Debt servicing to take N3tr in N5.509tr revised 2020 budget
• Buhari seeks approval for fresh $ 5.513b loans • Senate may give accelerated approval next week • NGF to meet Malami over Executive Order 10, 2020 • To interface with FG over AFDB $ 1b COVID- 19 facility
ASUM of N2.951 trillion has been voted by the presidency for debt servic - ing in the N5.509 trillion revised budget of 2020 sent to the National Assembly by President Muhammadu Buhari yesterday . The revised budget bill, the second reading of which has already been done by the Senate, indicates that debt servicing was raised from N2.4 trillion as approved in the main budget in December 2019 to the new figure of N2.9 trillion. Also, the revised budget bill shows that following the revision of key macroeconomic parameters, projected oil revenues for 2020 have been significantly reduced.
Senate Majority Leader, Yahaya Abdullahi, who presented the lead debate during the consideration of the general principles of the revised budget bill, said: “The 2020 Appropriation Act ( Amendment) Bill is now predicated on oil production of 1.93 million barrels per day and a benchmark oil price of $ 35 dollar per barrel. “The official exchange rate has also been adjusted upwards to N360/ US$ 1 by the Central Bank of Nigeria ( CBN). At the Importers and Exporters Foreign Exchange ( IEFX) window, where the bulk of foreign exchange transactions are consummated, the exchange rate recently depreciated from about N360/ US$ 1 in January, 2020 to over N385/ US$ 1.
“While the CBN continues to make strenuous efforts to stabilize the exchange rate, it is generally expected that the naira will suffer further devaluation as Nigeria is projected to lose about $ 26 billion in oil revenues, its principal source of foreign currency.”
The budget bill has also adjusted downwards the nonoil revenue projections, including various tax and customs receipts. Additionally, the first- line deductions by the Nigerian National Petroleum Corporation ( NNPC) for federally funded upstream projects/ expenditures have been significantly reduced by 65 per cent from N1.223 trillion to N424.23 billion.
“These cuts include the removal of N457.50 billion provision for premium motor spirit ( PMS) under- recovery, with the re- introduction of a price modulation mechanism ( tied to international price movement) as the basis for pricing PMS going forward.”
It was also pointed out that the aggregate revenue available to fund the 2020 budget is now projected at N5.09 trillion ( 35 per cent or N2.78 trillion less than 2020 budget passed by the National Assembly.)
According to the Senate leader, 26 per cent of this is projected to come from oilrelated sources while the balance is to be earned from non- oil sources. The provision of Stamp Duty was reduced to N200 billion from N463.95 billion, while Signature Bonus is down to N350.52 billion from N939.30 billion. The revised budget bill further shows that “some nonessential and deferrable
expenditure ( especially those classified as administrative capital expenditure) were reduced in favour of growth- enhancing, propoor funding expenditures and social sector investments in order to combat the current pandemic as well as its negative impacts on the economy”
Abdullahi said provision for sinking fund to retire mature bonds to local contractors/ creditors was N272.9 billion, adding that the provisions for personnel and pension cost were retained at N2.83 trillion and N536.72 billion.
The sum of N25.56 billion ( representing 1 per cent of the Consolidated Revenue Fund) has been provided for the Basic Health Care provision Fund. Other critical provisions such as N22.73 billion for routine immunization in the service wide votes and N81.14 billion for the power sector reform programme were retained. “The aggregate amount available for the capital expenditures ( exclusive of Capital in Statutory Transfers) in this reversed 2020 budget is N2.23 trillion, consisting of N1.264 trillion for MDAS, N100.3 billion for Covid- 19 expenditures, N20 billion for Capital Component for the Special Intervention Programme, N274.85 billion for other Capital supplementation,
N141.17 billion Capital Budget for Ten GOES, N42.96 for Donor Grant Funded Expenditures and N387.30 billion funded by Project- Tied Loans,” Abdullahi explained.
Earlier yesterday, another letter from President Buhari seeking an approval for fresh external loans totalling $ 5.513billion was read on the floor of the upper legislative chamber by the Senate President, Ahmad Lawan.
Buhari in the request said the loans became imperative for funding the revised 2020 budget and insulating the nation’s economy from the yet- to- abate COVID- 19 pandemic. The loan, according to the president, is to enable the Federal Government to finance the deficit in the 2020 revised budget.
In the letter, Buhari also explained that part of the loan would be used to finance some food security programmes as well as provide support to state governments.
