N’Assem­bly Lead­ers Meet Min­is­ters, CBN Gov over 2020 Bud­get Re­view

THISDAY - - FRONT PAGE - Deji Elu­moye, Chuks Okocha and Udora Orizu in Abuja

The Na­tional Assem­bly leadership yes­ter­day met with the Min­is­ter of Fi­nance, Bud­get and Na­tional Plan­ning, Mrs. Zainab Ahmed; Min­is­ter of State for Pe­tro­leum Re­sources, Chief Sylva Timipre; Gov­er­nor of the Cen­tral

Bank of Nige­ria (CBN), Mr. God­win Eme­fiele; and other top govern­ment of­fi­cials on the state of the econ­omy and the planned re­view of 2020 Bud­get.

THIS­DAY learnt that fol­low­ing yes­ter­day’s meet­ing in Abuja, the

Na­tional Assem­bly, which had ad­journed ple­nary for two weeks on Tuesday to curb the spread of the COVID-19 pan­demic in the leg­isla­tive com­plex, may re­con­vene next week to con­sider a down­ward re­view of the bud­get in view of the down­ward slide of the in­ter­na­tional oil mar­ket.

An­a­lysts have, how­ever, ad­vised the fed­eral govern­ment to dis­close sec­tors and line items to be af­fected by the planned N1.5 tril­lion bud­get cut.

Sources told THIS­DAY that the leadership of both the Se­nate and the House of Rep­re­sen­ta­tives were un­der pres­sure to re­con­vene next week to re­view the 2020 Ap­pro­pri­a­tion Act.

The pres­i­dency was said to have pre­pared a sup­ple­men­tary bud­get, which it in­tends to present to the two cham­bers through Ahmed.

The pro­posed bud­get re­view is said to have been based on oil bench­mark of $30 per bar­rel un­like the $57 bench­mark used for the 2020 bud­get passed by the Na­tional Assem­bly last De­cem­ber.

The fed­eral govern­ment re­cently an­nounced its de­ci­sion to re­duce the N10.59 tril­lion 2020 bud­get by N1.5 tril­lion, due to the dras­tic fall in the price of crude oil in the in­ter­na­tional mar­ket caused by the out­break of COVID-19 and trade war be­tween Russia and Saudi Ara­bia.

In a tele­phone conversati­on with THIS­DAY yes­ter­day, Chair­man of the House Com­mit­tee on Me­dia and Pub­lic Af­fairs, Hon. Ben­jamin Kalu, said the re­view of the 2020 bud­get was one of the ur­gent na­tional is­sues and the law­mak­ers might re­con­vene if nec­es­sary.

"Like it was pointed out in the speaker’s re­marks, the two-week break is not a holiday and mem­bers will be asked to re­con­vene if there is any na­tional is­sue in need of a quick leg­isla­tive interventi­on.

"The re­view of the 2020 bud­get in view of the cur­rent state of the global eco­nomic re­al­i­ties ne­ces­si­tated by the coro­n­avirus pan­demic, to me ap­pears like one of those ur­gent na­tional is­sues. Though I am yet to be for­mally briefed by

the leadership on whether or not we will be back by next week, most of the mem­bers are in town and will re­con­vene if called upon."

The need for the leg­is­la­tors to re­con­vene was said to have in­formed why the leadership of the Na­tional Assem­bly yes­ter­day met with some min­is­ters and heads of agen­cies from the ex­ec­u­tive arm of govern­ment to brain­storm on the im­pact of the pan­demic on the econ­omy.

The meet­ing touched on the planned re­view of the 2020 bud­get and the Medium Term Ex­pen­di­ture Frame­work and Fis­cal Strat­egy Pa­per passed late last year by the Na­tional Assem­bly.

Pres­i­dent of the Se­nate, who also dou­bles as the Chair­man of the Na­tional Assem­bly, Dr. Ah­mad Lawan, who presided over the meet­ing, said an im­me­di­ate re­view of the 2020 bud­get and Medium Term Ex­pen­di­ture Frame­work was im­per­a­tive, par­tic­u­larly against the back­drop of the im­pact of coro­n­avirus on global econ­omy.

The meet­ing, which lasted for about four hours, ac­cord­ing to Lawan, was sum­moned to “dis­cuss the pro­posed re­view of the 2020 bud­get and the Medium Term Ex­pen­di­ture Frame­work.”

“If we have to re­view the bud­get it­self, we have to con­sider the MTEF/FSP. Even in sick­ness, we need govern­ment to pro­vide ser­vices. The im­pact of COVID-19 is well known to all of us in terms of health and the econ­omy.

“Here, we will be talk­ing of rev­enues that we es­ti­mated to fund the bud­get 2020. Be­cause the oil price has gone so low due to the im­pact of COVID-19, the Min­is­ter of State (Pe­tro­leum Re­sources) should be able to tell us where we will be in the next six months or so.

