Nigeria to spend N11trillion in 2020

The Federal government rolls out the 2020 budget amidst stifling economic hardship by the people.


Nigeria is having its biggest budget ever since it gained independence in 1960. The federal government is going to spend 11 trillion Naira in the New Year making it the biggest in the nation’s history. It is about 3trillion Naira more than what was budgeted in 2019 (N8.92trillion). The early passage of the budget is expected to make the Nation’s financial system to revert to begin from January-December instead of the hiccups usually experienced with late budget passages. The Senate by early December passed the 2020 budget, approving NI0.59 trillion as aggregate expenditure. The approved figure is N263.946 billion higher than the N10.330 trillion presented to the National Assembly for consideration and approval by President Muhammadu Buhari in October.

A breakdown of the budget figure as approved by the Senate indicates N560. 4 billion for statutory transfers, N4.84 trillion for recurrent expenditure, capital expenditure provision of N2.46 trillion and N2.72 trillion for debt servicing. The fiscal deficit of the budget is N2.28 trillion while the deficit to Gross Domestic Product (GDP) ratio is 1.52 per cent. In the approved budget, defence got the highest vote for recurrent expenditure with N784, 589 billion. It also got the highest vote of N116.181 billion for capital expenditure. The education sector got the second highest recurrent expenditure of N490.303 billion as well as N84.728 billion for capital expenditure. Works and housing sector got the highest capital expenditure vote of N315, 563 billion in addition to its N27.983 billion recurrent expenditure.

Key assumptions and parameters upon which the 2020 budget was based include crude oil production of 2.18 mbpd, while the benchmark oil price is $57. According to the budget document, the GDP growth rate is projected at 2.93 per cent while inflation rate is put at 10.81 per cent. The budget is also based on an exchange rate of N305 per United States dollar. When President Buhari presented the 2020 budget proposal to the joint session of the National Assembly in October, he stated: “The expenditure estimate includes statutory transfers of N556.7 billion, non-debt recurrent expenditure of N4.88 trillion and N2.14 trillion for capital expenditure (excluding the capital component of statutory transfers).”He had also proposed N2.45 trillion for debt service, and sinking fund to retire maturing bonds issued to local contractors was voted N296 billion.

Before the passage of the budget, former Deputy President of the Senate, Ike Ekweremadu, drew attention to the ravaging problems of poverty and unemployment in the country, pointing out that the diligent execution of budgets would be helpful in resolving the challenges. Fatai Buhari (APC, Oyo State) stated: “We must take oversight duties very seriously to ensure that the gains recorded in passing this budget timely are actualized.” Bassey Akpan (PDP, Akwa Ibom) said President Buhari had no business to fail because “we passed this budget in time and we have amended all laws to ensure improved revenue base. So all the committees must go to work to ensure that revenues expected are realized.”

In the House of Representatives, the lawmakers also passed the 2020 budget to the tune of N10, 594,362, 364,830 trillion. The decision followed the adoption of the report of the appropriation committee submitted by the chairman, Mr. Muktar Betara, at the plenary presided over by Speaker Femi Gbajabiamila. Highlights of the bill showed an addition of over N260 billion to the N10.33 trillion proposed by President Buhari. A breakdown of the bill shows that N560.47 billion is for statutory transfers, N2.72trillion is for debt service, N4.84 trillion is for recurrent (non-debt) expenditure while N2.46trillion is for contribution to the development fund for capital expenditure for the period starting 1st of January to 31st of December 2020.

The federal ministries of works and housing, power as well as agriculture and rural development and defence got the lion share of N315.56billion, N129.08 billion, N124.39 billion and N116.18billion.A further breakdown of the statutory transfers shows allocation of funds as follows: National Judicial Council N110billion, Niger-Delta Development Commission (NDDC) N80.8billion and Universal Basic Education (UBE) N111.7billion, National Assembly N128billion, Public Complaints’ Commission N4.7billion, Independent National Electoral Commission (INEC) N40billion, National Human Rights Commission N2.5billion, North East Development Commission N38. 49 billion, and the Basic Health Care Fund N44. 49billion.Termed the “Budget of Sustaining Growth and Job Creation”, the 2020 budget proposal of N10.33 trillion is comprised of: Statutory transfers – N556.7 billion; Debt service – N2.45 trillion; Sinking fund – N296 billion to retire certain maturing bonds issued to local contractors; Non-debt recurrent expenditure – N4.88 trillion; and Capital expenditure – N2.14 trillion It is also premised on the following assumptions: Oil benchmark price: $57 per barrel Oil production: 2.18million bpd Exchange rate: N305/$1 Oil Revenue: N2.64 trillion Non-Oil Revenue N1.81 trillion and other revenues of N3.7 trillion. This figure according to the budget speech is 7 percent higher than the 2019 comparative estimate of N7.594 trillion that was passed. A breakdown of the sum of N556.7 billion provided for Statutory Transfers in the 2020 Budget includes the following: N125 billion for the National Assembly; N110 billion for the Judiciary; N37.83 billion for the North East Development Commission (NEDC); N44.5 billion for the Basic Health Care Provision Fund (BHCPF); N111.79 billion for the Universal Basic Education Commission (UBEC); and N80.88 billion for the Niger Delta Development Commission (NDDC), which is now supervised by the Ministry of Niger Delta Affairs.

