President Muhammadu Buhari has on the 8th of October 2019 presented the first budget for the next 2020 fiscal year, before the joint sitting session of the ninth national assembly. The budget which was described as a budget for sustaining growth and job creation is based on an estimated oil price benchmark of US$57 per barrel, a daily oil production estimate of 2.18 million barrels per day (BPD), and an exchange rate of N305 per US Dollar. This will determine the socio-economic direction of the government and has huge implications on the economic outcomes for a particular year
While presenting the budget, the president introduced a finance bill for consideration and passage into law by the assembly to give effect to the proposed increment in value-added tax (VAT) rate which the budget seeks to achieve.
It is worth noting that at a time of subsisting domestic and global economic challenges, the budget is expansionary on the side of recurrent expenditures in recognition of domestic realities relating to the payment of the new minimum wage and servicing of public debt which has become worrisome. With the proposed expenditure estimated for N10.33 trillion which includes statutory transfers of N556.7 billion, non-debt recurrent expenditure of N4.88 trillion, and N2.14 trillion of capital expenditure (excluding the capital component of statutory transfers), the sum of N8.155 trillion is estimated as the total Federal Government revenue in 2020 and comprises oil revenue N2.64 trillion, non-oil tax revenues of N1.81 trillion and other revenues of N3.7 trillion. This is 7 percent higher than the 2019 comparative estimate of N7.594 trillion inclusive of the government-owned enterprises.
As part of the federal government’s plan to invest critically in infrastructural development under the budget, her main emphasis has been on the completion of as many ongoing projects as possible, rather than commencing new ones. It reflects in its 262 billion, 127 billion, 123 billion, 112 billion and 100 billion allocated to Works and Housing, power, transportation, universal Basic Education, defense and zonal intervention projects respectively, other sectors like education, health, agricultural, interior and trade/investment get less as 48 billion, 46 billion, 83 billion, and 40 billion.
Revenue generation as a challenge for the national assembly
As the budget appropriation bill scaled second reading on the floor of the senate, the senate president, Ahmad Lawan, identified revenue generation as a major challenge of the budget.
According to him, the successful implementation of the budget may be difficult to realize until proactive measures are taken to address the situation.
He said, “We are seriously challenged in generating revenues, and it appears that until something drastic is done, this shortage of revenue will continue to militate against the implementation of the budget.
“We have to continuously engage the revenue-generating agencies and schedule quarterly evaluation to be handled by our relevant committee, particularly the senate committee on finance. It is a serious challenge when only thirty percent is devoted to the capital budget, though an improvement from what we inherited from 2014 when the allocation was fifteen percent. But that is not to say we cannot do better”.
On another angle, the assembly drew the attention of the executive arm of government to certain areas that needed some tweaking to enhance the economy. They said the figure of N2.14 trillion proposed as capital expenditure was rather too insufficient to stimulate the Nigerian economy along a trajectory that guarantees growth. They also claimed the need to diversify the economy away from oil so to change the country’s approach to planning, revenue generation, and even budgeting.
Nigerians fear over budget sustainability
Nigeria’s revenue service has pulled in just 58% of the targeted amounts so far for this year, fuelling fears that the target may not be met after all. The government’s spending plan is also based on the country pumping an average of 2.18 million barrels per day (BPD) at an average price of $57 a barrel. It assumes the official exchange rate will stay constant at N305 to $1.
But due to fluctuating oil revenues, several provisions of the 2019 budget were not implemented, a problem acknowledged by the president. Daily oil production averaged 1.86bpd as at June 2019, as against the estimated 2.3bpd that had been forecast.
Analysts had opined that the only way to achieve the government’s ambitious tax revenue targets would be a wide-ranging restructuring of the tax system with far more accountability.
In the view of Muda Yusuf, DG, Lagos Chamber of Commerce, and Industry, while lauding the Executive arm of government and the National Assembly, who according to him, have demonstrated an unequivocal commitment to the return to the January – December cycle for the federal government budgets, he said, the key assumptions underpinning the budget are realistic except for the exchange rate assumption of N305 to the dollar.
He said “This is one assumption that is difficult to justify, especially at a time when declining revenue has become a major issue both for the government and the citizens. The 2020 budget numbers underscore the need to be more innovative in boosting revenue, reducing leakages, and ensuring that revenue-generating agencies of government remit what is due to the government. We need to do things differently if we must get a different result.”
Echoing similar sentiments, action aid Nigeria (AAN) as a nongovernmental organization, followed the budget with keen interest and decry the abysmal capital allocations to agriculture N83b, health N46b, education N48b, and the Social Investment Programme N30b. Emphasizing the pertinency of making adequate provisions for funding of agriculture, health, and education sectors, they opined that it portrays the continued downward trends in the allocation to these key sectors. This may seem hazy, but this same line is followed by many due to the paltry budgets of N48bn for education and N46bn for health.
