Dwindling oil production output, weak revenue generation, huge debt servicing cost are some of the indices, threatening the N10. 33 trillion 2020 Budget presented by President Muhammadu Buhari to a joint sitting of the National assembly on the 8th of October, 2019, Babajide Okeowo writes.
“Nigeria is broke and needs to do something fast,” is the damning statement by Head of Tax and Regulatory Services at PricewaterhouseCoopers, Taiwo Oyedele on the economic state of the country.
He is not alone. Many economics experts and different stakeholders have continued to pick holes in the 2020 budget estimates.
For example, the government is proposing an oil production output of 2.18mbpd while the country’s current oil output stands at 1.69mbpd. Similarly, the Minister of State for Petroleum, Timipriye Sylva, recently stated that Nigeria is fully committed to complying with the Organisation of the Petroleum Exporting Countries, OPEC’s new production quota of 1.774mbpd. This amounts to over projection on the output expected to fund the budget and a far cry from the situation on the ground.
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Similarly, the issue of revenue expected to be generated to fund the budget is still an issue that stakeholders believe will hamper the execution of the 2020 budget. The Federal Government is projecting a revenue generation of N8.15trillion to fund the budget. The proposed revenue is expected to be financed by, among others, the additional revenue that would be derived from a proposed increase in the Value Added Tax (VAT) rate from 5% to 7.5%, the balance is expected to be sourced from loans, which will further increase the debt servicing headache of the country.
According to the Lead Director, Centre for Social Justice, Eze Onyekpere, in an earlier interview attributed the quest of Federal Government to raise over N8tr in revenue as akin to building castles in the air.
“The government is expecting revenue of almost N8tn while the balance will come from deficit funding. If you look at what was generated in 2018, we had full revenue figure, it was not up to N4tn. Now we are expecting over N8tn. Where is the money going to come from? We may end up building castles in the air,” he said.
On his part, Oyedele believes if the pattern of 2019 repeats itself, getting the required revenue to fund the budget will be a mirage.
“If you take a look at the first-half performance of the 2019 budget, the expected collection from non-oil revenue was down by almost thirty per cent while revenue from oil went up by 5 per cent, which is not enough to offset the decline,” he said.
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Oyedele also believed that the rising cost of debt servicing will hamper the performance of the budget.
“In terms of expenditure, the government has spent 30 per cent more than it budgeted for and has not spent a dime on capital project. When you put all these together, you will see that the deficit has gone up including the cost of servicing our debts which has also gone up. Even from the Medium Term Expenditure Framework, MTEF, the projection for the next three years show that the country’s debt is still going to keep rising because the deficit is still going to be around N2tr for each of those three years” he said.
In all, it is left to be seen how the above-mentioned factors will play a role in the performance or otherwise of the 2020 budget.
Highlights of the budget
Projected Federal Government Revenue: N8.15trillion.
Oil Price Benchmark: $57
Crude Production Output: 2.18mbpd
Capital Expenditure: N2.14tn
Exchange rate: N305/$1