Earlier, the President also noted that the budgetary allocation to the National Human Rights Commission had been increased from N1.5 billion that was approved in the 2019 budget to N2.5 billion in the 2020 budget to enable the Commission perform its functions more effectively. This represents a 67% increase in funding. Performance of the 2019 Budget Speaking about the 2019 Budget performance, the President stated that the “Budget of Continuity” was based on a benchmark oil price of US$60 per barrel, oil production of 2.3 million barrels per day and an exchange rate of N305 to the Dollar. Thus, based on these parameters, it had projected a deficit of N1.918 trillion or 1.37 percent of Gross Domestic Product. However, as of June 2019, Federal Government’s actual aggregate revenue (excluding Government-Owned Enterprises) was N2.04 trillion with a revenue performance of only 58 percent of the 2019 Budget’s target due to the under performance of both oil and non-oil revenue sources. In other words, oil revenues were below target by 49 percent as at June 2019 with lower-than-projected oil production, deductions for cost under-recovery on supply of premium motor spirit (PMS) as well as higher expenditures on pipeline security/maintenance and frontier exploration.

He also stated that daily oil production averaged 1.86 mbpd as at June 2019, as against the estimated 2.3 mbpd that was assumed. However, the shortfall was partly offset as the market price of Bonny Light crude oil averaged US$67.20 per barrel which was higher than the benchmark price of US$60. Nonetheless, revenue projections from restructuring of Joint Venture Oil and Gas assets and enactment of new fiscal terms for Production Sharing Contracts did not materialise, as the enabling legislation for these reforms is yet to be passed into law. President Buhari also gave a bleak view of the performance of non-oil taxes and independent revenues as well as receipts from Value Added Tax which were below expectations due to lower levels of activities in certain economic sectors after the holding of the general elections in March, 2019. He stated that corporate taxes were also affected by the seasonality of collections which tend to peak in the second half of the calendar year.

In addition, he attributed some failures in the 2019 Budget implementation to the delay in the approval and under performance of revenue collections. As such, only recurrent expenditure items have been implemented substantially. For instance, of the prorated expenditure of N4.46 trillion budgeted, only N3.39 trillion had been spent by June 30, 2019 with capital releases under the 2019 Budget commencing in the third quarter. Following this, as at 30th September 2019, a total of about N294.63 billion had been released for capital projects with a further direction given to the Ministry of Finance, Budget and National Planning to release an additional N600 billion of the 2019 capital budget by the end of the year.

Despite the delay in capital releases, a deficit of N1.35 trillion was recorded at the end of June 2019 which represents 70 percent of the budgeted deficit for the full year. The President however reassured that despite the anomalies, Nigeria has been able to meet its debt service obligations with staff salaries and overhead costs being largely covered. Following the President’s budget address in October, the Speaker, Hon. Femi Gbajabiamila ended the ceremony with a vote of thanks lauding the President for fulfilling his constitutional obligation timeously. Some highlights of the Speaker’s remarks admitted that there were flaws in the process of passage and implementation of Nigeria’s annual budgets. He stated that while some of the challenges were structural, others were a function of negligence in adhering to procedure.

He however promised that the 9th Assembly had resolved to improve on these imperfections and leave a legacy of budgets that are enacted without rancour and achieve the objectives of national development for which they are intended. The Speaker further mentioned that the National Assembly fully intended to return to a January to December budget cycle and put an end to the policy instability and economic uncertainty that characterized an unpredictable budget cycle. The goal of presenting the 2020 Appropriation Act early to the lawmakers was done so it can come into effect on January 1, 2020.

He also stated that the main emphasis of the budget is on the completion of many ongoing infrastructure projects, instead of starting new ones. Minister of Finance, Budget and National Planning, Zainab Ahmed, said the 2020 national budget would consolidate on the achievements of 2019 and 2018 budgets. She said the federal government intends to leverage on private capital and counterpart funding for the delivery of infrastructural projects.