Emeka Okoroanyanwu
Last week Thursday, President Muhamadu Buhari unfurled a 2021 conservative appropriation of N13.08 trillion with an alarming deficit of N5.2 trillion or 3.4 per cent of the country’s GDP.
And to fund the deficit, the Federal Government will have to borrow about N4.28 trillion, thus compounding the nation’s debt woes estimated at about N38 trillion as at December last year. Buhari said N205.15 billion of the amount will be sourced from privatization proceeds, indicating that the Federal government is bent on going ahead with the planned sales of some government assets next year.
Another area government plans to source for funds for the budget are drawdowns of N709.69 billion from multilateral and bilateral loans secured for specific projects and programmes.
Government, according to President Buhari in an address to a joint session of the National Assembly, would utilize N3.12 trillion to service existing debt. This represents 23.85 per cent of the total budget. This year, N2.68 trillion was set aside for debt servicing.
Buhari disclosed that N2.183 trillion of the amount would be dedicated to the service of domestic debts while N940.89 billion would go for foreign debts and another N220 billion moved into a Sinking Fund to pay off maturing bonds issued to local creditors and contractors.
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Other highlights of the budget, according to the president, who announced that the Nigerian economy may soon relapse into another recession, was a projection of N3.85 trillion or 29.43 per cent for capital expenditure while personnel costs would gulp N3.76 trillion or 28.75 per cent.
Buhari informed the NASS that the budget was predicated on daily crude production output of 1.86 million and oil benchmark of $40 per barrel.
Tagged, “Budget of Economic Recovery and Resilience,’ Buhari said the document “was prepared amidst a challenging global and domestic environment due to the persistent headwinds from the Coronavirus pandemic, the resulting global economic recession, low oil prices and heightened global economic uncertainty.”
He said: “The Nigerian economy is currently facing serious challenges, with the macroeconomic environment being significantly disrupted by the coronavirus pandemic. Real gross domestic product (GDP) growth declined by 6.1 per cent in the second quarter of 2020. This ended the 3-year trend of positive, but modest, real GDP growth recorded since the second quarter of 2017. I am glad to note that, through our collective efforts, our economy performed relatively better than that of many other developed and emerging economies.”
He said GDP growth is projected to be negative in the third quarter of this year and as such, “our economy may lapse into the second recession in four years, with significant adverse consequences. However, we are working assiduously to ensure a rapid recovery in 2021. We remain committed to implementing programmes to lift 100 million Nigerians out of poverty over the next 10 years.”
President Buhari said the 2021 budget was designed to further deliver on the goals of the country’s Economic Sustainability Plan. The plan, he noted, provides road map for post Coronavirus economic recovery as a transitional plan to take the country from the Economic Recovery and Growth Plan (2017 – 2020) to the successor Medium Term National Development Plan (2021 – 2025).
“In view of the many challenges confronting us, we must accelerate our economic recovery process, promote social inclusion and strengthen the resilience of the economy. The 2021 Appropriation has, therefore, been themed the ‘Budget of Economic Recovery and Resilience’. It is expected to accelerate the pace of our economic recovery, promote economic diversification, enhance competitiveness and ensure social inclusion,” Buhari said.
The president noted that the 2021 – 2023 Medium Term Expenditure Framework and Fiscal Strategy Paper set out the parameters for the 2021 Budget, which 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 percent and inflation closing at 11.95 percent.
Giving a breakdown of the budget, Buhari said federally distributable revenue is estimated at N8.433 trillion in 2021. Total revenue available to fund the 2021 Federal Budget, he said, is estimated at N7.886 trillion. This includes grants and aid of N354.85 billion as well as the revenues of 60 government-owned enterprises. Oil revenue is projected at N2.01 trillion while non-oil revenue is estimated at N1.49 trillion.
The president proposed an aggregate expenditure of N13.08 trillion for the Federal Government in 2021. This includes N1.35 trillion for government owned enterprises and grants and aid funded expenditures of N354.85 billion.
And for the year 2021, the proposed N13.08 trillion expenditure comprises of a non-debt recurrent costs of N5.65 trillion; personnel costs of N3.76 trillion; pensions, gratuities and retirees’ benefits of N501.19 billion; overheads of N625.50 billion; debt service of N3.124 trillion; statutory transfers of N484.49 billion; and Sinking Fund of N220 billion, to retire certain maturing bonds.
