By Tony Obiechina, Abuja
The Federal Government has reeled out plans on how the 2021 budget will impact the country’s economy which has been hit by the Covid-19 pandemic.
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, stated this in Abuja on Tuesday while presenting the breakdown of the 2020 budget to the public.
President Muhammadu Buhari last week presented N13.08 trillion Budget 2021 to the joint session of the National Assembly, as the estimate is N2.28 trillion higher than the 2020 revised budget of N10.805trillion.
The president at the presentation of the Budget 2021 themed ‘Budget of Economic Recovery and Resilience’ stated that the budget is aimed at promoting economic diversity and enhancing social inclusion,
He said: “For the first time in recent years, we commenced the implementation of this year’s capital budget in the first quarter,” Referring to government’s efforts to sustain the Nigerian budget’s January to December cycle, he stated that “As at 15th September 2020 a total of about N1.2 trillion had been released for capital projects. Every federal ministries departments and agencies (MDAs) has received at least 50 percent of its 2020 capital expenditure budget, in line with my earlier directives.”
He added that “In line with our commitment, we have worked extra hard to ensure early submission of the 2021 –2023 MTEF and FSP, as well as the 2021 Appropriation Bill, hoping that the National Assembly will pass this Bill into law early enough to enable implementation by 1st January 2021, given the collaborative manner in which the budget was prepared,”
Total capital expenditure projected in the budget is N3.85trn, representing 29 percent of the aggregate expenditure, which indicates an improvement over the 24 percent projected in budget 2020, with N2.69 trillion capital allocation.
In the 2021 budget, an aggregate expenditure of N13.08 trillion is proposed which, among other concerns, includes N1.35 trillion spending by government-owned enterprises (GOEs) and grants and aid funded expenditures of N354.85 billion.
For the fiscal year 2020, the proposed N13.08 trillion expenditure comprises non-debt recurrent costs 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 sinking fund of N220 billion (to retire certain maturing bonds).
A projected inflation rate of 11.95 per cent and gross domestic product (GDP) growth rate of 3.00 percent has also been projected.
The federal government budgeted N128 billion for the National Assembly and N63.5 billion for the Niger Delta Development Commission (NDDC). Based on the foregoing fiscal assumptions and parameters, total federally distributable revenue is estimated at N8.433 trillion in 2021. Total revenue available to fund the 2021 federal budget is estimated at N7.886 trillion.
This includes Grants and Aid of N354.85 billion as well as the revenues of 60 GOEs. Still on parameters and fiscal assumptions underpinning the 2021 Appropriation, the 2021 – 2023 MTEF and FSP set out the parameters for the 2021 Budget, which include: Benchmark oil price of US$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 US Dollar; and GDP growth projected at 3.0 percent and inflation closing at 11.95 percent.
On deficit, financed mainly by new borrowings totalling N4.28 trillion, N205.15 billion will come from privatisation proceeds and N709.69 billion in drawdowns on multilateral and bilateral loans secured for specific projects and programmes.
Also, Oil revenue is projected at N2.01 trillion. Non-oil revenue is estimated at N1.49 trillion. Other allocations include N29.7 billion for the North East Development Commission (NEDC), N110 billion for the Nigerian Judicial Council (NJC), N70.05 billion for Universal Basic Education Commission (UBEC) and N40 billion for the electoral umpire, Independent National Electoral Commission (INEC).
The breakdown of the budget estimates showed that the Ministry of Defence is allocated the biggest share in the sectoral allocations. In the recurrent expenditure, the ministry topped the list with N840.56 billion seconded by education, N545.10 billion; Police Affairs, N441.39 billion; Interior Ministry N227.02 billion, and Health Ministry, N380.21billion.
The fiscal balance, which takes into account the 2021 budget deficit (inclusive of GOEs and project-tied loans), is projected at N5.20 trillion.
This, as is stated in the proposal, represents 3.64 percent of estimated gross domestic product (GDP), slightly above the three percent threshold set by the Fiscal Responsibility Act, 2007.
The minister stated that the deficit will be financed mainly by new borrowings totaling N4.28 trillion, N205.15 billion from privatisation proceeds and N709.69 billion in drawdowns on multilateral and bilateral loans secured for specific projects and programmes.
The sum of N484.49 billion provided for statutory transfers in the 2021 Budget represents an increase of N56.46 billion (or 13 percent) over the revised 2020 provision.
The statutory transfer provisions are: Niger Delta Development Commission – N63.51 billion; North East Development Commission – N29.70 billion; National Judicial Council – N110.00 billion; Universal Basic Education Commission – N70.05 billion; Independent National Electoral Commission – N40.00 billion; National Assembly – N128.00 billion; Public Complaints Commission – N5.20 billion; Human Rights Commission – N3.00 billion; and Basic Health Care Provision Fund – N35.03 billion.
