As recession bites, Nigerians hold 2021 budget to critical scrutiny

On October 8, when President Muhammadu Buhari presented the 2021 budget proposal to the National Assembly he said: “Today marks an important occasion in our quest to accord the federal budget process the seriousness it deserves.” However, under scrutiny, many Nigerians doubt any serious contemplation went into the preparation.

Nigerians have taken to social media under the hashtag #Wasteful2021Budget to lampoon various budgetary provisions that would otherwise not merit more than a dismissive roll of the eye if the economy was not careening down a precipice.

“The 2021 Budget was prepared amid a challenging global and domestic environment due to the persistent headwinds from the Coronavirus pandemic. The resulting global economic recession, low oil prices, and heightened global economic uncertainty have had important implications for our economy,” Buhari said.

But his budgetary proposals have not reflected this priority. For example, budgetary provision for N507 million for the purchase of vehicles for some tertiary institutions, rehabilitation of offices of the EFCC and ICPC billed to gulp N309 million and even a N51.5 million planned expenditure for the production of wall calendars for the Ministry of Information and Culture only epitomizes a return to status quo and has drawn the ire of Nigerians.

The 2021 Budget tagged, the “Budget of Economic Recovery and Resilience,” was designed to deliver on the Government’s Economic Sustainability Plan goals, accelerate the pace of Nigeria’s economic recovery, promote economic diversification, enhance competitiveness and ensure social inclusion, the government said.

But analysts doubt the budget, which was sent to lawmakers only a month before the economy plunged into a recession, would do little to engender growth.

The 2021 Federal Government Budget proposed Revenue and Expenditure are N7.89 trillion and N13.08 trillion, respectively, resulting in N5.20 trillion fiscal deficit.

The 2021 Budget expenditure is benchmarked against a crude oil price of $40 per barrel and a daily oil production estimate of 1.86 million barrels per day. The reality is different. Oil producers failed on Monday to agree on a crucial deal that will keep out about 9.6 million barrels payday production next year, which could send prices reeling.

In the 2021 Budget, the government has earmarked N1.35 trillion spending by Government Owned Enterprises and Grants and Aid funded expenditure from N354.85 billion.

The budget contains recurrent expenditure of N5.65 trillion, personnel cost of N3.76 trillion, and debt service of N3.12 trillion. Statutory transfers have been put at N484.4 billion while Pension, Gratuities and Retirees Benefits was put at N501.19 billion and Overhead cost at N625.50 billion.

This follows the same budgeting pattern where low priority proposals are rife, where deficits continue to rise, and where paying salaries trumps building hospitals.

For example, in the 2019 budget, capital expenditure of N2.094 trillion was budgeted but the actual spending was only N1.165 trillion and in 2018, recurrent expenditure of N2.869 trillion was proposed but the actual expenditure of N1.665 trillion was spent.

However, in 2018 and 2019 actual recurrent expenditure amounted to N3.238 trillion and 4.251 trillion, respectively.
The deficit in the 2021 budget is higher than the 3 percent threshold set by the Fiscal Responsibility Act, a situation the government has blamed on the economic challenges due to Covid-19.

Non-debt recurrent expenditure includes N3.76 trillion relating to personnel costs, which constitutes the largest expense item.

“I am not sure the 2021 budget will provide an opportunity to spend out of recession, public costs are still too high and infrastructure expenditure is inadequate to stimulate the economy,” said Ayodele Oni, an energy lawyer, and partner at Lagos-based Bloomfield Law firm.

The Federal Government expects to finance the deficit by new borrowings, privatization proceeds, and drawdown on loans secured for specific projects.

Nigeria’s economy contracted by 3.62 percent in the third quarter of 2020, after it contracted by 6.1 percent in the second quarter of the year according to data from the National Bureau of Statistics (NBS), sliding into the second recession in five years.

Analysts have worried about the sustainability of the budget considering that prospects for revenue remain low while debts continue to rise.

“Revenue generation remains a challenge in the face of falling oil prices and economic contraction, especially as a result of the Covid-19 pandemic,” according to analysts at PwC Nigeria in a review of the budget.

The focus on capital expenditure is expected to create the enabling environment and infrastructure for businesses to thrive and stimulate economic activities. The annual presentation of Finance Bills and the introduction of Tax Expenditure Statement indicates the government’s increased focus on taxation and fiscal policies, said analysts at PwC Nigeria, but it is unclear if there are going to be enough economic activities to sustain taxes.