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Buhari: Nigeria’s economy facing serious challenges

…relapsed into recession in Q3
…proposes N13.08trn 2021 budget

President Muhammadu Buhari has acknowledged that the Nigerian economy currently faces serious challenges following the significant disruption of the macroeconomic environment by the coronavirus pandemic.

The President, who stated this while presenting the 2021 Appropriation Bill to a joint session of the National Assembly, yesterday, disclosed that real Gross Domestic Product (GDP) growth declined by 6.1 per cent in the second quarter of this year and ended a three-year trend of modest positive growth that began since the second quarter of 2017.

Buhari said that going by expert analysis of the situation, the GDP growth was also in the negative in the third quarter of the year, which implied that the economy technically relapsed into another recession, the second round in four years.

The 2021 Appropriation Bill, he said, was prepared amidst a challenging global economic recession, low oil prices and heightened global economic uncertainty which also had important implications for the Nigerian economy.

The bill, tagged ‘Budget of Economic Recovery and Resilience’, is predicated on a benchmark oil price of $40 per barrel; daily oil production estimate of 1.86 million barrels (inclusive of Condensates of 300,000 to 400,000 barrels per day); an exchange rate of N379 per dollar; and GDP growth projected at 3.0 per cent and inflation closing at 11.95 per cent.

Buhari said that based on the foregoing fiscal assumptions and parameters, total federally distributable revenue for 2021 fiscal year has been pegged at N8.433 trillion, while total revenue available to fund the budget is estimated at N7.886 trillion. This, he explained, included Grants and Aid of N354.85 billion as well as the revenues of 60 Government- Owned Enterprises.

In the same vein, revenue accruable from oil is projected at N2.01 trillion while non-oil revenue is estimated at N1.49 trillion. He said that the format of the 2021 Appropriation Bill has been modified to include budgeted revenues, no matter how small, for each Ministry Department and Agency (MDA) to focus on internal revenue generation. The Federal Government has also proposed an aggregate expenditure of N13.08 trillion in 2021.

This includes N1.35 trillion spending by Government- Owned Enterprises and Grants and Aid funded expenditures of N354.85 billion. A glance at the bill showed that the proposed N13.08 trillion expenditure comprises: 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. However, the 2021 Budget deficit (inclusive of Government Owned Enterprises and project-tied loans), is projected at N5.20 trillion, which represents 3.64 percent of estimated GDP, slightly above the 3 per cent threshold set by the Fiscal Responsibility Act, 2007.

The deficit will be financed by new borrowings totalling N4.28 trillion, N205.15 billion from privatization proceeds while N709.69 billion is expected from drawdowns on multilateral and bilateral loans.

“It is, however, to be noted that we still face the existential challenge of Coronavirus pandemic and its aftermath; I believe that this provides a justification to exceed the threshold as provided for by this law.

The deficit will be financed mainly by new borrowings totalling N4.28 trillion, N205.15 billion from privatization proceeds and N709.69 billion in drawdowns on multilateral and bilateral loans secured for specific projects and programmes,” he said.

The Federal Government has also made available the sum of N484.49 billion for Statutory Transfers in the 2021 Budget, which represents an increase of N56.46 billion (or 13 per cent) over the revised 2020 provision.

The Statutory Transfer provisions are as follows: Niger Delta Development Commission – N63.51 billion; North East Development Commission – N29.70 billion; National Judicial Council – N110.00 billion; Universal Basic Education Commission – N70.05 billion; Independent National Electoral Commission – N40.00 billion; 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 explained 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. He disclosed that a major part of the 2021 recurrent cost estimate is allocated to paying salaries and overheads in MDAs who provide critical public services to the people.

Highlights of the sectoral allocations for recurrent expenditure include: N227.02 billion for the Ministry of Interior; N441.39 billion for the Ministry of Po-lice 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 is still our largest single item of expenditure.

In the seven months to 31st July 2020, it accounted for 34 per cent of total Federal Government spending and is projected at 33 per cent of 2021 expenditure. To check the incidence of payments to non-existent personnel and unauthorized allowances, only federal staff that have been captured on the Integrated Personnel Payroll Information System (‘IPPIS’) platform will receive salaries. All agencies have been directed to ensure that they obtain all necessary approvals before embarking on any fresh recruitment.

Any breach of these directives will be severely sanctioned. “We remain committed to meeting our debt service obligations. Hence, 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,” he said.

The President said that an aggregate sum of N3.85 trillion is expected to be available for capital projects in 2021. However, he noted, capital expenditure in the coming year will remain 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 on collectively to ensure they receive adequate funding. Until projects reach completion, they do not deliver the dividends of democracy that Nigerians rightly deserve,” he said.

Highlights of the capital projects targeted 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; Industry, Trade and Investment: N51 billion; Education: N127 billion; Universal Basic Education Commission: N70 billion; Health: N132 billion; Zonal Intervention Projects: N100 billion; and Niger Delta Development Commission: N64 billion.

Some of the key projects for implementation in the Power sector include an unspecified number of Rural Electrification Projects in the 36 states and Abuja, Rural Electrification Access Programme in Federal Universities, the Kaduna LPFO Gas Fired-power Plant, the Mambilla Hydro Power Project and the Zungeru Hydropower Project. In the Ministry of Transportation, the budget has earmarked funds for projects such as the Lagos-Ibadan-Kano Line, Abuja-Kaduna Line, Port Harcourt-Maiduguri Line and Itakpe-Ajaokuta-Warri Line.

In a bid to maintain the peace in the Niger Delta region for economic and social activities to thrive, the provision of N65 billion for the Presidential Amnesty Programme has been retained in the 2021 Budget. In addition, the sum of N63.51 billion has been appropriated for the Niger Delta Development Commission and N24.27 billion has been provided for the capital projects of the Ministry of Niger Delta Affairs.

These allocations, the President said, would further support the development of the region by facilitating the completion of important ongoing projects, such as the East-West Road. On Government Fiscal Strategy in 2021, Buhari said: “The new petrol pricing regime has freed up resources that was allocated to subsidise petroleum products. Similarly, the ongoing IPPIS verification exercise has closed gaps that encourage ghost workers or pensioners.

The service reflective electricity tariffs will help resolve liquidity crisis in the power sector and make the sector attractive to foreign investment. These reforms have released trillions of naira for allocation to other priority areas,” he said. Buhari urged the lawmakers to promptly consider and pass the Petroleum Industry Bill into law as the enactment of the Bill will boost investors’ confidence and attract further investments into the oil and gas sector, as well as increase revenues accruing to the country.

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