• Wednesday, May 29, 2024
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BusinessDay

Updated: FG to cut budget by N1.5T, crude oil Bench mark at $30, capital budget 20%

Zainab Ahmed

 

The Nigerian government has announced revisions to its 2020 budget estimates that will cut the planned spending by as much as N1.5 trillion, it said late Wednesday.

The government announced a cut in crude oil benchmark price down to $30, against the $57 proposed in the budget on the backdrop of falling crude oil prices on the international market, while crude oil production remains at 2.18m barrels per day as earlier stated in the budget estimates.

Minister of Finance, Budget and National Planning, Zainab Ahmed, said government was embarking on a number of expenditure cuts in Customs revenue to reduce, and a  50% cut on revenue from privatization proceeds.

The Minister who announced this while briefing journalists after the Federal Executive Council meeting presided over by President Muhammadu Buhari, said FEC approved reductions in capital budget by 20%, and 25% cut in recurrent expenditures.

The proposal which will likely reduce the N10.59T 2020 budget by as much as N1.5T at the end of the new engagements with the National Assembly, is also expected to increase deficit to over N3T.

The Minister revealed that government had written to all the MDAs to submit their positions and forwards same to the Cabinet office

FEC also approved stoppage of recruitments except in the areas of security, including Armed Forces and the other security agencies.

Other measures include review in tax policies, while it hopes that reduction in recurrent expenditures will allow for operational surplus increase that should help increase government revenue

Ahmed stated that Presidency would be engaging the National Assembly as soon as possible to give legal backing that will enhance the new policies.

“We have written to every Ministry to make their inputs ahead of the proposed engagements with the National Assembly.

Government said the cut in the downstream sector expenditures might rise to as much as N457m, adding that “details were being expected from the Nigeria National Petroleum Corporation, NNPC”.

Ahmed also revealed that States would be expected to take similar measures, as the reforms will affect revenue shared amongst the three tiers of government

On the tax policy, the Minister disclosed that fiscal authorities were already working on fiscal incentives.

On jobs and recruitments, she revealed that government would not cut jobs but had ordered a stoppage of replacement which is being suspended because of high wage bill.

“We are not looking at job cuts, but while the recurrent expenditure is being reduced by 25%, job replacements will be put on hold, except for security agencies

The President had earlier summoned officials of Federal government Ministries, Departments and Agencies MDAs , including officials of government parastatals, considered critical to the execution of the 2020 budget to the meeting of the Federal Executive Council on Wednesday

BusinessDay gathered that Ahmed had briefed the cabinet meeting on the current state of the economy as Nigeria.

It was gathered that the President has asked the Presidential Economic team established to review the impact of Coronavirus and crash of Crude oil price, headed by the Minister of Finance to regularly update the cabinet of measures to tackle the effects of Crude Oil prices falls as experts projects that oil prices could go to as low as $20 per barrel

The Presidential Economic Advisory Council PEAC, led by Doyin Salami had on Tuesday expressed concern over possible slow growth occasioned by the negative impact of Coronavirus and recommended the revision of the 2020 budget to prioritize spending on health care, infrastructure and basic needs.

The Federal Executive Council is expected to review the team’s submissions and adjust policies and projects accordingly, BusinessDay gathered on Wednesday

The PEAC had painted sobering scenarios of what could happen to the Nigerian economy, if the Covid-19 pandemic lasted for too long.

The team expressed fears over possible “slower growth” occasioned by the dwindling world crude oil price, on which Nigeria’s budget is heavily dependent

They also see supply and demand sides of global economy being impacted negatively by the uncertainties, which would erode confidence, “governments acting unilaterally instead of cooperatively, further drop in oil prices, and lockdowns gaining grounds around the world.”

The EAC said there would also be oil glut, trade imbalance, drop in foreign reserves, and rise in unemployment.

Noting that many countries around the world may go into economic recession, the PEAC advocated hard work for Nigeria to keep its head above the waters.

They recommended amongst others, a possible revision of the 2020 Budget, with priority spending on healthcare, reprioritization of expenditure on infrastructure to focus on projects nearing completion with pro-poor effects”

Others include “curtailing recurrent expenditure, mobilizing the private sector to strengthen health sector infrastructure, and boosting of government revenue”.

They stressed that the projections may seem dire, but the worst may be avoided with hard work and scrupulous implementation of policies