Nigeria’s Minister of Finance, Budget and National Planning, Zainab Ahmed, confirmed on Tuesday that government does not have plans yet to access the Eurobond market in 2021, but will tap up to N850bn from unclaimed dividends and dormant accounts to partly fund this year’s N13.59trn budget already approved and signed by President Muhammadu Buhari.
“We will decide to go to the international market if the conditions are right, we will be monitoring the market,” Ahmed said during the virtual presentation of the 2021 budget.
The plan to tap up to N850bn from unclaimed dividends which has been energised by the 2020 finance Act has generated wide concerns, with many seeing it as illegal.
But addressing such concerns, Ahmed explained that the Finance Act 2020 has brought over 80 amendments to over 14 laws and allayed fears that these monies would be domiciled in a Trust Fund and paid to owners on demand.
She said these are part of government strategies to rev up lean revenues up to N7.99trn this year despite prevailing tight fiscal conditions.
Already, the Federal Government generated some N3.94 trillion revenue – 73 percent of income targets for 2020 fiscal year.
Ahmed said the government’s optimism of an improved income position is buoyed by its commitment to pursue fiscal transparency, accountability and comprehensiveness. Consequently, the budgets of 60 Government Owned Enterprises (GOEs) have been integrated into the 2021 budget proposal.
She said in aggregate, 30 percent of projected revenues is to come from oil-related sources while 70 percent is to be earned from non-oil sources.
The Federal Government’s 2021 aggregate budget – inclusive of GOEs and project-tied loans – is projected to be N13.59trn, which is 25.7 percent higher than the revised 2020 budget.
The budget of economic recovery and resilience aims at accelerating the country’s economic recovery process, promoting social inclusion and strengthening the resilience of the economy.
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Recurrent (non-debt) spending, estimated to amount to N5.99 trillion, is 44.1 percent of total expenditure and 13.3 percent higher than 2020 revised estimates (mainly reflecting increases in salaries and pensions).
Aggregate capital expenditure of N4.37 trillion is 32.2 percent of total expenditure and 62.9 percent higher than the 2020 revised budget (inclusive of capital component of statutory transfers, GOEs Capital & project-tied loans expenditures).
Some N3.32 trillion has been budgeted for debt service, indicating 24.5 percent of total expenditure, and 12.6 percent more than the 2020 revised budget.
N200bn has also been provided to retire maturing bonds to local contractors/suppliers, indicating 1.68 percent of total expenditure.
According to the finance minister, this reflects FGN’s continuing commitment to offset accumulated arrears of contractual obligations dating back over 10 years.
Out of the over N13 trillion, the budget deficit is put at N5.60 trillion for 2021, which represents 3.93 percent of GDP.
Ahmed explained that though the ratio is above the 3 percent fiscal requirement, the government relied on the special provision in the Fiscal Responsibility Act to go beyond the threshold.
The deficit is to be financed equally through domestic and foreign sources at N2.34 trillion each, while N709.69bn is to be sourced through multilateral/bilateral loan drawdowns.
The budget is also being proposed to be partly funded through N205.15bn from privatisation proceeds.
Ahmed admitted that revenue generation remains the most critical fiscal challenge over the medium term, but assured several measures to improve the situation and entrench a regime of prudence with emphasis on achieving value for money.
“Our budget has been constrained by our relatively low revenues,” she said.
Ahmed said the government is improving the tax administration framework to optimise its revenues and has included a section on Tax Expenditure Statement (TES) in the 2021-2023 MTEF/FSP, which seeks to dimension the cost of tax waivers/concessions and evaluate their policy effectiveness.
Tax Expenditures are currently estimated to be Company Income Tax (CIT) at N1.18 trillion, Value Added Tax (VAT) at N3.1 trillion, Customs Duties N347bn, and VAT on imports at N64bn.
She said going forward, the government intends to set an annual ceiling on Tax Expenditures to better manage their impact on already constrained government revenues.
She also noted that the government will aim to optimise the operational and collection efficiencies of GOEs, with a view to generating significantly higher revenues and controlling expenditures more tightly.
“Current sub-optimal revenue performance of most GOEs will be addressed through the effective implementation of the enhanced Performance Management Framework, including possible sanctions in case they default on their targets.
“The cost-to-revenue ratio of GOEs has by Finance Act, 2020 been limited to a maximum of 50 percent, while regular monitoring and reporting of revenue and expenditure performance of GOEs will be undertaken by both the Budget Office of the Federation and the Office of the Accountant General of the Federation,” the minister stressed.
According to her, efforts aimed at addressing revenue leakages include concluding the service-wide implementation of IPPIS; dimensioning cost of tax waivers and promoting policy dialogue and transparency around tax waiver regimes; and elimination of regressive subsidies.
Meanwhile, the Federal Government had released N1.8 trillion for capital expenditure as at end 2020, indicating up to 89 percent of the total capital appropriation, Ahmed stated.
She said out of this, N118.37 billion was released for COVID-19 capex.
