Some analysts yesterday reviewed President Muhammadu Buhari’s N10.33 trillion 2020 budget proposal, warning that the nation risks bankruptcy unless it curbs its penchant for borrowing.
Mr Buhari had presented the document to a crowded joint session of National Assembly saying: “The sum of N8.155 trillion is estimated as the total Federal Government revenue in 2020 and comprises oil revenue N2.64 trillion, non-oil tax revenues of N1.81 trillion and other revenues of N3.7 trillion.”
The budget deficit, projected to be N2.18 trillion, includes drawdowns on project-tied loans and related capital expenditure. He explained that the deficit represents 1.52 per cent of the estimated GDP, well below the 3 per cent threshold set by Fiscal Responsibility Act of 2007, and in line with ERGP target of 1.96 per cent.
“The deficit will be financed by new foreign and domestic borrowings, privatisation proceeds, signature bonuses and drawdowns on loans secured for specific development projects,” Buhari had said.
But Development Economist, Mr. Odilim Enwegbara asked: “For how long do we have to have such a prodigious Federal Government, a government that can’t stop its borrowing spree? Today, the debt service to revenue ratio is approaching 80 per cent with domestic debt approaching 70 per cent of the country’s overall debt stock. Can we continue to borrow at such unheard-of high cost, especially from our commercial banks to the extent that these banks can’t stop conniving with government agencies responsible for revenue generation to allow high deficit gaps that have meant more and more borrowing from banks to meet the shortages?
“With now close to N30 trillion debt and more than N2 trillion annually spent on mere debt service, and without the economy growing in a way that grows government revenues, how does the government want to repay the huge debt, especially at a time its recurrent spending continues to grow in such geometric progression?”
He, therefore, cautioned that unless drastic measures are taken to reposition the economy and grow it with millions of jobs, the country could go bankrupt.
Coalition of United Political Parties (CUPP) issued a statement yesterday saying the proposal is an “empty document not worth the paper on which it was written. It is a final weapon to consolidate Buhari’s next level of economic ruins, poverty, looting and visionlessness.”
Peoples Democratic Party (PDP) also said the proposal would further impoverish Nigerians, urging the lawmakers to amend it to serve the interest of the people.
The opposition party described it as “hazy and showing streaks of padding, fraudulent duplications, replete with false performance indices, deceptive projections and inexplicable expenditure assertions which create openings for continued looting of our national patrimony by leaders of All Progressives Congress (APC) and persons close to the presidency.”
It said: “It is inexcusable that despite the huge natural resources at President Buhari’s reach, he articulated a N10.33 trillion budget that is completely lacking in concrete wealth creation strategy but relies on further squeezing of Nigerians through excruciating taxes, levies and agonising tolls.”
It said further: “Mr. President failed to explain why his administration has remained hugely corrupt and how his presidency depleted our foreign reserves to an all time low $41,852 billion, accumulated huge foreign and domestic debts, and kept the naira at its knees at about N360 to $1USD under his watch.”
Buhari had explained: “The expenditure estimate includes statutory transfers of N556.7 billion, non-debt recurrent expenditure of N4.88 trillion and N2.14 trillion of capital expenditure (excluding the capital component of statutory transfers). Debt service is estimated at N2.45 trillion, and provision for Sinking Fund to retire maturing bonds issued to local contractors is N296 billion.”
According to him, “The sum of N556.7 billion is provided for Statutory Transfers in the 2020 Budget and includes: N125 billion for the National Assembly; N110 billion for the judiciary; N37.83 billion for the North East Development Commission (NEDC); and N44.5 billion for the Basic Health Care Provision Fund (BHCPF).”
On the basic assumptions of the proposal, he stated: “We have adopted a conservative oil price benchmark of US$57 per barrel, daily oil production estimate of 2.18 mbpd and an exchange rate of N305 per US Dollar for 2020. We expect enhanced real GDP growth of 2.93 per cent in 2020, driven largely by non-oil output, as economic diversification accelerates, and the enabling business environment improves. However, inflation is expected to remain slightly above single digits in 2020.”
He told the lawmakers: “The non-debt recurrent expenditure includes N3.6 trillion for personnel and pension costs, an increase of N620.28 billion over 2019. This increase reflects the new minimum wage as well as our proposals to improve remuneration and welfare of our police and armed forces.”
Some of the key capital allocations are: works and housing, N262 billion; power, N127 billion; transportation, N123 billion; Universal Basic Education Commission, N112 billion; defence, N100 billion; zonal intervention projects, N100 billion; agriculture and rural development, N83 billion; water resources, N82 billion; and Niger Delta Development Commission, N81 billion.
