President Muhammadu Buhari recently presented a N10.33 trillion 2020 Appropriation Bill to a joint session of the National Assembly. The draft estimate pegs the Federal Government’s revenue target at N8.155trillion. This is seven per cent higher than the N7.594trillion the government planned to generate in the 2019 budget. Also, the Federal Government plans to generate N2.64 trillion as oil revenue, N1.81trillion from non-oil receipts and N3.7trillion from other revenue sources.
The “Budget of Sustaining Growth and Job Creation,” proposes a non-debt recurrent expenditure of N4.88trillion, capital expenditure of N2.14trillion, N2.45trillion for debt servicing, N296 billion for Sinking Fund to retire maturing bonds issued to local contractors, and a deficit of N2.18trillion.
The amount proposed for debt servicing represents 1.52 per cent of estimated GDP, including drawdowns on project-tied loans and related capital expenditure for 2020. The amount earmarked for debt servicing is far below the three per cent threshold set by the Fiscal Responsibility Act 2010. The budget deficit, according to the President, would be financed by foreign and domestic borrowing, privatisation proceeds, signature bonuses and drawdowns on loans secured for specific development projects. The bud- get is predicated on 7.5 per cent Value Added Tax (VAT), $57 per barrel oil benchmark and 2.18 million barrels per day oil production.
The projection is also based on exchange rate of N305/$1 and 2.93 per cent GDP growth driven largely by non-oil output. Highlights of the expenditure estimate in- clude statutory transfers of N556.7 billion, from which N125billion is for the National Assembly, N110bilion for the Judiciary, N80.88billion for Niger Delta Development Commission (NDDC), N37.83billion for the North East Development Commission (NEDC). The breakdown of allocation for capital expenditure shows that Works and Housing got the lion’s share of N262billion, Power N127bilion, Transportation N123bil- ion, N112 billion for Universal Basic Education Commission (UBEC), Defence N100bil- lion, Agriculture and Rural Development, N83billion and N82bilion for Water Re- sources.
Education sector is allocated N48billion, Health N46billion, Federal Capital Ter- ritory N28billion and Social Investment Programme (SIP) N30billion. According to President Buhari, the additional revenue from the hike in VAT will be deployed to education, health and infrastructure programmes, with 85 per cent of the revenue allocated to the states and local governments. Some business owners are optimistic of improved budget execution next year in view of its early presentation by the President. However opinions are divided over the budget’s prospects. Some experts are of the view that government has fixed unrealistic revenue targets for the budget. They also believe that the budget assumptions lack the capacity to spur growth. This, according to them, calls for concern unless the National Assembly rejigs its revenue targets and other assumptions.
There is need to examine the funding challenges which experts say may vitiate the objectives of the budget. Unfortunate- ly, the variance between the budgeted and actual accruals has widened within the last few years. This might have compelled the government to borrow from domestic and external markets.
For instance, as at June this year, government could only generate N2.46trillion from both oil and non-oil sources of the projected N6.996trillion target for the full year. If this is anything to go by, the concern that funding challenges could be imminent is not misplaced. However, this could be averted if there are good fiscal policies that will increase the tax net. We also believe that the oil benchmark of $57 per barrel as well as the 2.18mbpd oil production and exchange rate of N305/$1, are unrealistic. With the debt servicing higher than the capital expenditure, it is doubtful that the budget will create jobs.
We urge the National Assembly to adopt a bipartisan approach in its deliberations on the budget. The lawmakers should ensure that the details of the budget proposal are thoroughly scrutinised before legislative approval is given. There is need to pass the budget in time for the President’s assent. It should be noted that the budget is the most important financial document for economic growth and development of the country. Therefore, its effective implementation is crucial. For some years now, our budgets have not been adequately implemented.
Statistics from the Ministry of Finance and Office of Budget and National Planning show that in the last 10 years, the average budget implementation had not exceeded 22 per cent. To enhance the execution of the 2020 budget, we call for prompt release of funds. Therefore, the Ministers and heads of Ministries, Departments and Agencies (MDAs) should endeavour to defend their allocations before the October 31 deadline set by the Senate. We have no doubt that effective execution of the 2020 budget is likely to usher in the anticipated January-December budget cycle.