Nigeria’s finance minister, Zainab Ahmed, said Tuesday that the Federal Government faces “significant medium-term fiscal challenges, especially with respect to revenue generation and rapid growth in personnel costs”.
To clean up the government’s ugly balance sheet, Ahmed said key reforms would be implemented with “increased vigour to improve revenue collection and expenditure management”.
She said improving transparency regarding government finances is a good place to start.
“It is proposed that the FGN budget from 2020 will reflect the revenues and expenditures of GOEs and the multi-lateral/bi-lateral projected loans and related expenditures,” Ahmed said.
“Achieving fiscal sustainability and macro-fiscal objectives of government will require bold, decisive and urgent action. Government is determined to act as may be required,” she said.
Dwindling government finances have taken a toll on public infrastructure and economic growth.
The government has failed to meet revenue projections for the past three years and there are no signs the trend will reverse this year.
In the first six months of 2019, the government raised N2.0 trillion, 30 percent off the mark of projected revenues of N2.9 trillion for that period and N6.9 trillion for the full-year, according to data by the Ministry of Finance.
Despite the revenue failings over the years, the government expects revenue to rise 10 percent in 2020.
Revenue is estimated at N7.63 trillion from N6.9 trillion target for 2019.
The government, however, plans to spend less in 2020, with expenditure target of N8.9 trillion.
The decrease is mainly stoked by a decline in capital spending.
In 2020, the Federal Government plans to cut a whopping N1.16 trillion off capital expenditure from N2.92 trillion in 2019 to N1.76 trillion.
This will see capital expenditure dropping to 21 percent of total expenditure in 2020 compared to 32 percent in the 2019 approved budget.
The revenue framework shows that the share of oil revenue has been projected at N2.36 trillion, share of minerals and mining at N1.89 billion, share of dividend (NLNG) at N124 billion, share of VAT at N292 billion, share of Company Income Tax at N839 billion, customs at N368 billion, and share of federation account levies at N54 billion, respectively. Other revenue projections are N36 billion from grants and donor, stamp duty at N200 billion, N237 billion from domestic recoveries and fines, N939 billion from signature bonus and renewals, N345 billion from FGN share of actual balance in special account, N300 billion from special levies account, N849 billion from independent revenue, and N990 billion from top 10 GOEs.
In the key assumptions of the 2020 budget which was presented by Ahmed, the government targets oil production of 2.18mbpd, which is lower than the 2.3mbpd for 2019.
Ahmed said that the oil production target appears to be more realistic as the actual daily crude oil production and exports have been well below budget projections since 2013.
Ahmed also said that a lower oil price at $55/barrel has been assumed for 2020 against $60/b considering the expected oil glut next year, as well as the need to cushion against unexpected price shock.
GDP growth rate is put at 2.93 percent in 2020, lower than the 3 percent target for 2019.
Ahmed also said the government is currently reviewing the quantum of waivers, but will not just withdraw its decision on granting pioneer status accorded to some investors.
“The idea is to see which one we can begin to pull back and throw away from the pool to reduce the cost on government – but to encourage businesses and to make Nigeria competitive, some of them are essential,” she said.
Also from 2020, budgets of all MDAs and Government Owned Enterprises (GOEs) will now be contained and published in the nation’s annual budget, the minister equally announced.
Ben Akabueze, director-general, Budget Office, in his remark stressed that efforts are ongoing to ensure Nigeria returns to a January-December budget cycle effective from 2020.
He said the key reforms such as the strategic revenue growth initiative will be implemented with increased vigour to improve revenue collection and expenditure management.
“In furtherance of our objective of greater comprehensiveness and transparency in the budget process, it is proposed that the government budget from 2020 will reflect the revenues and expenditure of government-owned enterprise and the multi-lateral/bilateral project-tied loans and related expenditures,” he said.
He said that bold, decisive and urgent action is required in achieving fiscal sustainability and macro fiscal objectives of the government.
ONYINYE NWACHUKWU, CYNTHIA EGBOBOH, Abuja, & LOLADE AKINMURELE, Lagos
