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President Muhammadu Buhari on December 31, 2020, signed the 2021 Appropriation Act, thereby paving way to the implementation of the N13.58trilion fiscal estimates tagged “Budget of Economic Recovery and Resilience.” The President’s assent came 10 days after both chambers of the National Assembly raised the proposed budget by N508billion, and three days after it was transmitted to the president for his signature. The increase arose from the N365billion requested by the presidency for the upscaling of the National Social Investment Programme (NSIP). The lawmakers also retained the revenue benchmarks, the oil production and price benchmark at 1.8 million barrel per day, which some experts claim are unrealistic.
The approved budget contains an aggregate expenditure of N13.588trillion, projected revenue of N7.886trillion. This includes N3.50trillion of the Federal Government share of the federation revenue and another N1.348trillion from government-owned enterprises, as well as capital supplementation of N1.06trillion and total Capital expenditure of N4.125trillion. Statutory transfers stand at N496.5billion, Revenue expenditure of N5.64trillion and Gross Domestic Product (GDP) growth of three per cent. The budget has a deficit of N5.2trillion or 40 per cent of the total budget, while N3.3trillion is provided for debt servicing for the financial year. This means that the 2021 budget will require specific borrowing plan and supplementary funding to actualise government’s expansionary fiscal policy.
According to President Buhari, the budget “is very critical to the delivery of the government’s legacy projects.” This requires effective implementation, especially the capital components of the budget. For all of this to work, the 2021 budget should be able to stimulate domestic economic activities and create employment opportunities in key sectors of the economy, in particular, youth employment. Good enough, the World Bank has hinted that about 30 million new jobs are needed in Nigeria between now and 2030 to avert mass poverty.
Besides, the Ministries, Departments, Agencies (MDAs) should ensure prompt and full remittance of collected revenues. Interestingly, President Buhari has warned that heavy sanctions await MDAs that do not comply. The president’s warning is premised on the fact that budget is an effective tool to achieve development and welfare of the people. To achieve this goal, there is need for effective implementation of the budget. Previous budgets, especially the capital components, have fallen far short of 60 per cent implementation. At least, 90 per cent implementation is required to meet the objectives of the new budget.
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However, we are concerned that the objectives of the budget may be hampered because of lack of effective implementation. The key parameters of the budget may be hindered by the second wave of the Coronavirus pandemic which could push back oil prices down the trough. Also the production benchmarks could pose serious challenge to meeting the revenue target as it is above the current OPEC quota. Nigeria’s quota has hovered between 1.3mbd and 1.5mbd in the past few months, thereby making the production benchmark 400,000 above its current quota. For the budget to support economic recovery, it must deliver on priorities. However, the government should worry about its dwindling revenue. Also, the declining crude oil price may place additional macroeconomic pressure on the country, at least in the first quarter of 2021.
We, therefore, urge the Federal Government to work with the private sector to improve infrastructure. Besides, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria has limited options. It can either maintain current policy rates and increase the yields on Nigerian Treasury Bills at the Open Market Operation, or increase the Cash Reserve Requirement to mop-up the expected liquidity in the financial market.
Above all, the government should deepen its economic diversification effort especially in agriculture and other non-oil sectors of the economy. These are two areas that will touch the lives of many Nigerians. In all, the 2021 budget must ensure that the economy is supported fully through public expenditure. And with proper management of the economy, effective implementation of the budget and the projected three per cent growth in GDP, the country is likely to exit the current recession soon. Therefore, let government strive to achieve 90 per cent implementation of the budget.
