Senate Refers 2020 Revised Budget, Loan Request to Relevant Committees

* No provision for subsidy
* Debt Service-N2.91 trillion
* Oil Production-1.93 mpd
* Oil benchmark- $25 per barrel
* Exchange rate- N360/$1
* Capital expenditure – N2.23tr
* Recurrent Expenditure – N4.928tr

The Nigerian government is now to spend a whopping N2.951 trillion on debt service as both chambers of the National Assembly pass the revised 2020 Appropriation Bill for second reading.

Members of both chambers however frowned at the increase in the budget for debt servicing from N2.4 trillion as approved in the 2020 budget in December 2019, to the new figure of N2.95 trillion.

The revised Appropriation Bill saw the government reducing the 2020 budget as passed by the National Assembly in December 2019 to about N10.51 from the original budget of N10.59.
The revised 2020 Appropriation Bill however made no provision for petroleum subsidy, while oil production was reduced from 2.1mbpd to 1.93mbpd.

The oil price benchmark was put at $25 per barrel.

Moving the motion for the budget to be read a second time, Leaders of both chambers, Senator Yahaya Abdullahi and Rep. Ado Doguwa said that N398.505 billion is for Statutory Transfers.

The budget of the National Assembly was however reduced from N128 billion as passed in December to N115 billion in the revised budget.

The sum of N4.928 trillion is budgeted for Recurrent (Non-Debt) Expenditure while the N2.230 trillion is for contribution to the Development Fund for Capital Expenditure for the year ending on 31 December, 2020.

Senate Leader, Yahaya Abdullahi, in his lead debate, recalled that the 2020 Budget was predicated on oil production of 2.18 million barrels per day and a benchmark oil price of $57 dollar per barrel with an exchange rate of N305 to one U.S. dollar.

According to him, the outbreak of the Coronavirus Disease (Covid-19), and its rapid spin into a global pandemic has brought about corresponding economic consequences.

Abdullahi said that as a result of the pandemic, “there has been a slow-down of global economic activities as most countries are on lockdown with movement only limited to essential goods or persons performing essential services.

“Correspondingly, international oil prices have plunged triggered by the Saudi-Russia Oil War and weakening global demand.

“Further to the above, most of the assumptions underpinning the 2020 FGN Budget have had to be revised in the face of current realities, as Nigeria is vulnerable to the current global economic disruption caused by the Covid-19 crisis which has led to decline in Crude-oil prices and spikes in risk aversion in the global capital markets.

“Prior to the outbreak of Covid-19 Pandemic, the Nigerian economy had been characterized by wavering external sector and improving internal economic indicators.

“Over-dependence on oil revenue, constrained fiscal space, low foreign and domestic investments and declining foreign reserves made the economy disproportionately vulnerable to the twin shocks of crude oil price/production collapse and a health crisis affecting negatively the informal sector which accounts for over half of the Nigeria’s GDP.”

The Senate Leader noted that currently, Nigeria’s foreign reserves have declined to $35.9 billion in March, 2020 from $44.7 billion in April, 2020.

He attributed the decrease to the impact of the decline in crude oil receipts.

He said that “the uncertainty and general decline in global economic activities caused by the Covid-19 Pandemic have further dimmed the prospect of reversing the downward trend in Foreign Portfolio Investments (FPIs) in the Nigerian Treasury Bills (NTBs), also adversely impacted by the Covid-19 inspired flight to safety, represent the second biggest source of dollar inflow into the country after crude oil.

“Following the revision of key macroeconomic parameter, projected oil revenues for 2020 have been significantly reduced.

“Adjusted downwards also are non-oil revenue projections, including various tax and customs receipts.

“Additionally, the First-Line deductions by NNPC for Federally Funded Upstream Projects/Expenditures have been significantly reduced by 65% from N1.223 trillion to N424.23 billion.

“These cuts include the removal of N457.50 billion provision for premium motor spirit (PMS) under-recovery (also known as fuel subsidy), with the re-introduction of a Price Modulation Mechanism (tied to international price movement) as the basis for pricing PMS going forward.

“The aggregate revenue available to fund the 2020 budget is now projected at N5.09 trillion (35% or N2.78 trillion less than 2020 Budget passed by National Assembly), 26% of this is projected to come from oil related sources while the balance is to be earned from non-oil sources.

“The provision of Stamp Duty was reduced to N200 billion from N463.95 billion, while Signature Bonus is down to N350.52 billion from N939.30 billion.

“With the retained revenues of the 10 major Government-Owned Enterprises (GOEs), the aggregate FGN revenue is projected at N5.56 trillion.

