•N2.083tr too small for capital expenditure –Experts
Uche Usim, Juliana Taiwo-Obalonye (Abuja), Adewale Sanyaolu and CHinwendu Obienyi
The Federal Executive Council (FEC) presided over by President Muhammadu Buhari on Wednesday approved N13.09 trillion budget estimate for the 2021 fiscal year.
Briefing State House Correspondents after the meeting, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said the budget estimate is made up of N2.083 trillion for capital expenditure, representing about 29 per cent of the total budget.
According to her, the budget proposal is predicated on N379 exchange rate to the dollar, an oil benchmark of $40 per barrel, oil production volume of 1.86 million per day, including 400,000 barrels of condensate, Gross Domestic Product (GDP) growth of 3 per cent and 11.95 per cent inflation rate.
The minister who said the budget would run on N4.48 trillion deficit, puts the revenue target in the fiscal year at N7.9 trillion.
In a related development, the House of Representatives on Wednesday, approved the 2021-2023 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP). Part of the details of projections for the 2021 fiscal year as presented before the House by the Joint Committee on Finance, Appropriations, National Planning, and Economic Development shows other fiscal measures in the document include a planned new borrowing (domestic and foreign) of N4.28 trillion, special interventions (recurrent) of N350 billion, special interventions (capital) of N20 billion, and a projected fiscal deficit of N5.2 trillion:
But in his reaction to the proposed Appropriation bill, Mr David Adonri, the CEO of Highcap Securities, said:
“The budget is an annual ritual done by the government but it is never done or effectively implemented in line with what it is supposed to be used for. That is what we have been experiencing all these years and so it is also not likely that the decision that we will make in terms of the 2021 budget is different from what we have been seeing in the past.
“Although, we cannot base our judgement on that budget because what they have been presenting in the past didn’t even reflect in performance. So, we will watch and see what happens. But I am not expecting any difference at all.”
Also commenting on the proposal, Abuja Chapter Chairman of the CIBN, Prof Uche Uwaleke, told Daily Sun that “if the projected budget deficit is over N4 trillion against a capital spend of about N2.083 trillion, it means part of the money to be borrowed to finance the deficit is going into consumption. “This is worrisome and so I expect the National Assembly to take a closer look at these critical budget areas with a view to ensuring that its developmental aspects receive priority attention,” he added:
He further stated that the assumptions and budget parameters were realistic except for the exchange rate pegged at N379/$1, which he said may not hold due to ongoing process of unifying exchange rates across all forex windows by the Central Bank of Nigeria (CBN).
Meanwhile, Lead Director of the Centre for Social Justice, Eze Onyekpere, has described the budget as non-developmental.
“There is nothing to cheer about. It’s not a developmental budget. Look at the budget for capital expenditure: We’re not serious”, he said.
Similarly, Tope Fasua, the Founder and Chief Executive of Global Analytics Consulting Limited, said: there is an urgent need to move away from the envelope system of budgeting where agencies draw up their budget and transmit to the budget office.
For his part, Director General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, said he remained worried that country does not have the required revenue to match the budget size of N13.08 trillion. He explained that the economy is just recovering from the effects of the coronavirus pandemic, making it more fragile at the moment.
He said the budget size was equally capable of worsening the fiscal deficit situation because the country is already battling with the heavy burden of debt service, adding that these are some of the challenges that the economy is still battling with.
Yusuf however appreciated the fact that Government is presenting the budget early enough so that by January, the country would have successfully returned to the January to December budget cycle.