All Government-Owned Enterprises will be required to cut their 2020 capital expenditure and overhead budget by a quarter even if their spending plans have already been approved, Finance, Budget and National Planning Minister Zanaib Ahmed has said, as Nigeria trims its budget after low oil price jeopardize revenue forecast for the year.
The FG also lowered overhead provisions across the board by 16.7% although Security Agencies, Armed Forces and Healthcare institutions have been exempted.
The record-high 2020 budget of N10.59trn was Wednesday cut down by N1.5trn with critical revenue benchmark, crude oil price was lowered to $30bp from $57bp.
Oil price had fallen from around $60-$65 per barrel to as low as $25 owing to demand and supply shocks caused by the Coronavirus and dispute between OPEC+ heavyweights Russia and Saudi Arabia.
“In doing so we prioritize growth-enhancing, pro-poor expenditures and social investments generally,” said Ahmed, who explained that non-critical capital expenditures especially administrative capital spending had to be removed.
Purchase of furniture and fittings, computer systems, office buildings and lands, are among the items the government will no longer be spending on.
“Exceptions will however be made where such expenditures are absolutely warranted by the nature of an agency’s mandate,” Ahmed said, citing security vehicles, ambulances and fire-fighting trucks as being exempted from the cut in provision for vehicles.
Similarly, hospitals and school buildings are exempted from the cut in provisions for rehabilitation or construction of buildings.
Nigeria would also maintain personnel cost budget for Agencies but would hold off any recruitment exercise.
Despite lowering its oil price benchmark and trimming cost, revenue projections for oil remains around $5 too optimistic and budget deficit is expected to exceed about N2.3trn.