She added that: “In compliance with the Fiscal Responsibility Act 2007, all beneficiaries of statutory transfers will be required to provide the Budget Office of the Federation with periodic reports on the allocation and expenditure of funds for inclusion in the quarterly Budget Implementation Report.
“In view of recurrent expenditure, concerning government’s efforts to enhance national security and human capital development, a major part of the 2021 recurrent cost estimate is allocated to paying salaries and overheads in MDAs, providing the critical public services.
“Personnel cost, according to Mr. President, is still our largest single item of expenditure. In the seven months to 31st July 2020, it accounted for 34 percent of total federal government spending and is projected at 33 percent of 2021 expenditure. The government has provisioned N3.12 trillion for debt service obligation in 2021, representing an increase of N445.57 billion from N2.68 trillion in 2020. A total of N2.183 trillion has been set aside to service domestic debts while N940.89 billion has been provided for foreign debt service.
“Total overhead costs of MDAs and Government Owned Enterprises are projected to rise to N625.50 billion in 2021, mainly due to the inclusion of the overheads of an additional 50 Government Owned Enterprises. Overhead provisions have also been made for newly created agencies.
“To keep a tab on running costs, MDAs must adhere to extant expenditure controls. An aggregate sum of N3.85 trillion is expected to be available for capital projects in 2021, as summarised below: N1.80 trillion for MDAs’ capital expenditure; N745 billion for Capital Supplementation; N355 billion for Grants and Aid-funded projects; N20 billion for the Family Homes Fund; N25 billion for the Nigeria Youth Investment Fund; N336 billion for 60 GOEs; N247 billion for capital component of statutory transfers; and N710 billion for projects funded by Multi-lateral and Bi-lateral loans. The 2021 capital budget is N1.15 trillion higher than the 2020 provision of N2.69trillion. At 29 percent of aggregate expenditure, the provision moves closer to this administration’s policy target of 30 percent.
“Capital expenditure in 2021 remains focused on the completion of as many ongoing projects as possible, rather than the commencement of new ones. Key capital spending allocations in the 2021 Budget include: Power: N198 billion (inclusive of N150 billion for the power sector recovery plan); Works and Housing: N404 billion; Transportation: N256 billion; Defence: N121 billion; Agriculture and Rural Development: N110 billion; Water Resources: N153 billion; Industry, Trade and Investment: N51 billion; Education: N127 billion; Universal Basic Education Commission: N70 billion; Health: N132 billion; Zonal Intervention Projects: N100 billion; and Niger Delta Development Commission: N64 billion,” she further explained
Ahmed added that the main thrust of the capital spending programme in 2021 is the completion of as many ongoing projects as possible across the country, while prioritizing projects that can be rapidly completed to benefit Nigerians.
“In furtherance of inclusiveness agenda, the sum of N420 billion has been provided to sustain the social investment programme; N20 billion for the family homes fund, and social housing programme.
“Recently introduced is the N75 billion survival fund programme to support and protect businesses from potential vulnerabilities. Furthermore, the Central Bank of Nigeria (CBN) is reducing interest rate on its intervention facilities from nine percent to five percent with a 1-year moratorium till 31st March 2021, to provide concessional lending of: N100 billion to households and small businesses; N100 billion to the healthcare and pharmaceutical industry; and N1 trillion to large agricultural and manufacturing businesses.
“Looking at government fiscal strategy in 2021, implementing several measures to overcome the fiscal constraints, in addition to the strategic revenue growth initiatives (SRGI), government is leveraging technology and automation, as well as more effective monitoring of independently generated revenues.
“These are efforts aimed at addressing revenue leakages and redirecting scarce resources to the poor and vulnerable. The efforts include: Deregulation of the price of petroleum products; ongoing verification exercise with IPPIS; and implementation of service-based electricity tariffs,” she further stated.
Asked whether the government will consider issuing eurobonds to fund the 2021 budget, the minister said the government is still weighing it’s options.
“It’s an option on the table, if the domestic capital market offers enough yield, then there is no need for us to consider going to the International capital markets.
“But if the international markets offer much yield than the domestic market, then we will have to go into the international capital markets,”
Mrs Ahmed also added that to improve revenue transparency in the Budget, the finance bill will be accompanying the 2021 budget as well as the Tax Expenditure Statement (TES).
She said the decision is prompted at improving tax administration to optimize revenue through the Strategic Revenue Growth Initiative (SRGI).
She further stated that the recently deployed directors of revenue to Government Owned Enterprises (GOEs) will work in synergy with the affected agencies, but will however Independently report to government on the grey areas that needs to be improved.