Nigeria’s Year 2020 budget has been revised. This follows the global economic situation that warrants realistic spending as a reslt of the biting Coronavirus pandemic. The budget of N10.52 trillion was approved at a meeting of the Federal Executive Council chaired by President Muhammadu Buhari. The N10.59 trillion budget earlier approved remains valid until the Legislative arm appends its stamp on the revised budget.
Briefing the media, the Minister of Finance, Budget & Economic Planning, Mrs Zainab Ahmed said the amended budget now accommodates expenditures related to COVID-19, which was not included in the budget originally approved by the legislative arm. The revised budget, which requires the approval of the National Assembly, was based on assumption that crude oil price would be at $25 per barrel, the output of 1.94 million barrels per day and an exchange rate of N360 to $1. Ahmed told reporters the budget revisions approved by the cabinet reckoned with a crude oil output of 1.94 million barrels per day and an exchange rate of 360 naira to $1, a framework for its 2020-2022 spending plan.
The document presented to FEC shows that the federal government may have altered its proposals over budget reduction and settled for sources of financing the budget. The finance minister had hinted two months ago that the N10.59 trillion budget would be reduced by 15% due to the vagaries in crude oil prices at the spot market. A reduction of N71.5 billion was reflected in the amended budget.
The Finance Minister revealed that the deficit in the budget would be financed with loans from the International Monetary Fund (IMF) the World Bank, and other multilateral finance agencies. Domestic naira borrowings would also be utilized. Mrs Ahmed said adequate budgetary provision had been made for response to the COVID-19 pandemic. Spending related to COVID-19 was not accommodated in the approved estimates considered by the National Assembly.
Government intends to reduce the about 600 state-owned enterprises that consume about $3 billion on a yearly basis with little or no returns into the public purpose. Ahmed said that apart from local and foreign borrowings, government plans to privatisatize some of its agencies to the tune of 5.36 trillion naira to plug the deficit. The Steve Oronsaye panel on restructuring of the federal public service had recommended the scrapping and merging of 220 out the existing 541 government agencies as at 2016. The Federal Executive Council met to deliberate on the report; and later, a White Paper was produced. The Adamu Fika-led committee reviewed the report to ensure that the government was toeing the right path to economic prosperity.
According to Minister Ahmed, the Federal Government would begin a mid-term review of the budget. The adjustment just reflected became necessary because the budget has oil benchmark of $57 per barrel, but as of Wednesday, the Brent Crude oil price hovered around $53 per barrel, and as at the time the N10.59 trillion budget was signed into law in December last year, it was $60 per barrel. The Presidential Economic Advisory Council had warned that Nigeria could slip into another recession following the impact of coronavirus on global economy.
The committee warned that Nigeria risks another recession – four years after the last recession – due to the economic downside of coronavirus, part of which is the slow economic growth, significant decline in oil price $29 and trade imbalances. A State House statement on the committee’s reaction had explained that the committee: “Recommending, among others, a possible revision of the 2020 budget, with priority spending on healthcare, re-prioritisation of expenditure on infrastructure to focus on projects nearing completion with pro-poor effects, curtailing recurrent expenditure, mobilising the private sector to strengthen health sector infrastructure, and boosting of government revenue, the PEAC stressed that the projections may seem dire, but the worst may be avoided with hard work and scrupulous implementation of policies.”