The president said the sum of N484.49 billion provided for statutory transfers in the 2021 Budget represents an increase of N56.46 billion (or 13 percent) over the revised 2020 provision. The provisions are for the Niger Delta Development Commission (NDDC) which gets N63.51 billion; North East Development Commission, N29.70 billion; National Judicial Council, N110.00 billion; Universal Basic Education Commission, N70.05 billion and Independent National Electoral Commission, N40.00 billion.
Others are National Assembly – N128.00 billion; Public Complaints Commission – N5.20 billion; Human Rights Commission – N3.00 billion; and Basic Health Care Provision Fund – N35.03 billion.
The president warned that in compliance with the Fiscal Responsibility Act 2007, all beneficiaries of statutory transfers will be required to provide the Budget Office of the federation with periodic reports on the allocation and expenditure of funds for inclusion in the quarterly Budget Implementation Report.
Buhari said “in our efforts 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 the 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.
Personnel cost, the president noted “is still our largest single item of expenditure. In the seven months to 31st July 2020, it accounted for 34 percent of total Federal Government spending and is projected at 33 percent of 2021 expenditure.”
On debt service, the president said Nigeria remains committed to meeting its debt service obligations, adding “we have provisioned N3.12 trillion for this in 2021, representing an increase of N445.57 billion from N2.68 trillion in 2020. 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. N220 billion is provided for transfers to the Sinking Fund to pay off maturing bonds issued to local contractors and creditors.
The government projected that total overhead costs of MDAs and government owned enterprises would rise to N625.50 billion in 2021, mainly due to the inclusion of the overheads of an additional 50 government owned enterprises.
The president said overhead 11 provisions have also been made for newly created agencies and to keep a tab on running costs, MDAs, he warned, must adhere to extant expenditure controls.
On capital expenditure, Buhari said an aggregate sum of N3.85 trillion is expected to be available for capital projects in 2021 and to be disbursed in the following order; N1.80 trillion for MDAs’ capital expenditure; N745 billion for capital supplementation; N355 billion for Grants and Aid-funded projects; N20 billion for the Family Homes Fund; N25 billion for the Nigeria Youth Investment Fund; N336 billion for 60 government owned enterprises; N247 billion for capital component of statutory transfers; and N710 billion for projects funded by Multi-lateral and Bi-lateral loans.
The president said capital expenditure in 2021 remains focused on the completion of as many ongoing projects as possible, rather than the commencement of new ones. “We have also made efforts to ensure equity in the distribution of projects and programmes in the proposed budget. I will be providing the National Assembly a list of some of the most critical projects which we must work collectively to ensure they receive adequate funding. Until projects reach completion, they do not deliver the dividends of democracy that Nigerians rightly deserve,” he noted.
The capital spending allocations in the 2021 budget include power, N198 billion (inclusive of N150 billion for the power sector recovery plan); works and housing, N404 billion; transportation, N256 billion; defence, N121 billion; agriculture and rural development, N110 billion; water resources: N153 billion and industry, trade and investment, N51 billion
Others are education, N127 billion; Universal Basic Education Commission, N70 billion; health, N132 billion; zonal intervention projects: N100 billion; and Niger Delta Development Commission, N64 billion.
The president noted that the main thrust of next year’s capital spending programme was the completion of as many as 15 ongoing projects as possible across the country.
Some Nigerians have, however, reacted to the budget presented by the president. Socio-Economic Rights And Accountability Project (SERAP) described the budget presented to the National Assembly as a ‘travesty’ and urged the Senate president Ahmad Lawan and House of Representatives Speaker, Femi Gbajabiamila “to urgently push to cut the N128bn budget for the National Assembly in 2021.”
It said, “The National Assembly ought to prioritise spending for education and healthcare. We’ll see in court if our lawmakers approve this money for themselves,” SERAP tweeted.
But Chief Executive of Financial Derivatives Company, Bismarck Rewane praised the budget saying it is conservative and likely to achieve its purpose, expressing concerns over releases by the government.
For the Director General of the Lagos Chamber of Commerce and Industry, LCCI, Dr Muda Yusuf, expressed concern over the revenue projections saying it could lead to large deficit. He, however, praised Buhari for early presentation of the budget to the NASS.
The ruling All Progressives Congress, APC in a statement hailed the budget, noting it was in tandem with the party’s vision for Nigeria, saying it was achievable. But the Peoples Democratic Party (PDP) dismissed the bill saying it was unrealistic. Deputy Minority Leader for PDP in the House of Representatives, Toby Okechukwu said the proposed N13.08trillion budget was not different from last years, noting that while the size was increased, the value of the naira to the dollar has fallen.
