President Muhammadu Buhari recently signed into law the revised 2020 budget of N10.81trillion, an increase of N216 billion over the previous proposed expenditure in the 2020 Appropriation Act which the National Assembly approved and signed by President Buhari on December 17, 2019. At the signing ceremony, which took place at the Council Chambers of the Presidential Villa on July 10, President Buhari explained that the review of the budget became compelling because of the adverse effects of COVID-19 which resulted in the reduction of oil production quota by the Organisation of Petroleum Exporting Countries (OPEC).
Therefore, the immediate outcome of the fall of oil prices was the need to reallocate resources through the revised budget to pave way for effective implementation. The sum of N5.365trillion of the budget is to be funded by domestic and external borrowing, while direct revenue funding will cover N5.158trillion. The revised sum shows a difference of N71.5billion compared to the previously approved budget. Other highlights include N2.9trillion for Sinking Fund. Federal Government’s basic healthcare budget dropped from N44.4billion to NN25.5billion, a decrease of more than 42.5 per cent. The National Assembly also added N4billion to “take care of hazard and other welfare packages” for resident doctors who were not captured in the earlier Appropriation Act.
The revised budget is also premised on 1.9 million barrels per day and $25 oil benchmark. The initial budget was premised on 2.18mpd, and $57 oil price benchmark. Due to the COVID-19 pandemic, crude oil prices in the international market had fallen sharply from a high of $72.20 per barrel in January 2020 to below $20 per barrel in April. Currently, it hovers between $38 and $40 per barrel. With these developments, the global economy may plunge into recession. Nigeria’s economy may not be spared of the impending recession unless urgent macroeconomic and fiscal measures are taken to avert the situation.
Interestingly, President Buhari has given assurance that government’s Ministries, Departments and Agencies (MDAs) will receive 50 per cent of their capital allocations at the end of July. Although the president disclosed that a measure of progress had been made in the implementation of the 2020 Appropriation Act, with about N253 billion reportedly released for implementation, much more should be done within the remaining five months. This has become necessary if the government intends to sustain the January-December budget cycle. To ensure effective implementation of the budget, the Ministerial Monitoring Committee should be diligent in its assignment. Beyond that, government must be more serious with the diversification of the economy. It is hoped that with the budget review, and the recently launched N2.3 trillion stimulus programme, the economy will be well-positioned for recovery. Currently, many fundamentals of the economy have worsened significantly since the outbreak of COVID-19. With inflation rate put at 12.56 per cent in June, the growth prospect is dim. Besides, debt servicing will gulp a whopping N2.6 trillion.
A breakdown of the amended budget shows that N422.77 billion is for Statutory transfer, N4.938trillion is voted for Recurrent (non-debt) expenditure, while N2.488trillion is for contribution to Development Fund for Capital expenditure. The fiscal deficit of the budget is over N2.28trillion, while the deficit to Gross Domestic Product (GDP) ratio is 1.52 per cent. Since previous budgets had not achieved more than 50 per cent implementation, we call for, at least, 70 per cent implementation of the revised budget in order to stimulate the economy and ensure the realisation of the budget theme, which is sustaining growth and job creation. With dilapidated infrastructure across the country, we hope that the budget will frontally address infrastructure challenge and others facing the country.
The 2020 budget must not be allowed to suffer the fate of previous budgets in terms of implementation. Nigerians are likely to expect a significant level of implementation. It is sad that in the previous budget, over 265 Federal Government’s agencies misappropriated over N300billion in violation of the fiscal and audit rules governing their operations. If such malfeasance continues, it is going to sabotage the realisation of the 2020 Appropriation Act. For effective implementation of the revised budget, we call for prompt release of appropriated funds, especially for capital projects. Therefore, all hands must be on deck to ensure that the 2020 budget succeeds.