Experts Fault 2021 Budget, Say N13.08trn Expenditure Not Implementable
Some finance and economic experts have said that the Federal Government’s 2021 budget of N13.08trn is too ambitious and may not be easily implementable,
The experts said that for an economy that has been projected to go into recession by the end of this year, having a budget size that is as huge as N13.08trn is unrealistic.
President Muhammadu Buhari had presented a budget proposal of N13 08trn up by 22.9 per cent from the N10.8trn 2020 budget, with revenue projected at N7.5trn, while the deficit amounts to N5.1trn.
Considering the impact of the Covid-19 crisis on the Nigerian economy, the Chief Executive Officer of Cowry Assets Management, Johnson Chukwu, said the “budget is overly optimistic.”
He said, “In the current year, the government said by the end of June they will achieve 60 per cent of their revenue projections for the 2020 budget which it has struggled to measure-up with.
“Looking at this year, I don’t see how much revenue change we are going to see next year.
“Aside from revenue from the country’s oil export, the major revenue will be coming from other independent revenue sources.
“I do not think the economy will have fully recovered as it will lead to the achievement of the budget proposal.”
He said increasing the revenue projection to about N7.5trn was “highly optimistic”
He added, ” I think the government needs to be more realistic in it’s projections and if it does that, it will also help us to review our approach to managing our finance or building infrastructure.”
Chukwu said the Nigerian government does not have a revenue profile to continue to build infrastructure from budgetary allocations.
“If we have a budget that is more realistic, we may not have the strong feeling that we cannot build infrastructure as it stands today,” he added.
Over the years, Africa’s most populous country has relied on both domestic and foreign borrowings to fund fiscal deficits.
The 2020 budget deficit was N4.97trn and the government had borrowed $3.4bn from the International monetary fund and raised N1.54trn from domestic investors through bond auctions to fund the deficit.
Nigeria’s budget projection for next year which is 21 per cent up from the 2020 budget of N10.8trn has a deficit amounting to 3.62 per cent of 2021 projected Gross Domestic Product.
The Fiscal Responsibility Act of 2007 stipulated that “The aggregate expenditure and the aggregate amount appropriated by the National Assembly for each financial year shall not be more than the estimated aggregate revenue plus a deficit, not exceeding three per cent if the estimated Gross Domestic Product or any sustainable percentage as may be determined by the National Assembly for each financial year.”
The deficit in the 2021 budget estimate is higher than the three per cent threshold provided by the Act.
Nigeria’s former Vice President, Atiku Abubakar had said the violation of the Act portends danger for the economy.
Speaking on the development, a Professor of Economics at the Ahmadu Bello University, Zaria, Peter Njiforti, told THE WHISTLER that the violation of the Fiscal Responsibility Act is worrisome.
He said, “We put law and we violate the law. We have a law in place that is guiding our budget so that the deficit will not exceed three per cent of our GDP and we have a budget where the deficit exceeds the threshold, then we are violating the law.”
Njiforti said the government should have explained in a note why the threshold was exceeded.
He said, “I think the projection is actually ambitious and if you look at the budget N3.12 trn is for debt servicing. So the thing about the budget is that they did not emphasise the extent at which the 2020 budget has been achieved.
“Ideally in presenting the budget they should give us an idea about the performance of the previous budget sector by sector so that we will know what was projected and realised.
“The budget is somehow ambitious because pronouncement is one thing, actual realisation is another thing.”
Chief Economist at the Nigerian Economic Summit Group, Wilson Erumebor, said the main issue for the budget is in the area of implementation.
He said, “Will the revenue target of N7.9trn be met? Deficit of over N5trn is huge to be funded mainly by borrowing, and by implication, Nigeria’s debt stock will surge by N4.3trn.”
A former Deputy Governor, Central Bank of Nigeria, Dr Obadiah Mailafia, also said that the overall budget is ambitious, adding that a deficit of N5.20trn is on the high side which may not be sustainable considering the current economic realities of the nation.
He said, “Right now with the economic realities, coupled with the COVID-19, we are heading towards recession and the only solution is to pump in money into the economy to restore confidence.”
Mailafia stressed on the need for the government to exercise control over expenditure, adding that no one can tell where the government spending is going to.
He added, “Nigerians are not feeling the impact of government’s spending at all.
“I will say that there is need for government to carry out more infrastructural project that are labour intensive, thereby creating jobs for the people.
“If things continue the way it is, we may see more people living in poverty, and the economic situation may get worse.”