“We should have con­cepts that can de­liver fast and are sus­tain­able. Any­thing that we do that can­not pro­vide suc­cour and re­lief to our peo­ple will lead to catas­tro­phe,” the Se­nate Pres­i­dent stated.

On his part, the Speaker of the House of Rep­re­sen­ta­tives, Hon. Femi Gba­jabi­amila, de­scribed the meet­ing as

timely.

"Tak­ing a cur­sory look at some of the pa­pers (pre­sen­ta­tions), I think this meet­ing is ac­tu­ally very timely and very im­por­tant be­cause we live in very un­usual time and it's time we start thinking out­side the box to see how we can sta­bilise our econ­omy and the di­rec­tion it's go­ing to take," the speaker said.

Ear­lier, Ahmed had ex­plained that “prior to COVID-19 and oil price de­cline, the Nige­rian econ­omy was al­ready frag­ile and vul­ner­a­ble.”

Ac­cord­ing to her, due to the global eco­nomic down­turn pre­cip­i­tated by the im­pact of the coro­n­avirus, in­ter­na­tional oil prices plunged as low as $22 per bar­rel on the in­ter­na­tional mar­ket.

She added that the im­pact of the pan­demic, which re­sulted in in­ter­na­tional cri­sis, cre­ated a dis­rup­tion in travel and trade and put “in­creas­ing pres­sure on the naira and for­eign re­serves as the crude oil sales re­ceipts de­cline and the coun­try’s mi­cro-eco­nomic out­look wors­ens."

She said in view of Nige­ria’s eco­nomic re­al­i­ties, the Cri­sis Man­age­ment Com­mit­tee con­sti­tuted by Pres­i­dent Muham­madu Buhari in re­sponse to the COVID-19 and Oil Price De­cline Cri­sis ex­pressed con­cern that “the de­cline in in­ter­na­tional oil prices or do­mes­tic pro­duc­tion may be mag­ni­fied if a se­vere out­break of the pan­demic oc­curs in Nige­ria.”

She, there­fore, pro­posed a re­view of the 2020 bud­get us­ing a $30 per bar­rel price bench­mark as against the $57 ini­tially passed in De­cem­ber by the Na­tional Assem­bly, to pre­pare for the worst case sce­nario, as well as in­su­late the Nige­ria econ­omy against any form of un­ex­pected cri­sis.

Ahmed added that the rev­enue col­lec­tion tar­get for the Nige­ria Cus­toms Service has been re­duced from N1.5 tril­lion to N943 bil­lion “due to an­tic­i­pated re­duc­tion in trade vol­umes; and pri­vati­sa­tion pro­ceeds to be cut by 50 per cent, based on the ad­verse eco­nomic out­look on sales of the In­de­pen­dent Power Projects (IPPs) and other as­sets.”

The fed­eral govern­ment would also cut rev­enuere­lated ex­pen­di­tures for the Nige­rian Na­tional Pe­tro­leum Cor­po­ra­tion (NNPC) for sev­eral projects in­cluded in the 2020 Ap­pro­pri­a­tion Act.

Ahmed said: “The fed­eral govern­ment is work­ing on Fis­cal Stim­u­lus Mea­sures to pro­vide fis­cal re­lief for tax­pay­ers and key eco­nomic sec­tors; in­cen­tivise em­ploy­ers to re­tain and re­cruit staff dur­ing the eco­nomic down­turn; stim­u­late in­vest­ment in crit­i­cal in­fra­struc­ture; re­view non-es­sen­tial tax waivers to op­ti­mise rev­enues and com­pli­ment mone­tary and trade in­ter­ven­tions to re­spond to the cri­sis."

In ad­di­tion, the fed­eral govern­ment has made pro­vi­sion for health sec­tor in­ter­ven­tions by in­tro­duc­ing im­port duty waivers for es­sen­tial in­put for phar­ma­ceu­ti­cal firms; tax waivers on new equip­ment and de­fer­ment of tax to in­crease pro­duc­tion.

Ahmed added that the fed­eral govern­ment would re­lease N6.5 bil­lion in two tranches (N1.5 bil­lion and N5 bil­lion) to the Nige­ria Cen­tre for Dis­ease Con­trol (NCDC) as interventi­on to as­sist in the fight against the spread of COVID-19.

She stated that La­gos State Govern­ment would re­ceive N10 bil­lion sup­port from the fed­eral govern­ment to com­bat coro­n­avirus spread in the state.

In ad­di­tion, she in­formed the law­mak­ers that Nige­ria had re­ceived a grant of $18.2 mil­lion from Ja­pan to­wards strength­en­ing seven NCDC cen­tres across the coun­try.

Also, N1 bil­lion would be re­leased by govern­ment to phar­ma­ceu­ti­cal firms in the coun­try to stim­u­late pro­duc­tion.

In his pre­sen­ta­tion, Eme­fiele said “while we would ex­pect to see a de­cline in our ex­pected growth pro­jec­tion for 2020 rel­a­tive to 2019, the ex­act im­pact will be de­pen­dent on how well the coro­n­avirus is con­tained over the next few month, and how long low oil prices per­sist.”

