Barring any change in plan, the Presidency is expected to officially table before the two chambers of the National Assembly today, proposals on review of the 2020 budget. Taiye Odewale examines areas to be reviewed.
Fall in oil prices
Though the N10.594 trillion 2020 budget was approved by the National Assembly and signed into law by President Muhammadu Buhari in December 2019, but signs that underlying projections cum assumptions of the budget estimates, are no longer achievable , started showing in January this year with steady fall in the price of crude oil in the International market.
The fall, which arose from the outbreak of coronavirus pandemic otherwise known as COVID-19, worsened in March and April this year with the crude oil price in the international market, sliding to as low as $18 per barrel as against $57 per barrel projected as oil price benchmark for it.
Initial reduction of budget
Expectedly the federal government in its first reaction to devastation of COVID-19 on revenues projections for the 2020 budget estimates declared in April that the entire budget size would be slashed from the earlier projected N10.594trillion to N9trillion.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, who made the declaration during an interface with leadership of the National Assembly, said the proposed cut from the earlier proposal is N1.5 trillion.
According to her, the projected cut of N1.5trillion would largely be taken from the earlier projected N2.465trillion capital expenditure and overhead component of the earlier projected N4.862trillion recurrent expenditure anchored on $30 per barrel as oil price benchmark as against $57 per barrel earlier projected and signed.
Planned budget review
Perhaps due to fluctuations of the oil price that time, official request for the intended budgetary slash, was not made to the National Assembly by President Muhamnadu Buhari throughout the month of April.
But indication for such is now emerging arising from oil price relative stability in the international market hovering between the range of $30 to $35 per barrel, upon which the federal government is fixing $25 per barrel as new oil price benchmark for the proposed budget review.
The Finance Minister, who made the disclosure last week Thursday during another interface with the leadership of the National Assembly, said aside the $25 per barrel oil price benchmark, the 2.3 million barrel per day oil production earlier projected for the budget , would also be slashed to 1.9million barrel per day.
She added that the exchange rate earlier fixed for N305 to a US dollar, will be N360 to a US dollar for the implementation of the reviewed budget when approved by the National Assembly.
“As a result of the drastic drop in the oil price in the international market, earlier projected revenues of N8.419trillion of funding the budget, is now slashed to N5.548trillion which is 34 percent (N2.87 trillion) lower than what was initially approved.
“In line with the global economic outlook and relevant domestic considerations, the assumptions underpinning the 2020-2022 Medium Term Expenditure Framework (MTEF) and the 2020 Budget was revised to slash crude oil benchmark price from US$57 per barrel to US$25 per barrel; reduce crude oil production benchmark from 2.18 million barrels per day to 1.9 mbpd.
“There is also the upfront fiscal deductions by the Nigerian National Petroleum Corporation (NNPC) for mandated oil and gas sector expenditures by 65 percent from N1.223 trillion to N424 billion”, she said .
The federal government’s aggregate expenditure budget, she explained, was slashed by N88.412 billion; Statutory Transfer from N560.47 billion to N397.87 billion; and Overhead costs of Ministries, Departments and Agencies of Government from N302.43 billion to N240.91 billion.
Debt service increased but other projections slashed
However, she said Debt Service provision was increased from N2.453 trillion to N2.678 trillion.
Sourcing of the proposed N500billion Intervention Fund against COVID-19, according to her , will be will be N263.63 billion from Federal Government Special Accounts, N186.37 billion from Federation Special Accounts and the balance of N50 billion expected as grants and donations.
She explained further that “the sum of N186.37 billion will be applied toward COVID-19 interventions across the federation, while an additional N213.60 billion was provided for in the Service Wide Votes for COVID-19 Crisis Intervention recurrent expenditures.”
“While a total of N100.03 billion was provided for in the Intervention Fund for new capital spending, the Federal Government carried out a cut in capital expenditures for Ministries, Departments and Agencies of Government from N1.564 trillion to N1.262 trillion.
“It is necessary to reallocate resources in the 2020 budget, to ensure the effective implementation of required emergency measures, and mitigate the negative socioeconomic effects of the COVID-19 pandemic”, she added.
NASS to cooperate
In his remarks, the Senate President, Ahmad Lawan, told the executive arm of government to ensure that the interest of Nigerians remains protected in the proposed cut to the 2020 national budget.
He expressed the willingness of the federal lawmakers to expeditiously consider the proposed amendment to the 2020 budget which the Minister said would be presented to the National Assembly by next week (this week now).
“The budget amendment is very important, but I believe that when we are faced with this kind of challenge (COVID-19 pandemic), it is an emergency and we should do everything and anything possible to fast track the passage and implementation of the government intervention that is so critical and crucial at this stage.
“I believe that we shouldn’t delay it any longer. Next week, and I will suggest the early part of next week, we should have that document(MTEF) ready so that we can consider it alongside the budget. It is supposed to be the tonic of what Nigerians are waiting for.
“We have listened to the various adjustments you have made to avoid going into recession. However, to avoid going into a deeper recession, I think we need to do a little bit much more.
“After this meeting with the leadership, I suggest that you engage with our relevant committees in the Senate and House of Representatives to look at the nifty gritty that would be considered more in detail at the presentation level”, he said.
Need for feasible benchmark
In his own remarks, the Speaker of the House of Representatives, Femi Gbajabiamila, called on the federal government to adopt a feasible benchmark in the proposed amendment to the 2020 budget.
He said: “The benchmark is so critical and so important, because once you passed the law it becomes difficult to adjust that benchmark, and then what happens to the excess?
“We have always had problems with the Excess Crude Account, potentially an account which has no backing of the law. So, let’s even assume that the price remains static at $35 that means we have $10 going to the Excess Crude Account which we have no control over in terms of spending, that is why we guard that benchmark price very jealously”.
Expectedly after repeated interactive sessions between the executive and the National Assembly on the required need for downward review of the 2020 budget , a communication to that effect from President Buhari should follow , particularly this week, since the federal lawmakers after today’s session , will go on Sallah recess till Tuesday, June 2, 2020.