Minister of Finance, Budget and National Planning, Zainab Ahmed confirmed on Friday that the Federal Government has spent N1.25 trillion on debt servicing between January and May 2020. The government also plans a record N11.86 trillion budget for 2021.
The minister also said government spent some N1.32 trillion on personnel cost including pensions during the period, but has only released N253.33 billion for capital expenditure due to the budget revision exercise.
The minister disclosed this during a virtual conference on the presentation of the 2021-2023 Medium Term Expenditure Framework & Fiscal Strategy Paper (MTEF/FSP) which held shortly after President Muhammadu Buhari signed the revised N10.8 trillion budget into law.
The draft 2021-2023 MTEF/FSP was prepared against the backdrop of
heightened global economic uncertainty, with the framework indicating continued
global challenges due to the COVID-19 pandemic.
At the meeting, Ahmed raised concerns that Nigeria’s fiscal risk has somewhat been elevated by the Covid-19 pandemic which has exacerbated structural weakness in the economy.
“The covid-19 pandemic has further elevated the dwindling government finances and has taken a toll on public infrastructure and economic growth, as the government has been unable to meet revenue projections in the past years.
“The disruptions in global trade and logistics would negatively affect custom duty collections in 2020. The covid-19 containment measures though necessary are inhibiting domestic economic activities with consequential negative impact on taxation and other government revenues,” Ahmed stressed.
Revenue performance from January to May 2020 shows FGN’s retained revenue at N1.48 trillion which represents 56 percent of the target. The minister put FGN share of oil revenues at N701.6 billion; non-oil tax revenues at N439.32 billion; Companies income tax and value added tax collections at N213.24 billion and N68.09 billion; and Customs collections at N158 billion.
Despite the notable disruptions caused by the covid-19 pandemic, the government has projected N6.98 trillion as revenue in 2021, though down from the N7.63 trillion target for 2020, with an aggregate projected expenditure target of N11.86 trillion.
Ahmed further assured that the government has put in place policies to enhance its ability to generate more revenues and cushion the impact of the covid-19 pandemic on the economy, which still faces significant medium term fiscal challenge especially with respect to its revenue.
On the key assumption of the 2021 budget which was presented by the Minister, the government targets oil production of 1.86 mbpd, with an oil price benchmark at $40 per barrel and exchange rate at N360/$.
With GDP growth rate is put at 3 percent in 2021, up from the projected -4 percent in the revised 2020 budget, the Minister said since oil GDP growth rate has a strong positive correlation with the real gdp growth rate rate in Nigeria, hence, changes in the underlying drivers of the oil GDP will significantly affect real GDP performance”.
According to the Minister, the 2021 budget with a N5.16 trillion deficit is framed against the backdrop of a challenging global macroeconomic environment as well as domestic factors. “We aim to keep the deficit within the 3 percent ceiling over the medium term and are therefore working on identifying new revenues sources and cost reduction”.
“FIRS and the Nigeria Custom are in the process of automating the activities, eliminating cash collection to reduce losses. we are also working to expand the tax nets, find new sources of revenue to augment the 2021 budget deficit”.
Ben Akabueze, Director-General, Budget Office in his remarks, admitted that with the rate of shutdown in the economic activities, there may be negative growth in the third and fourth quarters of this year.
He however said key reforms and policies will be implemented to stimulate the economy to mitigate cushion the impact of the projected recession.
“We are working to develop specific policies to stimulate the economy to ensure that even if there would be a negative growth, it will not be on the high side, and even if the much projected recession happens, it will be short lived and we bounce back to positive growth.