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Deliberating the illusion And Reality Of FG’s 2020 Budget

October 14, 2019, 3:19 pm News Seen: 114
Deliberating the illusion And Reality Of FG’s 2020 Budget
Deliberating the Illusion And Reality Of FG’s 2020 Budget

President Muhammadu Buhari presented the 2020 appropriation and finance bills of the Federal Government FG to the National Assembly by last week, CHIMA NWOKOJI in this report analyzed the policy document through lens of economic and finance experts.
Nigerians seemed happy with the quick submission of the bill to the legislators because it should give ample time for examining and hasten final approval, especially as the current leadership of the National Assembly is supportive.
The budget is underpinned by four pillars including fiscal consolidation, infrastructure & human capital development, incentivizing the private sector and enhancing social investment programmes. These goals seem laudable at first glance, but experts are worried by the small sizes of budget allocations which they said suggest a shaky foundation that could affect progress. Their conclusion is that the budget needs re-visiting but not padding.”
In this context, the economist indicated that “We will continue to get poorer and poorer as our growth is lower than population growth; with population growth of 2.7 per cent per annum, even if we grow GDP at 2.5 per cent at 2019, we are getting poorer and poorer. And even if we grew at 3.5 per cent per year, it would take about 100 years to increase GDP per capita.”
The International Monetary Fund IMF did not differ from this idea when recently, it warned that Nigeria could face up to eight years of getting poorer and poorer starting from 2015-2022 – if something is not done immediately but the 2020 budget is theoretically in deficit but could be a balanced budget, if the Excess Crude Account ECA accruals are backed out. The budget deficit is projected at N2.2 trillion.
Keynesian economists would recommend that Nigeria should embark on deficit spending allocate more money on labour-intensive infrastructure projects in order to stimulate employment and stabilise wages in this period of economic downturn.
The Federal Government of Nigeria FGN budgetary expenditure has been growing at an average of 12.7 per cent compared to the average inflation rate of 13.57 per cent.
“This means that after adjusting for inflation, Nigerian budgets have actually declined. If you go further to adjust for exchange rate depreciation, the decline gets more disturbing. In effect, the budget expenditure in 2020 is approximately 5.78 per cent lower than the actual budget in 2016,” he said, agreeing with Dr. Nevin that Nigeria is not spending enough during this economic downturn.
It means that the N2.5 trillion or 24.3 per cent allocations to capital spending cannot provide the boost needed in infrastructure.
This explains why for example, pursuant to a motion moved by Babajimi Benson APC, Lagos, the House of Representatives called for more funding for the education sector in the 2020 budget, a prayer the House adopted.
The House also urged the federal government to increase the annual budgetary allocation to the health sector from 5 per cent to 15 per cent as had been pledged by successive governments in order to curb unnecessary deaths caused by the failing health system.
Doubtful Revenue Expectations
They are worried that 2020 budget ignores lessons from the recent difficulties the FG encountered as regards budget performance.
For context, the Chief Executive Officer, Afrinvest West Africa Limited Mr. Ike Chioke said FG’s revenue projections underperformed actual collection by 47.8 per cent in 2017 and was little changed at 44.7 per cent in 2018 and 41.6 per cent as at first half H1 :2019 and available records show that the FG projected revenues of N8.2 trillion in 2020, is 17.1 per cent higher than N7.0 tillion in 2019 and more than twice the actual collection of N4.0 trillion in 2018 but the Oil revenue projection was lowered 29.7 per cent to N2.6 trillion vs. 2019: N3.7 trillion, reflecting prudent adjustments in the wake of lower for longer oil prices and weak oil production due to the slow pace of oil and gas reforms.
In its weekly review, the firm observed that looking at 2017, 2018 and H1:2019 budget performance, total collection from the non-core, non-oil revenue lines was zero “if we exclude independent revenue. We believe these unrealistic assumptions set up the budget for poor implementation.”
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