External borrowings to rescue as Senate cuts 2020 budget to N10.509 trillion

The Federal Government yesterday changed the earlier plan of drastically slashing the 2020 passed budget of N10.594trillion to N9trillion by reducing it with just about N85billion through a new proposal of N10.509trillion .

Consequently the earlier approved N2.4trillion for debts servicing in the 2020 fiscal year, is now jerked up to about N3trillion, now standing at N2.951.710trillion.

As highlighted by President Muhammad Buhari to both Chambers of the National Assembly in separate letters to that effect , the newly proposed N10 .509trillion is predicated on oil price benchmark of $25per barrel as against $57per barrel fixed for the earlier one.

Other underlying assumptions of the revised N10 509trillion budget are 1.93million barrels oil production per day as against 2.3million barrel oil production per day earlier approved., the exchange rate of N360 to a US dollar as against N305 to a US dollar earlier passed and approved.

Other critical components of the newly proposed N10.509trillion budget are N398.505 billion as statutory transfers, N4.928.525trillion as recurrent expenditure and N2.230.912trillion as capital expenditure.

The President in the letter explained further that aggregate revenue for funding the now revised 2020 budget is N5.09trillion which is 35% or N2.78trillion less than the one passed by the National Assembly and signed into law by him in December 2019.
Part of the N85billion reduced from the earlier approved 2020 budget, is N11billion deducted from the N110billion capital votes allocated to the Judiciary in the previous budget.

The Chairman, Senate Committee on Judiciary, Human Rights and Legal Matters, Senator Micheal Opeyemi Bamidele ( APC Ekiti Central), kicked against the deduction during debate on general principles of the revised 2020 Appropriation bill .

Senator Bamidele in kicking against the proposal said the earlier votes of N110billion given the Judiciary was not in any way, enough to drive efficiency within the arm of government, let alone , N99billion it is reduced to now.

” Many of the courts have no airconditioners and functional public address system which were expected to be procured through the earlier approved votes.
” I most humbly submit very strongly that the N110billion approved for the arm of government should be retained in the revised proposal if it cannot be increased “, he said .

Senator Mathew Urhoghide ( PDP Edo South) called for caution on the increased external loans taking as according to him, the latest move, has jerked up debt serving for the 2020 fiscal year from N2.4trillion to N3trillion.

He also called for specifics on proposed N213.5billion COVID-19 intervention fund in knowing exact amounts to be expended on what and what.

” Lumping an intervention fund together in a budgetary proposal like this is not good as far as issues of transparency and accountability are concerned.

” The relevant committee that will later interface with officials from the executive arm of government should ensure that this is done for the purposes of effective and efficient oversights later by the National Assembly “, he said.

Earlier in his lead debate on the revised appropriation bill, the Senate Leader, Senator Yahaya Abdullahi ( APC Kebbi North), most of the assumptions underpinning the 2020 FGN Budget have had to be revised in the face of current realities, as Nigeria is vulnerable to the current global economic disruption caused by the Covid-19 crisis which has led to decline in Crude-oil prices and spikes in risk aversion in the global capital markets.

He said : Prior to the outbreak of Covid-19 Pandemic, the Nigerian economy had been characterized by wavering external sector and improving internal economic indicators. Over-dependence on oil revenue, constrained fiscal space, low foreign and domestic investments and declining foreign reserves made the economy disproportionately vulnerable to the twin shocks of crude oil price/production collapse and a health crisis affecting negatively the informal sector which accounts for over half of the Nigeria’s GDP.

“Following the revision of key macroeconomic parameter, projected oil revenues for 2020 have been significantly reduced. Adjusted downwards also are non-oil revenue projections, including various tax and customs receipts. Additionally, the First-Line deductions by NNPC for Federally Funded Upstream Projects/Expenditures have been significantly reduced by 65% from N1.223 trillion to N424.23 billion.

“These cuts include the removal of N457.50 billion provision for premium motor spirit (PMS) under-recovery, With the re-introduction of a Price Modulation Mechanism (tied to international price movement) as the basis for pricing PMS going forward.

“The aggregate revenue available to fund the 2020 budget is now projected at N5.09 trillion (35% or N2.78 trillion less than 2020 Budget passed by National Assembly). 26% of this projected to come from oil-related sources while the balance is to be earned from non-oil sources.

” The provision of Stamp Duty was reduced to N200 billion from N463.95 billion, while Signature Bonus is down to N350.52 billion from N939.30 billion. With the retained revenues of the ten major Government-Owned Enterprises (GOES), the aggregate FGN revenue is projected at N5.56 trillion.

“The 2020 Appropriation Act (Amendment) Bill is now predicated on Oil production of 1.93 million barrels per day and a benchmark oil price of $25dollar per barrel.

“The official exchange rate has also been adjusted upwards to N360/ US$1 by the Central Bank of Nigeria (CBN). At the Importers and Exporters Foreign Exchange (IEFX) window, where the bulk of foreign exchange transactions are consummated, the exchange rate recently depreciated from about N360/ US$1 in January 2020 to over N385/US$1”.

Virtually all the Senators who contributed to the debate like Ibrahim Yahaya Oloriegbe ( APC Kwara Central), Adamu Aliero ( APC Kebbi Central ), Lillian Uche Ekwunife ( PDP Anambra Central), Albert Bassey Akpan ( PDP Akwa Ibom North-East) etc, said the revised appropriation bill was in order.

In his remarks, the Senate President, Ahmad Lawan, directed the Committee on Appropriation along with Finance to work on it and the MTEF)FSP paper between now and Tuesday next week.