*To deduct states' N614bn bailout from FAAC allocations
*Workers to forfeit salaries over non-enrolment in IPPIS
The federal government on Tuesday unveiled the draft
2020-2022 Medium Term Fiscal Framework (MTEF) and Fiscal Strategy Paper (FSP)
with a projected total budget of N9,789,243.466 for 2020.
It expressed concern that the country faces significant
medium-term fiscal challenges, especially with respect to revenue generation
and rapid growth in personnel costs.
The total budget (excluding that of government-owned
enterprises--GOEs) is N8.907, 940,657.001.
The Minister of Finance, Budget and National Planning, Mrs.
Zainab Ahmed, who unveiled the 2020-2022 Medium Term MTEF/FSP which guides
government's fiscal plan, in Abuja, Tuesday, disclosed that the 2020 budget is
predicated on certain key assumptions, including oil production of 2.18 million
barrels per day (mbpd), a benchmark oil price of $55 per barrel, an exchange
rate of N305 per dollar, and projected revenue of N7.6 trillion.
It is also to be based on an inflation rate of 10.81 per
cent, 2.93 per cent gross domestic product (GDP) growth rate and nominal GDP of
N142.96 trillion
While the 2019 Budget is predicated on 2.3mbpd oil
production and $60 per barrel benchmark, that of 2020 will have a lower daily
oil production target and benchmark oil price.
Explaining, the minister said: “Oil production volume is
projected to average 2.18mbpd for 2020. Although this is lower than the
projected oil production volume of 2.3mbpd for 2019, we believe that this is a
more realistic projection. For 2021 and 2022, the projections are 2.22mbpd and
2.36mbpd respectively
"Actual daily crude oil production and exports have
been well below budget projections since 2013 despite the installed capacity of up
to 2.5mbpd, for a number of reasons. For 2018, actual production.was 1 84mbpd
and for the first half of 2019, it was 1.86mbpd (base production).
"A lower benchmark oil price of $55/b (against $60/b
for 2019) is assumed considering the expected oil glut in 2020 as well as the
need to cushion against unexpected price shock."
According ro her, there are strong indications of the oversupplied market in 2020, adding that all three of the major forecasters--
the Organisation of Petroleum Exporting Countries (OPEC), International Energy
Association (IEA) generally see non-OPEC production growing by around 2mbpd in
2019 and even more in 2020.
Giving more highlights on the 2020 budget proposals, the minister
put personnel cost (inclusive of pension costs) at over N3 trillion has
continued to rise.
She noted that the federal government was however taking
steps to contain the rising personnel costs, noting that all ministries,
departments and agencies (MDAs) that are not hooked on the Integrated Payroll
and Personnel Information Systems ((IPPIS)) will have their staff salaries
stopped at the end of October,
Giving details of the 2020 budget proposals, Ahmed put the
total revenue target at N7.6
trillion compared to the 2019 revenue figure of N7.
5 trillion.
The 2020 budget's capital expenditure will also decline from
32 per cent (N2.9 trillion) in 2019 to 21 per cent (N1.7 trillion) in the 2020 budget.
She also hinted that in 2020, the deficit is projected at N1.7
billion to be financed from domestic and foreign borrowing shared equally at
N850 billion apiece.
Details of the 2020-2022 (MTEF/FSP also indicate that
capital expenditure will witness successive cuts for the three-year period to
N1.76 trillion, N1.70 trillion and N1.68 respectively.
On the other hand, recurrent expenditure is expected to
increase from N4.3 trillion in 2019 to N4.7 trillion in 2020.
The minister listed sources of additional revenue financing
for 2020 budget proposal to include privatisation proceeds of N126.5 billion as
against N2010 billion in 2019; multilateral /bi-lateral projects tied to
loans--N328.1 billion compared to the 2019 figure of N92.8 billion; new
borrowings N1.7 trillion as against N1.6 trillion comprising domestic and
foreign borrowing..
On expenditure, the federal government proposed statutory transfer stands at N526.4 billion
2020 as against N502 trillion figure of 2019, debt service of N2.4 trillion as
against N2.1 trillion in 2019 and a
sinking fund of N296 billion compared to
the 2019 figure of N110 billion.
The federal government
is also proposing a recurrent (non-debt) of N4.7 trillion compared
to N4.3 trillion in 2019.
Of the amount, personnel cost(MDAs) is proposed at N2.6 trillion compared to N2.2 trillion in 2019.
The personnel costs
of GOEs is put N218.8 billion as against
N160.5 billion in 2019 while overheads for MDAs is N280.2 billion compared to
N268.1 billion in 2019.
Pensions, gratuities and retirees benefits are to gulp N
536.7 billion as against N528 billion provided in 2019.
The minister noted that the creation of five new ministries
would shoot up recurrent expenditure in 2020 due to personnel cost and
overheads.
On waiver and tax incentives, the minister said the government
was bothered about increasing waiver requests, adding that there would be a review, going forward.
"We agree from the finance side that we have too many
incentives and too many waivers. But our partners in the trade will not
necessarily agree with us. We also agree that there has to be a review of the
Pioneer Status certificate issuance process because the waivers and the
incentives are really costing us a lot.
"But when a decision has been made and approvals have
been given, and a private business makes an investment decision based on those
incentives, you can’t pull it out overnight. So, there has to be a period
within which the commitments that have been made are allowed to exit before you
impose new conditions. But we are currently reviewing the quantum of waivers,"
Ahmed stated.
On the N614 billion bailout fund, which the federal government advanced to the states in 2016 as budget support facility, the minister said deductions would be made from source during the next Federation
Account Allocation Committee (FAAC) meeting in about two weeks and remitted to
the Central Bank of Nigeria (CBN).
Her words: "The N614 billion bailout funds to states
is not going to form part of the revenue for funding the budget. It was a loan
which was advanced by the CBN and the repayment will be made to the CBN. So,
the recovery process for us is to deduct from the FAAC allocation to the states
and then we remit to the CBN and we are going to start these remittances by the
next FAAC, so there will be no requirement for us to consider the FSP (Fiscal
Strategy Paper) implementation.
"We do that as a matter of wanting the states to stay
on the path of fiscal sustainability but it will not be a condition for the
deduction. We will deduct direct at source and remit to the CBN," she
said.
The bailout was given to the states to help pay salaries,
gratuities, and pensions. The CBN provided N614 billion in loans at 9 per cent
with a grace period of two years.
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