“In order to forestall, or at least slow down, a decline into another recession, the Federal Government did not set out to implement an austerity-style cuts in expenditure.

“However, in a bid to reprioritize government spending, some non-essential and deferrable expenditure (especially those classified as Administrative Capital Expenditure) were reduced in favour of growth-enhancing, pro-poor funding expenditures and social sector investments in order to combat the current Pandemic as well as its negative impacts on the economy.

“The FGNs expenditure budget (including grants and donor funding) is estimated at N10.51 trillion (inclusive of project-tied loan financed projects and expenditures of ten GOEs), down from N10.59 trillion in the 2020 Appropriation Act.

“Debt servicing is estimated at N2.68 trillion while provisions for sinking fund to retire maturing bonds to Local Contractors/ Creditors is N272.9 billion.

“The provisions for Personnel and Pension cost was retained at N2.83 trillion and N536.72 billion respectively.

“The sum of N25.56 billion (representing 1% of the Consolidated Revenue Fund) has been provided for the Basic Health Care provision Fund.

“Other critical provisions such as N22.73 billion for routine immunization in the Service Wide Votes and N81.14 billion for the Power Sector Reform Programme has been retained.

“The aggregate amount available for the Capital Expenditures (exclusive of Capital in Statutory Transfers) in this reverse 2020 budget is N2.23 trillion, consisting of N1.264 trillion for MDAs, N100.3 billion for Covid-19 Expenditures, N20 billion for Capital Component for the Special Intervention Programme, N274.85 billion for other Capital supplementation, N141.17 billion Capital Budget for Ten GOEs, N42.96 for Donor Grant Funded Expenditures and N387.30 billion funded by Project-Tied Loans.

“The 2020 Appropriation Act (Amendment) Bill is now predicated on Oil production of 1.93 million barrels per day and a benchmark oil price of $25 per barrel.

“The official exchange rate has also been adjusted upwards to N360/US$1 by the Central Bank of Nigeria (CBN).

“At the Importers and Exporters Foreign Exchange (IEFX) window, where the bulk of foreign exchange transactions are consummated, the exchange rate recently depreciated from about N360/US$1 in January, 2020 to over N385/US$1.

“While the CBN continues to make strenuous efforts to stabilize the exchange rate, it is generally expected that the Naira will suffer further devaluation as Nigeria is projected to lose about US$26 billion in oil revenues, its principal source of foreign currency.

Also in his lead debate, House Leader, Rep Ado Doguwa pleaded with members to give the revised 2020 appropriation bill speedy consideration.

Doguwa however stressed the need for a thorough work on the document while putting the interest of the Nigerian people into consideration.

Senator Smart Adeyemi said that with the current downturn in the global economy, it is time for Nigeria to develop its agricultural sector to boost the revenue of Government.

Rep. Sada Soli expressed concern about the existence of excess crude account which he described as illegal, adding that the National Assembly must move fast to recover the funds in the account and ensure they were appropriated and used in funding the budget.

Several members of the House spoke on the need to look for other sources of funding the budget rather than borrowing, adding that there was no basis of increasing money for debt servicing while seeking to take more loans.

Rep. Johnson Oghuma frowned at the new exchange rate of N360 to the dollar saying that it does not make sense to subject the country’s exchange rate to the whims of other countries whom he described as non-oil producing countries.

Rep. Ndidi Eumelu, on his part, expressed disappointment that the empowerment programmes of the lawmakers were removed from the budget, pointing out that there was no basis for the Executive to sit down and amend the budget of other arms of government.

Briefing Senate Correspondents after the second reading of the revised budget, Chairman Senate Committee on Media and Public Affairs, Senator Ajibola Basiru, said it was correct to say that the Senate is usually quick to approve loan requests by the executive.

He said: “I will take us back memory lane to the last tranche of loan request which are normally composed of domestic borrowing and external borrowing.

“It took the Senate Committee a period of five or six weeks to scrutinise the request and all agencies that are supposed to expend the money were requested to appear for specific projects to which these borrowing was attached to and the details were requested by the Senate.

“I want to say with all sense of responsibility that we are not quick to approve the request (loan request)- there is a lot of misinformation about the reclassification of the source of the initial N850 billion external loan.

“What the Senate did on the floor when we resumed after the COVID-19 lockdown was just to approve that the initially approved loan be sourced from domestic markets because of the vagueness of the international market.

“It is not empirical to so say we are quick, at the same time we must also get one thing right. Senators are also Nigerians. We are also citizens and we must also be patriotic.”