The Federal Government has explained why it exceeded the three per cent fiscal deficit threshold prescribed by the Fiscal Responsibility Act while preparing the 2021 budget.
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 amounted to N5.21trn.
The President had said the proposed N13.08trn expenditure comprises Capital Expenditure of N3.85trn, Non-debt Recurrent Costs of N5.65trn; Personnel Costs of N3.76trn; Pensions, Gratuities and Retirees’ Benefits of N501.19bn; Overheads of N625.5bn; Debt Service of N3.124trn; Statutory Transfers of N484.49bn; and Sinking Fund of N220bn to retire certain maturing bonds).
The President said the 2021 Budget deficit inclusive of Government Owned Enterprises and project-tied loans is projected at N5.2trn, adding that this represents 3.64 percent of the budget size.
The N5.21trn deficit of the budget exceeded the three per cent threshold prescribed by the FRA 2007 for the annual budget.
Specifically, Section 12, sub-section 1 of the Act states, “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 of the estimated Gross Domestic Product or any sustainable percentage as may be determined by the national Assembly for each financial year.”
The Presidential candidate of the Peoples Democratic Party, PDP, in the last general election, Alhaji Atiku Abubakar, had on Saturday faulted the 2021 budget saying that it contravenes the fiscal responsibility act.
In his post on Facebook, the former Vice President said: “Looking at the 2021 Budget Proposal placed before the National Assembly by President Muhammadu Buhari on Thursday, October 8, 2020, a number of issues, very grave and perhaps disturbing issues arise.
“I could bring up several of them, but for the sake of its direness and consequence to our economy, permit me to address one very important issue.
“The budget deficit in the proposal is N5.21trn. This amount is just over 3.5 per cent of Nigeria’s 2019 GDP. This is contrary to the Fiscal Responsibility Act of 2007.”
But speaking on the development on Tuesday in Abuja, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed said that although the 2021 budget deficit exceeded the three per cent threshold, the government has not breached the law.
She said that there is a provision in the Fiscal Responsibility Act that allows the government to surpass the threshold during “unusual times.”
The finance minister noted that since the country is battling the negative impact of Coronavirus pandemic and faced with the threat of economic recession, there is need to exceed the threshold to save the economy from collapse.
She said, “Under the Fiscal Responsibility Act, the deficit prescribed is three per cent but there is a provision that states that during unusual times, the three per cent fiscal deficit threshold can be exceeded and that is what we did. “