Budgets play a crucial role in the democratic process as they provide one of the most important financial control and oversight mechanisms within the political arena. In this connection, budgetary governance deals with relevant practices across the full spectrum of budget activity – formulation of the annual budget, overseeing its implementation and ensuring its alignment with public goals.
In addition to these fundamentals, President Muhammadu Buhari’s presentation of the 2021 Appropriation Bill before the joint National Assembly early October – essentially underlines the executive’s resolve to firm up fidelity to standardization of the budget calendar – the January to December budget cycle.
Addressing a joint session of the national parliament, President Buhari acknowledged the valued legislative cooperation of NASS. Read him: “I wish to commend your tremendous efforts in approving the revision of the 2020-2022 Medium-Term Expenditure Framework and Fiscal Strategy Paper, and passage of the 2020 Appropriation (Repeal and Amendment) Act, in response to the Coronavirus Pandemic.
“Today marks an important occasion in our quest to accord the federal budget process the seriousness it deserves. In line with our commitment, we have worked extra hard to ensure early submission of the 2021-2023 Medium-term Expenditure Framework and Fiscal Strategy Paper, as well as the 2021 Appropriation Bill. It is my sincere hope that the National Assembly will pass this Bill into law early enough to enable implementation by 1st January 2021, given the collaborative manner in which the budget was prepared.”
While the credit squarely rests with the president on this score, due recognition must also go to the duo of Minister of Finance, Budget and National Planning, Mrs. Zainab Shamsuna Ahmed and Minister of State for Budget and National Planning, Prince Clem Ikanade Agba who did the spade work. They astutely coordinated the process, working in concert with the National Assembly.
More, good a thing the National Assembly has assured Nigerians of its readiness to pass the 2021 budget before the end of the year. This commendable position was disclosed by the President of the Senate, Ahmad Lawan, in his opening remarks before the president was called to lay the budget before the joint session of the two chambers.
In Lawan’s words – “The National Assembly is ready to pass the 2021 budget before the end of the year. I thank members of the National Assembly for fulfilling that promise, by working assiduously towards achieving that promise, and the same vigor would be applied to the 2021 Appropriation Bill when it is presented.”
Before looking at the positive projections in the 2021 budget proposal, it would be germane to highlight some achievements of the 2020 budget. It can be recalled that the 2020 budget tagged “Budget of Sustaining Growth and Job Creation” was amended in response to recent fiscal pressures – a measure that enabled the federal government to effectively respond to the public health challenge of Coronavirus outbreak and moderate its adverse economic impact.
Pursuant to FG’s revised assumptions, the amended 2020 Budget was based on a benchmark oil price of 28 US Dollars per barrel; oil production of 1.80 million barrels per day and an exchange rate of N360 to the US Dollar.
Based on these budget parameters, the aggregate revenue of N5.84 trillion was projected to fund N10.81 trillion in expenditure. The projected deficit of N4.98 trillion, or 3.57 percent of GDP, is expected to be financed mainly by borrowing.
In 2020, the average daily oil production was 1.88 mbpd up to June, as against the revised estimate of 1.80 mbpd for the entire year. However, the market price of Bonny Light crude averaged 40.79 US Dollars per barrel, significantly higher than the revised benchmark price of 28 US Dollars.
As at July 2020, the federal government’s actual revenue available for the budget was N2.10 trillion. This revenue performance was only 68 percent of the government’s pro-rated target in the revised 2020 budget. At N992.45 billion, oil revenue performed well above the budget target, by 168 percent. Non-oil tax revenues totaled N692.83 billion, which was 73 percent of the revised target.
To improve independent revenue performance, the FG directed that the cost profiles of Government Owned Enterprises (‘GOEs’) should be scrutinized and limits imposed on their cost-to-revenue ratios. Supervising Ministers were also directed to ensure closer monitoring of the revenue generating activities and expenditures of the Government Owned Enterprises.
On the expenditure side, as at end of July 2020, a total of N5.37 trillion had been spent as against the pro-rated expenditure of N5.82 trillion. Accordingly, the deficit was N3.27 trillion which represents 66 percent of the revised budgeted deficit for the full year.
It is noteworthy that despite these challenges, the FG met the nation’s debt service obligations and is also up to date on the payment of statutory transfers and staff salaries, while overhead costs have been significantly covered.
