The Federal Executive Council FEC, on Wednesday approved the 2020 budget of N10.07trillion and the Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper FSP
This is as Minister of Transportation, Rotimi Amaechi, disclosed that FEC also approved about $450m for various rail projects
According to him, “council approved the revised estimate total cost for the rehabilitation of Itakpe/Ajaokuta Rail line. The contract was awarded $122 million but we requested for a total of $56 million additional works which were broken down into $38.8 million additional works and 17.2 million variation now bringing the contract of Itakpe to Warri to a total of $178.7 million.
“ We also requested for Lagos to Ibadan with extension to Lagos port complex in Apapa, we asked for additional works for $374 million with another variation of $282 million which totalled to $656.8 million added to $1.5 billion that the contract was initially awarded to.
Minister of Finance , Budget and National Planning , Zainab Ahmed, while briefing the State House Correspondents, after the first Federal Executive Council meeting presided over by President Muhammmadu Buhari, disclosed that Federal government will begin consultations on the Value Added Tax, VAT with the view to increasing it from the current 5% to 7.2%
This followed FEC approval of the proposals for an increase in the Value Added Tax from the current 5% to 7.2%
“The expenditure for the year 2020 is in the total sum of N10.07 trillion. This is three percent less than the approved expenditure in the 2019 budget that has been passed unto law. The total expenditure includes statutory transfers, non-debt recurrent expenditure such as salaries and pensions and also the social intervention Programme.
The government , she said has started working on the amendment of the VAT Act to enable the new VAT take effect from the year 2020, while consultations will commence as soon as possible.
The budget is predicated on basic assumptions of a deficit of 2.15Trillion, oil production of 2.18 million barrels per day at a bench mark of $55 per barrel of crude oil.
“We also reported to council and council has agreed that we start the process towards the increase of the VAR rate. We are proposing and council has agreed increase the VAT rate from five percent to 7.2 percent.
She disclosed that federal government only retains 15 percent of the VAT, while 85 percent is retained by the states and local government, adding that “ the state need additional revenue to be able to meet the obligations of the minimum wage.
“This process involves extensive consultations that needs to be made across the country at various levels and also it will involved the review of the VAT Act. So, it is not going to be implemented immediately until the Act is reviewed.
“So accordingly, following these assumptions the total revenue estimate in the sum of N7.5 trillion for the year 2020 and N2.09 trillion that will be accruing to the federation account and the VAT respectively.
“There will of course be the distribution to the three tiers of government based on the statutorily revenue sharing formula as defined in the constitution and to this effect, it means the federal government will be receiving proposed aggregate of N4.26 trillion from the federal account and the VAT pool, while the states and the local government are expected to receive N3.04 trillion and N2.27 trillion respectively.
“The 2020 budget has a debt service estimated at N2.45 trillion and a sinking fund to retire maturing obligations issued to local contractors and other creditors in the sum of N296 billion. So there is a total sum of N3.43 trillion that is provided for personnel and pension cost inclusive of N218 billion for the top 19 government owned enterprises in the country.
“This represents an increase of N453 billion over the 2019 approved budgetary expenditure. This also implies a 40 percent of this recurrent expenditure to the projected revenue.”
“The budget deficit is projected at N2.15 trillion in the year 2020 and this is lower than what was approved in the 2019 budget which was N2.47 trillion.
“Let me state that these projections include draw downs on project tied loans and this represent 1.51 percent of estimated gross domestic product (GDP). This is well below what is allowed by the Fiscal Responsibility Act of 2007 which is still put at three percent.
“I want to add that council approved our presentation and so the next phase for us is to consult with the National Assembly and then the Medium Term Expenditure Framework (MTEF) to the National Assembly for their own view and subsequent approval.
Federal Executive Council (FEC), also approved a total of N182. 68 billion for various road projects across the country.
The Minister of State for Works and Housing, Abubakar Aliyu, who disclosed this after the FEC meeting chaired by President Muhammadu Buhari at the Presidential Villa, Abuja, gave a breakdown of the benefiting states to include, Lagos, Niger, Kano, Katsina, Edo, Kwara, Taraba, Jigawa, Imo, Abia, Yobe, FCT, and Anambra.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, disclose that the FEC approved the Medium Term Expenditure Framework 2020 to 2022, which will guide the 2020 Budget.
Tony Ailemen, Abuja