President Buhari, in a separate letter, also submitted the revised 2020- 2022 Medium Term Expenditure Framework and Fiscal Strategy Paper ( MTEF/ FSP) and the 2020 budget for consideration and approval.
The president said the loans to fund the 2020 revised budget are being expected from multilateral institutions like the International Monetary Fund ( IMF) $ 3.4 billion; World Bank $ 1.5billion; African Development Bank ( AFDB) $ 500 million; and the Islamic Development Bank ( IDB) $ 113million.
On the Federal Government’s priority projects, the president said $ 125million would be taken from the African Development Bank to strengthen the healthcare system and improve the response to COVID- 19 while $ 23 million is for financing smallholder farmers to mitigate food security impact of the COVID- 19 pandemic.
The government is also to source $ 600 million from the Islamic Development Bank to support Nigeria’s response to challenges posed by COVID- 19 and $ 500 million from the African ExportImport Bank to provide critical medical supplies to combat COVID- 19.
The presidency also said it intended to borrow Euro 995million from the ExportImport Bank of Brazil to support a green imperative and enhance the mechanisation of agriculture and agro- processing in Nigeria. Buhari said that the government was negotiating with the World Bank for between $ 500million - $ 750 million for COVID- 19 Action Recovery and Economic Stimulus Programme to support state- level efforts to protect livelihoods, ensure food security and stimulate economic activities.
According to him, another $ 500 - $ 750 million is being negotiated with the World Bank for State Fiscal Transparency and Sustainability Programme to provide fiscal support to the states. Buhari disclosed that the Islamic Development Bank had indicated that only $ 113million of financing would be available to the Federal Government in the 2020 fiscal year to fund the COVID19 response, which will come from the restructuring of previously approved but inactive facilities for Nigeria. In another letter fowarding the revised 2020- 2022 Medium Term Expenditure Framework and Fiscal Strategy Paper and the revised Appropriation Bill 2020 to the Senate, the president stated: “It has become necessary to revise the 2020- 2022 MTEF/ FSP and amend the Appropriation Act 2020, in view of the sharp decline in crude oil prices and the cut in Nigeria’s crude oil production quota occasioned by the COVID- 19 pandemic. In effect, the assumptions underlying the 2020 Appropriation Act are no longer sustainable. “It is also imperative to adjust expected revenues considering the widespread disruptions in other domestic economic activities, as well as international trade and transportation, due to the measures implemented across the world to curtail the spread if the COVID- 19 pandemic.
“Furthermore, it is necessary to reallocate resources in the Appropriation Act 2020 to ensure an effective implementation of required emergency measures and other actions necessary to mitigate the negative socio- economic effects of the COVID- 19 pandemic.”
Meanwhile, the Nigeria Governors Forum ( NGF) has constituted a legal committee that will engage with the Attorney General of the Federation ( AGF) on the implications of the recently passed Executive Order 10, 2020 on governance at the sub- national level. The NGF Chairman and Ekiti State governor, Dr. Kayode Fayemi, disclosed the development in a communique issued at the end of the forum’s ninth teleconference.
According to Fayemi, the team nominated by the forum to engage with the AGF comprised the governors of Sokoto, Plateau and Ondo states.
Fayemi said that the forum also resolved to interface with the Ministry of Finance, Budget and National Planning, on the $ 1 billion COVID- 19 crisis facility approved for the country at the request of the Federal Government by the African Development Bank ( AFDB), to embark on the delivery of projects that will meet the needs of Nigerians during the pandemic, in such areas as health emergency assistance, agriculture and food security.
This decision, he said, resulted from a brief from Ebrima Faal, Senior Director of the African Development Bank ( AFDB) Nigeria on the $ 1billion COVID- 19 crisis facility and update from Zouerayoussoufou, Managing Director and CEO of the Aliko Dangote Foundation on activities of the CACOVID.
He further disclosed that the governors endorsed the development of a threemonth plan on reopening the economy by the NEC Sub- Committee that will interface with the Presidential Task Force on COVID- 19, comprising the governors of Delta ( Chairman), Ekiti, Lagos, Anambra, Kano, Bauchi and Plateau states as well as the FCT minister.
“Through the NEC Ad- Hoc Sub- Committee on COVID- 19 comprising the governors of Kaduna ( Chairman), Kebbi, Ebonyi, Ogun, Nasarawa, Edo, and Jigawa states, the forum will interface with the Economic Sustainability Committee chaired by the Vice President, Prof Yemi Osinbajo, to incorporate the contributions of state governments in the Economic Sustainability Plan as a national response to the COVID- 19 crisis,” Fayemi said.