Significantly, for the first time in recent years, the FG commenced the implementation of this year’s capital budget in the first quarter. As at 15th September 2020 a total of about N1.2 trillion had been released for capital projects. Every federal MDA has received at least 50 percent of its 2020 capital expenditure budget, in line with FG’s earlier directives.
Notwithstanding the inescapable challenges, in the agricultural sector, the FG recorded appreciable success in rice and other crops mainly through the Anchor Borrowers Programme and the Presidential Fertilizer Initiative, anchored by the Central Bank of Nigeria and the Nigeria Sovereign Investment Authority, respectively. These efforts helped to reduce the adverse impact of COVID-19 pandemic on the nation’s food availability, prices and security.
Considerable progress was made on the railway projects connecting different parts of the country with the Lagos-Ibadan Line to be operationalized soon. The Abuja-Kaduna Line is running efficiently. The Itakpe-Ajaokuta Line was finally completed after over 30 years since it was initiated and commissioned in September 2020 with arrangements to complete the Ibadan-Kano Line underway.
The Port Harcourt-Maiduguri Line and Calabar-Lagos Coastal Line, which will connect the Southern and Eastern States to the North, and the South-South as well as South-East to the North, and South-West, respectively will shortly kick-off.
Under the period of budget review the FG also implemented innovative financing strategies to pull-in private sector investment to bridge the infrastructure deficit with the creation of an Infrastructure Company.
Under the Road Infrastructure Tax Credit Scheme, the FG is undertaking the construction and rehabilitation of over 780km of roads and bridges, nationwide, to be financed by the grant of tax credits to investing business. Ongoing projects under this scheme include: Construction and Rehabilitation of Lokoja-Obajana-Kabba-Ilorin Road Section II (Obajana-Kabba) in Kogi and Kwara States; Construction of Apapa-Oworonshoki-Ojota Expressway in Lagos State; and Construction of Bodo-Bonny road with a Bridge across the Opobo Channel in Rivers State.
Going forward, what are the positive projections in the 2021 budget proposal themed the ‘Budget of Economic Recovery and Resilience’ which, according to President Buhari, is designed to further deliver on the goals of FG’s Economic Sustainability Plan. The plan provides a clear road map for the government’s post-Coronavirus economic recovery as a transitional plan to take the nation from the Economic Recovery and Growth Plan (2017-2020) to the successor Medium-Term National Development Plan (2021-2025).
The 2021 Appropriation targets acceleration of the nation’s economic recovery, promotion of economic diversification, enhancement of competitiveness and ensuring of social inclusion. The parameters for the 2021 Budget include: a benchmark oil price of 40 US Dollars per barrel; Daily oil production estimate of 1.86 million barrels (inclusive of Condensates of 300,000 to 400,000 barrels per day); Exchange rate of N379 per US Dollar; and GDP growth projected at 3.0 per cent and inflation closing at 11.95 per cent.
To enhance national security and human capital development, a major part of the 2021 recurrent cost estimate is allocated to paying salaries and overheads in MDAs providing these critical public services. These include: N227.02 billion for the Ministry of Interior; N441.39 billion for the Ministry of Police Affairs; N545.10 billion for Ministry of Education; N840.56 billion for Ministry of Defence; and N380.21 billion for Ministry of Health.
Besides remaining committed to meeting the nation’s debt service obligations the main thrust of federal government’s capital spending programme in 2021 is prioritisation of the completion of as many on-going projects as possible across the country. These are important positions. A total of N2.183 trillion has been set aside to service domestic debts while N940.89 billion has been provided for foreign debt service.
On the strategic education front, the Ministry of Education’s capital allocation has been increased by 65 per cent to improve the education of children and funds have also been provided for the provision of scholarship awards to Nigerian students at home and abroad.
These positive projections listed amongst much more, captured in the 2021 budget, indeed makes it a “Budget of Economic Recovery and Resilience.” But then, it is hoped that by the time the document passes through the legislative mills, it will still retain, very largely, its original shape, content and texture. While expecting that the National Assembly would do its constitutional work of scrutinising, cnsidering and approving the budget, I do expect that there would be no fundamental disagreements as to necessitate wide gaps in the document.
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