Ogun State, with little or no financial buffers, may suffer the harsh impacts of economic turmoil and falling oil price as a result of coronavirus in terms of budget performance for 2020 fiscal year, since government has declared move to make a downward review to N449.97 billion fiscal estimates approved for the year 2020.
Recall that the state designed a three-year Medium Term Expenditure Framework for which the benchmark for capital expenditure is put at 60%, 65% and 70% for fiscal years 2020, 2021 and 2022, respectively; inflation rates pegged at 10.2%, 8.49% and 6.59% for three years and gross domestic product contributions stand at 2.4% of N2.99 trillion for 2020; N3.06 trillion for 2021 and N3.14 trillion 2022.
Whereas, sources of 2020 budget finance, which include N255.946 billion of IGR – 57% of the budget; N43.431 billion of Statutory Allocation – 10%; N22.031 billion VAT – 5%, and N129.566 billion of Capital and other Receipts – 28% may not be realised to effectively finance the budget as company shares and government bonds and securities are getting flat.
This is as Nigeria’s local and foreign earnings are seriously dwindling, which will definitely have negative impacts on IGR, VAT collections, Statutory Allocations, Capital and other receipts, except some fiscal palliatives as well as financial mechanisms are devised to shore up the budget.
Therefore, N271.2 billion budgetary allocations for capital expenditure, representing 60.3%, may suffer abysmally in favour of N178.8 billion recurrent expenditure, representing 39.7% going by Governor Dapo Abiodun’s pledge to start paying N30,000 minimum wage to state workers as well as proposed emergency funds being considered for the clinical consumables against coronavirus and other health challenges that are troubling the country and Ogun state in particular.
Making an official statement on the current economic realities staring government on the face, Governor Abiodun at the weekend rolled out measures to tackle the economic effects of coronavirus, saying: “As a result of the recent global economic challenges resulting from coronavirus pandemic and the crash in the prices of crude oil, a number of measures have been announced to mitigate the imminent reduction in monthly FAAC allocations from the Federation Accounts.”
The governor reeled out these measures while receiving the Interim Report of the State’s Economic Team led by the Commissioner of Finance and Chief Economic Adviser, Dapo Okubadejo, saying: “Some of the measures devised include budget review, restructuring and refinancing of existing loan obligations and processing of new credit facilities to improve the State’s cash flow and take advantage of the more favourable interest rate regime in the country.”
Confirming government’s position on economic realities through an official press statement issued by Kunle Somorin, the chief press secretary to Governor Abiodun in Abeokuta at the weekend, explained further that “other initiatives include creatively shoring up internally generated revenue, eliminating leakages and aggressive cost reduction, especially recurrent cost.
“Also recommended are enhancing accountability and transparency and strengthening the Government Delivery Unit to ensure efficient and effective delivery of projects and policies. Furthermore, government would prioritise spending on its focal areas such as agriculture, healthcare, infrastructure, and other projects that will enhance the living standards of the citizenry.”
Considering all the emergency measures listed above, the governor added, “Having anticipated the enormity of the economic challenges the prevailing circumstances portend, the government is confident that these measures will sufficiently address them.
“Indeed, there is no compromise on Dapo Abiodun administration’s commitment to deliver on its electoral promises as encapsulated in the Building Our Future Together Agenda, regardless of the prevailing economic circumstances,” the statement concluded.
