 billion given to the states.

Each of the benefitting state is expected to pay back the equivalent of N17.5 billion.

She said that N650 billion was a conditional budget support provided by the CBN to help states pay salaries, gratuities and pensions.

 

The CBN provided the N650 billion in loans at nine per cent with a grace period of two years. The Federal Ministry of Finance helped in the disbursements with documented approval by the presidency.

With regards to the many incentives and waivers given to investors, the Finance minister said: “We have too many incentives and too many waivers. But our partners in the trade will not necessarily agree with us. We also agree that there has to be a review of the pioneer status certificate issuance process because the waivers and the incentives are really costing us a lot.”

She warned that the government will not just withdraw its decision on granting pioneer status accorded to some investors, adding: “When a decision has been made and approvals have been given, and a private business makes an investment decision based on those incentives, you can’t pull it out overnight. So, there has to be a period within which the commitments that have been made are allowed to exit before you impose new conditions.

“The government is currently reviewing the quantum of waivers. The idea is to see which one we can begin to pull back and throw away from the pool to reduce the cost on government. But to encourage businesses and to make Nigeria competitive, some of them are essential.”

The government has also warned Nigerians to brace for challenging 2020 to 2022 fiscal years.

Mrs. Ahmed said the 2020 to 2022 fiscal years would be very challenging with respect to revenue generation and rapid growth in personnel costs.

 

She attributed the growth in personnel cost to the creation of new ministries and appointment of additional ministers.

She, however, assured of the government readiness to take firm decisions to contain rising personnel cost.

Mrs. Ahmed said: “Any government staff not captured in the Integrated Payroll and Personnel Information System (IPPIS) by October 2019 should forget salaries.”

From 2020, the budgets of all MDAs and the Government Owned Enterprises (GOEs) will now be contained and published in the nation’s annual budget.

The 2020 – 2022 Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) outlines Federal Government’s fiscal policies/strategies and macroeconomic projections for 2020–2022 and provides the broad framework for the annual budget in line with the Fiscal Responsibility Act (FRA), 2007.

In the proposed 2020 appropriation, the Federal Government plans to cut N1.16 trillion off the capital expenditure from N2.92 trillion in 2019 to N1.76 trillion.

This will then see capital expenditure dropping to 21 per cent of total expenditure in 2020 compared to 32 per cent in the 2019 approved budget.

Mrs. Ahmed said the country is planning to trim its budget for 2020 marginally by 0.19 per cent to N8.90 trillion, as against the N9.16 trillion approved by lawmakers for 2019.

The government approved a 34 per cent  and 66 per cent capital/recurrent expenditure fiscal policy in 2018 and 32 and 68 per cents in the approved 2019 budget.

Details of the Medium Term Expenditure Framework (MTEF) and fiscal strategy paper (FSP) 2020-2022 showed that capital expenditure will suffer successive cuts for the three-year period to N1.76 trillion, N1.70 trillion and N1.68 respectively for 2020, 2021 and 2022 despite increases in total expenditure at N8.6 trillion, N8.98 trillion and N9.4 trillion during the same period.

Recurrent on the other hand, is expected to increase from N3.41 trillion in 2018 to N4.7 trillion in 2019.

Key assumptions of the 2020 Budget Framework, oil production 2.18 mbpd; oil price $55/b; exchange rate N305/$; inflation rate 10.81per cent; nominal consumption N122.75 trillion; N142.96 trillion nominal GDP; and GDP Growth Rate of 2.93per cent.

A lower benchmark oil price of $55/b (against $60/b for 2019) is assumed considering the expected oil glut in 2020, as well as the need to cushion against unexpected price shock.

There are strong indications of an oversupplied market in 2020. All three of the major forecasters – Organisation of Petroleum Exporting Countries (OPEC), International Energy Association (IEA) and the U.S Energy Information Administration (EIA) generally see non-OPEC production growing by around 2mbpd this year, and by even more next year.

Federal Government plans to borrow N1.7 trillion in 2020 of this amount, N850 billion will be domestic borrowing while the balance of N850 billion will be from foreign borrowing.

 

TheNation

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