2021 Budget: FG’s Proposed N13.1trn Expenditure May Not Put Nigeria On Path Of Growth – Analysts | Independent Newspapers Nigeria

LAGOS  – The Federal Government’s planned expenditure of N13.1 trillion in the 2021 budget, representing 21.3% rise from the previous year’s N10.8 trillion, is not large enough to support the country’s growth aspirations at 8.0% of Gross Domestic Product (GDP), Analysts have warned. 

The analysts also argued that the weak budget implementation capacity of the Federal Government may, in the broader context, upset the proposed expenditure which is expected to hasten the path of economic recovery by reining in the ongoing stagflation. 

The 2021 Appropriation Bill, which is targeted at boosting economic recovery and resilience amid COVID-19, was presented to the National Assembly by President Muhammadu Buhari on Thursday, last week, exactly the same period as last year, and the earliest since November 2017. Much like the 2020 budget, this would hasten passage and implementation. 

The President, in his presentation, noted that the Finance Bill 2020, which sets out revenue and fiscal policy plans for 2021, would be sent to the National Assembly for final consideration and approval. 

Also, the president revealed plans to provide more clarity on the estimated cost of tax exemptions, incentives and rebates by publishing an annual ‘Tax Expenditures Statement’ in line with the Fiscal Responsibility Act (FRA) 2007. 

Dr. Timothy Olawale, Director General of Nigeria Employers’ Consultative Association (NECA), in an exclusive interview with DAILY INDEPENDENT, said the proposed budget estimate of N13.08 trillion presented to the Joint National Assembly tagged, “Budget of Economic Recovery and Resilience”, was based on some assumptions – recurrent expenditure of N5.65 trillion, (43.2%) of which, personnel cost N3.76 trillion, debt servicing, N3.12 trillion (23.9%), overhead costs N625.5 billion. 

The Capital Budget is N3.58 trillion (27.4%), with a deficit of N5.194 trillion. 

Inflation rate is anticipated at 11.95%, GDP growth rate at 3%, oil benchmark at $40, and estimated oil production of 1.86mbpd – all looks unrealistic to achieve the economic recovery and resilience as proposed by the Federal Government. 

According to them, “We observed that the current administration has not addressed the high cost in recurrent expenditure, which amounts to about 43% of the budget, and debt service taking more significant portion than Capital Expenditure, at nearly 27% of the budget. 

“We are not convinced that funding budget deficit of about N5 trillion, which was hugely to service debt and recurrent expenditure, could be addressed as a ‘Budget of Economic Recovery and Resilience’, and we believe it could not address the fundamentals of economic recovery from any meaningful angle. By the end of year 2020, the debt profile of the country would have reached N35 trillion.” 

NECA’s Director General said: “While adding the N5.19 trillion anticipated in 2021 and, we believe, there would still be additional borrowings, which could suggest that the country could reach a N45 trillion debt mark by end of 2021. 

“With the projection for economic growth, based on last 5 years’ GDP growth and a likely deep into recession in Q3, 2020, there is no likelihood that the economy in 2021 could achieve a 3% growth rate. 

“We are worried that economic growth has been anemic over the last five years averaging 1% since 2015; well below levels needed to drive meaningful development. In 2018, Nigeria overtook India as having the most people globally living in extreme poverty. 

“Even before the COVID-19 pandemic, Nigeria’s economy was facing headwinds from rising external vulnerabilities and falling per capita GDP levels. 

“It is also interesting to note that the value of the debt service in the 2021 budget is equivalent to 87.1% of the capital expenditure. 

Olawale, however, said: “While we will not try and throw the baby out with the bathwater, we applaud some intentions like the plan to publish for  the first time a tax expenditure statement for the year, which should contain the tax exemption, incentives and rebates. This intention will promote adequate planning for businesses and investors”. 

Auwal Musa Rafsanjani, in a phone conversation with our correspondent, stated that the proposed revenue expenditure by the Federal Government looks unrealistic to achieve the economic recovery and resilience needed to lift Nigeria from the current recession. 

He said: “There is no economy in the world where borrowing to service the budget and debt as the case in Nigeria would stand the test of time in her survival front 

“We call for blocking leakages that still permeate the system in order to promote accountability and transparency to encourage investors to boost financial inflows in the government accounts. 

“A more strategic need is to reduce the dependence on revenues from oil and strategize ways and means in stimulating non-oil economy to provide the needed revenue for funding of the budget. Strengthening the tax regime will 

“While we applaud the ongoing efforts in addressing the Infrastructural challenges across the country, we call for the promotion of more private-public partnership in addressing infrastructural provisions under the tax rebate and incentive, instead of resulting in heavily borrowing in order to reduce the burden on our lean revenue.” 

Dr. Muda Yusuf, Director General of Lagos Chamber of Commerce and Industry (LCCI), in response to the proposed expenditure of N13.1 trillion in the 2021 budget by the Federal Government, commended the early presentation of the budget and the MTEF to the national Assembly. 

He emphasised that the administration has demonstrated commitment to sustaining the return to January – December budget cycle, and that the National Assembly has similarly stated its commitment to pass the budget before year end. 

He said: “The emphasis on completion of ongoing projects is laudable. This would save the country the recurring incidence of abandoned projects which currently litter the country. 

However, revenue projections seem optimistic, having regards to revenue performance over the last few years. We have witnessed large negative variances in revenue targets over the last few years. This poses a risk of bigger deficits than projected. 

“The ballooning recurrent expenditure and debt service is a cause for concern. The combination of these two line items exceeds the total revenue expected. The implication is that the entire capital budget would be funded from borrowing. This is a cause for concern.”

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