President Muhammadu Buhari, this week, issued a stern warning to agencies of government saddled with the responsibility of revenue generation to work hard to meet their targets or get sanctioned.
The president issued the warning after signing the N13.588 trillion 2021 Appropriation Bill and the 2020 Finance Bill into law.
In this respect, both the Legislative and the Executive are commended for ensuring a timely passage of the Appropriation Act 2021, and enactment of Finance Act 2020.
This is the second consecutive year that the budget has been approved before the commencement of the fiscal year, and raises hope of sustaining Nigeria’s return to the January to December budget cycle.
The 2021 budget, themed: “Budget of Economic Recovery and Resilience,” is designed against the backdrop of a global economic crisis and domestic impact of COVID -19.
Before approving the budget for the president’s signature, the National Assembly increased the aggregate revenue and planned expenditure from ₦7.89 trillion to ₦7.99 trillion and from ₦13.08 trillion to ₦13.59trn respectively. This has increased the budgeted fiscal deficit by ₦405 billion from ₦5.196 trillion to ₦5.601 trillion.
The additional ₦0.51 trillion planned expenditure in the approved budget is mainly due to the increase in contribution to the Development Fund for Capital Expenditure for the year. The budget is expected to accelerate the pace of Nigeria’s economic recovery, promote economic diversification, enhance competitiveness and ensure social inclusion. The budget is also designed to further deliver on the goals of the Nigeria Economic Sustainability Plan (NESP) which was approved by the Federal Executive Council (FEC) on 24 June 2020.
The NESP provides a clear road map for Nigeria’s post-Coronavirus economic recovery as a transitional plan, to take Nigeria from the Economic Recovery and Growth Plan (2017-2020) to the successor Medium-Term National Development Plan (2021–2023).
The proposed aggregate revenue and expenditure budgets for 2021 are ₦7.89 trillion and ₦13.08 trillion, respectively, resulting in ₦5.02 trillion fiscal deficit.
The deficit will be financed mainly by new borrowings totalling ₦4.28 trillion, ₦205.15 billion from privatisation proceeds and ₦709.69 billion from drawdowns on multilateral and bilateral loans secured for specific projects and programmes.
The disruption of the world’s economic activities due to the COVID-19 pandemic which led the fall in oil prices and the drastic reduction in demand for Nigeria’s crude oil severely impacted the country’s fiscal position and actualisation of the 2020 budget.
As at July 2020, the federal government of actual revenue available for the 2020 budget was ₦2.10 trillion. This represents 36% of the revised 2020 revenue and 68% of the pro-rated revised target.
Surprisingly, oil revenue performed well above the budget target, by 168% due to recent rise in oil prices and non-oil tax revenues summed up to ₦692.83 billion, which is 12% of the revised revenue budget and 73% of the revised target.
GDP growth has, however, declined by 6.1% in the second quarter of 2020, ending the 3-year trend of modest real GDP growth recorded since the second quarter of 2017. GDP growth is projected to be negative in the third quarter of 2020.
Clearly, the managers of the economy will have their task cut out for them in ensuring that the Nigerian economy does not lapse into a second recession in four years, with significant adverse consequences.
With respect to expenditure, a total of ₦5.37 trillion had been spent as against the pro-rated expenditure of ₦5.82 trillion as at end of July 2020, accounting for a deficit of ₦3.27 trillion, which may be attributable to possible efficiencies or delayed expenditure.
Despite the economic challenges in the year, Nigeria managed to service its debt obligations and settle personnel costs and statutory transfers.
Clearly, with the country still reeling from the impact of the COVID-19 pandemic, a slow recovery is being projected in 2021 and this, likely, informs the modest revenue expectations in the budgetary assumptions for non-oil revenue.
It is clear that the economy will still require infusion of fiscal palliatives to help keep businesses afloat, inclusive of deferral of tax payments and, possibly, statutory transfers.
Despite government’s efforts to create more job opportunities for Nigerians in 2020, unemployment rate stood at 27.1% while underemployment rate stood at 28.6% as at June 2020.
To improve the unemployment and underemployment statistics, the federal government is implementing the Special Public Works programme to provide 774,000 employment opportunities to youth across the 774 local governments.
The government also introduced the ₦25b billion Nigeria Youth Investment Fund to cater for the investment needs of persons between the ages of 18 and 35 years.
Of course, in spite of the lofty ideals contained in the 2021 budget, the issue of revenue still remains a threat to its successful implementation, and realisation of the ideals that budget, no doubt, is a national economic document, an important economic policy instrument of government that reflects the government priorities regarding its social and economic policies, thereby making the realisation of its intendments significant.
Budget also translates policies, political commitments, campaign promises and goals into decisions regarding where funds should be spent and how money should be collected.
Fortunately, the government is not only aware of the problem to mobilise resources for its realisation but it is ready to address any associated problem that could hinder its realisation. “We are intensifying our domestic revenue mobilisation efforts so that we can have adequate resources to fund the 2021 Budget,” the president said.
The president, consequently, warned that “revenue generating agencies, and indeed all ministries, departments and government-owned enterprises, must work very hard to achieve their revenue targets, control their cost-to-revenue ratios, as well as ensure prompt and full remittance of revenue collections.”
“Relevant Agencies are to ensure the realisation of our crude oil production and export targets. Heads of defaulting Agencies are hereby warned that they will be severely sanctioned,” he said. “I also appeal to our fellow citizens and the business community, at large, to fulfil their tax obligations promptly.”
There is no doubting the fact the previous year was not encouraging for many economies, including Nigeria, and the prayer and expectations of nations is for the current year to be better.
It is, therefore, heart-warming to hear the president expressed delight that despite disruptions occasioned by the coronavirus pandemic, implementation of the 2020 budget had passed previous thresholds.
“In spite of the adverse impact of the Coronavirus Pandemic on the nation’s economy and the Government’s revenues, we have made appreciable progress in the implementation of the 2020 Budget,” he said.
Still, it can be said about Nigeria that, as usual, much has been expended in terms of budget with little to show for it, as far as the living conditions of the masses is concerned.
Therefore, this government should make every effort to ensure that capital budgets are fully implemented. The issue of half implementation and embezzlement of the allocated money should be tackled by the officials of the Economic and Financial Crimes Commission (EFCC) so as to ensure that the money allocated is used for what it was meant for.
Also, the federal government should ensure quick release of capital expenditure votes to stimulate the economy and ensure that there is flow of income which will ultimately reach the common people in the country.
Government should also try to put in place effective machinery that will ensure strict adherence to due process and total implementation of annual budget provisions and avoid misappropriations.
It should be noted that negative effect of budget implementation rate on the economy poses strong questions as to whether the government has enough capital to fund annual budgets.
This can be effectively handled by increasing income drive of the government and supplementing annual budgets by way of internal and external borrowings.