“Budget of Sustaining Growth and Job Creation” is the year 2020 executive budget proposal that President Mohammadu Buhari presented to joint session of the National Assembly, Abuja on Tuesday, October 8, 2019.
When the President signed the 2020 Appropriation Act on December 17, 2019, the N10.59 trillion Budget consisted of N4.84 trillion recurrent expenditure, N2.46 trillion capital expenditure, N2.72 trillion for debt servicing, N2.28 trillion for fiscal deficit and deficit-to-Gross Domestic Product (GDP) ratio of 1.52 per cent. The Appropriation Act was also predicated on projections of crude oil production of 2.18 million barrels per day, oil benchmark of $57, exchange rate of N305 to the dollar, gross domestic product (GDP) growth rate of 2.93 per cent, inflation rate of 10.81 per cent and the statutory transfer of N556.7 billion. The sum of N8.155 trillion is estimated as the total Federal Government revenue in 2020 comprises oil revenue N2.64 trillion, non-oil tax revenues of N1.81 trillion and other revenues of N3.7 trillion.
This is 7 percent higher than the 2019 comparative estimate of N7.594 trillion inclusive of the Government Owned Enterprises. According to President Buhari “investing in critical infrastructure is a key component of our fiscal strategy under the 2020 Budget Proposals. An aggregate sum of N2.46 trillion (inclusive of N318.06 billion in statutory transfers) is proposed for capital projects in 2020”.
Although the 2020 capital budget is N721.33 billion (or 23 percent) lower than the 2019 budget provision of N3.18 trillion, it is still higher than the actual and projected capital expenditure outturns for both the 2018 and 2019 fiscal years, respectively. Indeed, at 24 percent of aggregate projected expenditure, the 2020 provision falls significantly short of the 30 percent target in the Economic Recovery and Growth Plan (ERGP) 2017-2020. Budget deficit is projected to be N2.18 trillion in 2020. This includes draw downs on project-tied loans and the related capital expenditure. This represents 1.52 percent of estimated GDP, well below the 3 percent threshold set by the Fiscal Responsibility Act of 2007, and in line with the ERGP target of 1.96 percent.
The deficit will be financed by new foreign and domestic borrowings, Privatization Proceeds, signature bonuses and draw downs on the loans secured for specific development projects. In terms of debt servicing which has become one of this administration big criticism.2020 budgets, provide the sum of N2.45 trillion for debt service. Of this amount, 71 percent is to service domestic debt which accounts for about 68 percent of the total debt. The sum of N296 billion is provided for the Sinking Fund to retire maturing bonds issued to local contractors.
However, following the global oil prices crash and impact of the pandemic, the Nigerian government has amended the 2020 Appropriation Act to reflect the current economic realities as a result of the impact of the Coronavirus pandemic on the global economy. And the revised is now N10.810 trillion as passed by the National Assembly. According to The Minister of Finance, Budget and National Planning, Zainab Ahmed, that with the “coronavirus pandemic triggering a global economic crisis, the fiscal assumptions behind the budget is no longer realistic. Since the outbreak of the coronavirus, growth in most economies has gone into reverse, with the worst impact felt by commodities-dependent economies like Nigeria, following unprecedented decline in crude oil prices”.
The Nigerian government said due to Brent crude oil price crashed to an all-time low of $19.125 per barrel as at Friday, April 3, 2020, while oil production in 2020 year-to-date has dropped significantly below 2.0 million barrels per day.”
Because the 2020 Appropriation Act was based on certain fiscal assumptions, we have been compelled to revisit them given the emerging economic realities, “Accordingly, the projected oil revenues significantly affected, government has been compelled to revise the benchmark oil price for 2020 to $30 per barrel and oil production to 1.7 million barrels per day.