Abulwahab Isa 
Like previous budgets, the 2021 budget size of N13.08 trillion may encounter dearth of fund to finance it. To overcome the obstacle, the Federal Government has earmarked some national assets for sale, Abulwahab Isa reports
The 2021 fiscal budget, like the 2020 appropriation, was presented by President Muhammadu Buhari to a joint session of the National Assembly last week at record time. The timeliness of the budget presentation was in line with administration’s goal of sticking to January to December budget calendar cycle. The president presented N13 .08 trillion size budget expenditure compared to 2020’s N10.81 trillion. Themed: “Budget of economic recovery and resilience,” the 2021 budget is expected to give lease for accelerated development to Nigeria’s economy against the backdrop of COVID -19 disruptions. Essentially, the budget, President Buhari said, is to promote economic diversification, enhance competitiveness and ensure social inclusion. The 2021 budget is anchored on key variables: crude 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);exchange rate of N379 per $; a GDP growth projected at 3.0 per cent and inflation closing at 11.95 per cent.
Revenue/expenditure forecast
In 2021, government projected a total revenue of N8.433 trillion. Derivable revenues are expected to come from grants and aid in the sum of N354.85 billion as well as the revenue of 60 governmentowned enterprises. Oil revenue is projected at N2.01 trillion, non-oil revenue is estimated at N1.49 trillion. Ministries, departments and agencies of government (MDAs), regardless of size, to contribute to revenue basket. Expenditure outlook for 2021 N13.08 trillion is as follows: The sum of N1.35 trillion is appropriated for spending by Government Owned Enterprises, grants and aid funded expenditures N354.85 billion. Other expenditure items include non-debt recurrent cost 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 inking fund of N220 billion (to retire certain maturing bonds).
Tackling finance challenge
The Federal Government said it had evolved ways of financing the 2021 budget. In the new budget, government side stepped Eurobond borrowing for concessionary loans. Shedding light on how government plans to finance the N13.08 trillion budget, Vice President, Prof Yemi Osinbajo, said government would finance the budget with concessionary loans instead of commercial facilities. He listed assets earmarked for sale to finance the budget to include three power plants – Afam III, Aba Electricity Distribution Company and Yola Electricity Distribution Company. On plans to stimulate the economy, especially with the 2021 budget, the vice president said: “Borrowing is an important part of financing budget. It is not particularly bad. “An individual will say cut your coat according to your size. But for a nation, you are looking at more of cutting your coat according to your vision. You must have a vision, but between your vision and resources, there will always be a gap. “So, there will always be a need to borrow. The main issue is: are you borrowing for what purpose? In this government, a lot of the foreign borrowing has been focused on infrastructure. All of this is to build an economy not only for today but for the future. “When we borrow for infrastructure, we create jobs and opportunities immediately. The moment you begin to invest in infrastructure, you create jobs. “We are not likely to explore the Eurobond market; we are looking at concessionary financing which has an interest rate of 1.5 per cent to two per cent or even less. For 2021, we are looking at concessionary financing.” He said the planned sale of some plants was part of the sustenance of the nation’s privatisation policy. “There are three assets of the NIPP being considered for sale. We started considering three plants but that process was truncated by developments between 2018 and 2019,” he said. “We intend to look at all possible revenue generation sources but sale of assets is not a priority,” said the VP.
Kudos, knock trail budget
Every budget presentation is subjected to scrutiny and experts evaluation. 2021 budget is on public domain for experts’ evaluation. Professor Uche Collins Nwogufu of economics department, Nnamdi Azikwe University, picked hole in some of the provisions espoused in the N13.08 trillion budget. He faulted the huge allocation appropriated foe the National Assembly. “For instance, N128 billion was allocated to seemingly unproductive National Assembly composed of 469 persons while N127 billion allocated for education sector. You can see a conscious strategy of government to depreciate education. “You can see that Nigeria has to borrow N4 trillion to finance this budget and another N 3 trillion for debt servicing. This is a clear testimony that the national budget is driven from outside of the country; from China and other donor nations. “No mention was made on the nation’s preparedness to forestall the impact of COVID-19, considering that our creditor nations are hard hit by the pandemic and it is expected that they will come hard on those of us debtor nations with respect to Conditional it,” he said. Presidential candidate of the opposition Peoples Democratic Party (PDP) in the last election, Atiku Abubakar, also faulted some provisions of the budget. The former vice-president said the budget contravened the provisions of the Fiscal Responsibility Act, FRA. “The budget deficit in the proposal is 5.21 trillion. This amount is just over 3.5 per cent of Nigeria’s 2019 Gross Domestic Product, GDP. “This is contrary to the Fiscal Responsibility Act of 2007, which provides in Part II, Section 12, subsection 1 that “aggregate expenditure and the aggregate amount appropriated by the National Assembly for each financial year shall not be more than the estimated aggregate revenue plus a deficit, not exceeding three per cent of the estimated Gross Domestic Product or any sustainable percentage as may be determined by the national Assembly for each financial year.” According to him, “Nigeria had a GDP of approximately $447 billion in 2019. Three per cent of this amount is $13. 3 billion, which at the current official exchange rate of 379 to $1, gives you a figure of 5.07 trillion. So clearly, the budget deficit of 5.21 trillion, as announced by President Muhammadu, is above 3 per cent of our GDP and is therefore in contravention of the Fiscal Responsibility Act of 2007.”
Commendations.
On his part, Professor Uche Uwaleke, a former Commissioner of Finance in Imo State, and a fellow of the Institute of Chartered Accountants of Nigeria (ICAN), however, lauded executive arm for timely submission of budget in record time to National Assembly. He said both the assumptions and parameters were realistic. “I think the assumptions and budget parameters are realistic except for the exchange rate of N379 to the dollar that may not hold due to the ongoing process of unifying exchange rates across all forex windows by the CBN consistent with the IMF prescription. “I also think the real GDP growth rate projected at three per cent is a little ambitious in view of the impact of COVID’19 on the economy expected to linger till next year. This is why the recent Fitch report on Nigeria projects a GDP growth rate of 1.3 per cent for the country in 2021.” “I wish to note that the budget proposal seems to have set the right priorities with the bulk of capital spending going to Works and Housing, Power and Transport. For the first time in many years, the capital allocation to Education and Health are above that of defense. “I must add however, that new borrowings of over N4 trillion to part finance a deficit of over N5 trillion is worrisome given the already huge amount of over N3 trillion allocated to debt servicing alone. COVID’19, notwithstanding, the deficit to GDP should have been kept within the three per cent threshold stipulated in the Fiscal Responsibility Act 2007. I hope the National Assembly will consider any amendment within the budget envelope of N13.08 trillion and not end up jerking up the figure,” he added. A scholar and economist, Dr. Abdulmaji Jamal, in an interview in Bauchi, described the N13.8 trillion budget estimate as realistic. He explained that the benchmark of N379 to a dollar as envisaged by the estimate is reasonable, considering the nation’s dwindling oil revenue which may appreciate or indicate otherwise. He said that the 11.9 per cent inflation target of the expected annual expenditure was also reasonable. “But we must expect a significant reduction in the prices of consumables especially foodstuff,” he said.
Last line
Like previous budgets before it, the 2021 budget of N13.08 trillion presented recently by President Muhammadu Buhari is likely to be hindered by dearth of funds for implementation.