An­a­lysts Seek De­tails of Bud­get Cut

Mean­while, an­a­lysts have ad­vised the fed­eral govern­ment to dis­close sec­tors and line items to be af­fected by the planned N1.5 tril­lion cut in the 2020 bud­get.

While back­ing the pro­posed re­duc­tion in the fis­cal plan fol­low­ing the global im­pact of COVID-19 pan­demic, they also ad­vised the govern­ment to lay em­pha­sis on cut­ting ad­min­is­tra­tive cap­i­tal while boost­ing de­vel­op­men­tal cap­i­tal.

In separate in­ter­views with THIS­DAY, a former CBN Deputy Gov­er­nor, Dr. Oba­diah Mailafia and the Lead Direc­tor, Cen­tre for So­cial Jus­tice (CSJ), Eze Onyekpere, said the planned bud­get cut was in­evitable, but urged the fed­eral govern­ment to re­veal sec­tors the bud­get cut would af­fect.

The Fed­eral Ex­ec­u­tive Coun­cil (FEC) re­cently ap­proved a 20 per cent cut in cap­i­tal ex­pen­di­ture in the 2020 bud­get as well as a 25 per cent re­duc­tion in re­cur­rent ex­pen­di­ture.

The drop in crude oil price from the $57 bud­get bench­mark to about $25 per bar­rel also com­pelled the FEC to lower the bench­mark to $30 per bar­rel.

Re­act­ing to the de­ci­sions, Mailafia said: "I be­lieve these are re­al­is­tic mea­sures. But it would have been good to know the sec­tors that are be­ing af­fected by the bud­get cuts.

"There are no­to­ri­ous ar­eas of con­sump­tion that I think must not be our pri­or­i­ties. On the other hand, so­cial pro­grammes that fo­cus on the poor and vi­tal in­fra­struc­ture projects ought to be a pri­or­ity."

On the re­cent alarm raised by the Group Man­ag­ing Direc­tor (GMD) of the Nige­rian Na­tional Pe­tro­leum Cor­po­ra­tion (NNPC), Mele Kyari, that Nige­ri­ans should brace up for at least three months of tough times fol­low­ing the plunge in oil price and lack of demand for the Nige­rian crude, Mailafia stated that "he who wears the shoes knows where it pinches."

He stated: "If the NNPC Group Man­ag­ing Direc­tor raised such alarm, who are we not to cry wolf with him? The GMD was lament­ing the fact that hun­dreds of oil tankers from our shores are wan­der­ing aim­lessly in the At­lantic Ocean, with nowhere to go.

"Some of the big­gest buy­ers in Europe and Asia are in a com­plete eco­nomic lock­down. Europe has closed its bor­ders. When so­ci­eties face life-and-death choices, busi­ness of­ten has to take a back seat. This is the drama that is un­fold­ing at present."

Onyekpere also told THIS­DAY that the de­ci­sion to cut cap­i­tal ex­pen­di­ture in the 2020 bud­get was in­evitable con­sid­er­ing the plunge in oil rev­enue.

He said: "The drop in crude oil price from the $57 bud­get bench­mark to about $25 per was not an­tic­i­pated by the crafters of the 2020 fed­eral bud­get. But this should not be the sit­u­a­tion.

"The crafters of the bud­get have con­sis­tently failed, re­fused and ne­glected to ac­com­pany the bud­get with a Fis­cal Risk Ap­pen­dix as provided in sec­tion 19 (f) of the Fis­cal Re­spon­si­bil­ity Act (FRA). Apri­ori, the Fis­cal Risk Ap­pen­dix eval­u­ates the fis­cal and other re­lated risks to the an­nual bud­get (in­clud­ing the rev­enue frame­work) and spec­i­fies mea­sures to be taken to off­set the oc­cur­rence of such risks as well as mea­sures to be taken when the risks crys­tallise.

"Thus, this de­ci­sion made in a rather knee-jerk man­ner should have been sub­jected to em­pir­i­cal sim­u­la­tions, projects and anal­y­sis at the design stage of the bud­get."

Onyekpere, a lead­ing an­a­lyst on fis­cal mat­ters, ad­vised that the fed­eral govern­ment’s pro­posed bud­get cut should con­cen­trate on ad­min­is­tra­tive cap­i­tal while boost­ing de­vel­op­men­tal cap­i­tal.

He de­scribed the ad­min­is­tra­tive cap­i­tal as cap­i­tal in­vest­ments to en­hance the bu­reau­cracy and the smooth run­ning of govern­ment, while de­vel­op­men­tal cap­i­tal refers to in­vest­ments that im­pact on the over­all qual­ity of life, and ease of do­ing busi­ness, among oth­ers, of the ma­jor­ity of Nige­ri­ans.

He iden­ti­fied these to in­clude con­struc­tion of roads, hos­pi­tals, ed­u­ca­tion fa­cil­i­ties, and power sec­tor in­vest­ments, among oth­ers.

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