Others are: education, N48 billion; health, N46 billion; industry, trade and investment, N40 billion; North East Development Commission, N38 billion; interior, N35 billion; social investment programmes, N30 billion; Federal Capital Territory, N28 billion; and Niger Delta Affairs Ministry, N24 billion.
The president also hinted that amendments would be made to relevant laws to improve the tax system and boost revenue. To this extent, he announced that a finance bill would be sent to the National Assembly. He said the bill has five strategic objectives: promoting fiscal equity by mitigating instances of regressive taxation; reforming domestic tax laws to align with global best practices; introducing tax incentives for investments in infrastructure and capital markets; supporting micro, small and medium-sized businesses in line with the Ease of Doing Business Reforms; and raising revenues for government.
The president noted: “The draft finance bill proposes an increase of VAT rate from 5 per cent to 7.5 per cent. As such, the 2020 Appropriation Bill is based on this new VAT rate. The additional revenues will be used to fund health, education and infrastructure programmes. As the states and local governments are allocated 85 per cent of all VAT revenues, we expect to see greater quality and efficiency in their spending in these areas as well.”
Senate President Ahmad Lawan said the lawmakers would expedite action on the proposal. According to him, “The Ninth National Assembly has shown capacity, commitment and willingness to treat legislative matters that will impact on the lives of our citizens with dispatch and every sense of urgency.”
He therefore declared: “In order for timely passage, all ministries, departments and agencies (MDAs) are expected to appear before the committees for the defence of their budget estimates within the month of October. We have earmarked the month of October to be the sole window for all budget defence activities, this year, by all MDAs.”
Director General of the budget office, Mr. Ben Akabueze, meanwhile, has allayed the fear that increase in Value Added Tax (VAT) from five to seven per cent would worsen the plight of ordinary Nigerians.
Fielding questions from reporters at National Assembly complex in Abuja, he said: “VAT is not really a tax that concerns the common man. It’s a consumption tax. You only pay it when you consume the items it applies to. For instance, if you go to the market, buy your food ingredients, go home and cook the food, nobody charges you VAT. But if you go to a restaurant, sit down there and eat, they charge you VAT. The common man doesn’t go to expensive restaurants to eat. So, let’s not make this look like something that has to do with the common man.”
He added: “The budget is designed to sustain expenditure and that is why it still remains a deficit budget because that is the only way to stimulate the economy to ensure growth. As people spend, businesses make profit to hire more people. The best way to take people out of poverty is to put them in jobs.
“There has been great care not to hurt the poor and vulnerable so that they would not suffer. Items on the exemption list have been expanded to ensure new introduction establishing a threshold for whom VAT would apply, so that small businesses won’t be affected.”
But Mr Ali Ndume (APC, Borno), who described the budget presentation as historic, was cautious about jumping at conclusions. “I am trying to study the budget…the explanation given by the executive on VAT. I have to study it, so you don’t oppose it in ignorance. I have to be sure it does not affect the constituency I come from, the poorest of the poor. Instead of taxes that will have negative effects on the masses, like VAT, communications tax, as practised in other developed countries, could be adopted,” he said.
In other reactions, a former presidential economic adviser, Mr Magnus Kpakol, said the country’s recurring $30 billion national budget is too little to power growth, given the rise in population figures. “We should be concerned about how the numbers and policies in the yearly budgets affect the ordinary people. We should be thinking of improving what successive governments have not done well,” he said.
This was as a former director general of Nigerian Social and Economic Research, Mr Olu Ajakaiye, expressed optimism that the proposal should record a higher degree of implementation, unless there are cash flow issues. He was also hopeful the budget would be passed early, because both the executive and legislature are on the same page, particularly on the vexed issue of oil benchmark price which “used to be the bone of contention in the past.”
Some Nigerians condemned the total shutdown of activities at the National Assembly complex, saying it was paradoxical that the government would halt business activities on the sprawling premises because it wanted to present a proposal on how to make the economy grow.
One legislative aide told The Guardian: “We should stop this old way of making a mountain out of a mole hill. We should do things in a new way, not the archaic way, which progressive countries have since discarded. This Nigerian attitude, if not addressed can lead to something else.” He regretted that while the president was expected to present the budget proposal by 2:00 p.m., the complex had been shut down from 8:00 a.m. “By the time the president would have been through by 4:00 p.m. or thereabout, the day’s business would have been over. It is abnormal for any serious-minded country,” he said.
Another commentator lamented that all small-business holders, especially those who eke out a living from the sale of snacks and soft drinks, were deprived the opportunity to work.