The Problem Statement
The 2020 Appropriation Bill, “BUDGET OF SUSTAINABLE GROWTH AND JOB CREATION“, was presented by the President to the National Assembly on the 9th of October 2019 along with the draft Finance Bill (which has now been passed into law as Finance Act) which is intended to cause significant changes to the existing financial laws that will enable the Federal Government to boost its revenue generation capacity. The Appropriation Bill was signed into law by the National Assembly on the 5th December 2019 and assented by the President on the 17th December 2019.
The budget was increased from N10.33 trillion to N10.594 billion by the National Assembly.
Below is the table of the different faces of budget 2019 and 2020.
|Budget Assumption/ Fiscal Parameter||2019 Approved Budget||2020 Approved Budget||Percentage change|
|Benchmark oil price $||60||57||-5.00%|
|Oil production volume (Mbpd)||2.3||2.18||-5.22%|
|Inflation rate %||9.98||10.81||-8.65%|
|GDP growth rate (%)||3.01||2.93||-2.66%|
|Capital Expenditure (N’trn)||2.93||2.465||-15.87%|
|Statutory transfer (N’bn)||0.50||0.56||12.00%|
|Debt service (N’trn)||2.14||2.725||27.3%|
|Recurrent expenditure (non-debt) (N’trn)||4.74||4.842||2.15%|
|Total revenue (N’trn)
|Total expenditure (N’trn)||8.92||10.594||18.77%|
|Fiscal deficit (N’trn)||1.92||2.28||18.75%|
From the above, the key indicators and benchmarks:
- The total expenditure of N10.594trn
- Capital Expenditure of N 2.465trn
- Recurrent Expenditure N 4.842trn
- Statutory Transfer N560.4bn
- Debt Servicing N2.72trn
- Fiscal Deficit N2.28trn
- Estimated crude oil production of 2.18m barrels per day
- Estimated crude oil price of $57per barrel
- Exchange rate of N305/$1
- The projected GDP growth rate of 2.93%
- Projected Inflation 10.81%
The Policy Solution
The rapid approval of the 2020 Appropriation Act is very impressive and has set the Government on a good track in fiscal management. However, speedy approval will not guarantee the successful implementation of the Budget. The Federal Government needs to:
- Minimize the value of governance. Because the proportion of its projected capital Expenditure for the year (N2.465 trillion) is twice with The Recurrent (Non-Debt) Expenditure. The effect of this is that even the increase in the VAT rate to 7.5% may still not be adequate to boost non-oil revenue which has been underperforming for the past five years.
- There should be the immediate implementation of capital projects which have been appropriated.
- Vibrant social intervention plans and projects should be embarked upon so as to increase GDP and alleviate poverty.
- Create short and medium terms of borrowing to finance the budget.
The urge for the Federal Government to meet up with the expectations of Nigerians will steer up an aggressive revenue drive. It is expected that the Federal Government will pursue an aggressive collection of tax income Principally VAT, Stamp duties, and Company Income Tax by putting in place an appropriate framework to harness the anticipated benefits of the Finance Act. This will create a stiffer penalty for tax defaulters as there will be a mounting pressure on Federal Inland Revenue Services (FIRS) to meet up its target.
NIGAC Constructive Take/Position
The executive and legislative arm of government have really proven doubters wrong by working collectively in a quick approval of the budget. It has returned the nation into an appropriate budget cycle. This will be an apt indicator for foreign investors, financial players, and investment associates in transacting business.
The budget is in deficit as earlier explained. The Federal government needs to eliminate so many wasteful costs from their activities. It should reduce the bottlenecks of operating business in the country, open up other non-oil sectors such as agriculture, education, tourism, mines, and power, etc. This will create employment opportunities, increase foreign earnings, and reduce dependence on a mono-economy.