The Nigeria Federal Government has revealed plans to cut the 2020 budget by as much as N1.5 trillion. The disclosure was made by Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, while briefing State House correspondents at the end of the Federal Executive Council (FEC) meeting chaired by President Muhammadu Buhari at the Council Chamber, Presidential Villa, Abuja.
Ahmed said that there will be a cut of 20% from the capital expenditure of the 2020 budget while recurrent expenditure will be reduced by as much as 25%. Recall that she had earlier in the month hinted at the possibility of reducing the 2020 budget due to the coronavirus outbreak.
According to Ahmed, Buhari had introduced other far-reaching steps in the face of the new economic realities triggered by COVID-19. Another such factor is the decrease in the crude oil price from $57 per barrel to $30 per barrel in the revised budget. The global price of crude oil is now less than $30 per barrel.
Ahmed said, “We should cut down on the size of the federally funded upstream projects of the Petroleum sector. The reason being that we want to be able to receive more revenue by less reduction from NNPC.
The reduction of the crude oil price from $57 per barrel to $30 means that we are going to get so much less revenue, almost 45 percent loss as we planned. And because of that, we have to amend a number of projections in the budget as well as in the MTEF to reflect our current reality.
We also need to adjust Customs revenue which has been budgeted at N1. 5 trillion but we are adjusting it downwards because we anticipate that trade volumes will reduce and once trade volume is reduced, Customs revenue will be significantly impacted as a result.”
In addition, Ahmed said that the Nigeria government will would continue to pay wages and not fire employees, but due to the budget cut, would not be hiring or increasing the size of its workforce for the time being.
As a result of concerns about the economy falling back into recession, Ahmed said that the budget reductions will result in a reduction of around 40 to 45 per cent and will also impact states, because this means that the FAAC would be drastically reduced.
“FAAC is just a pool of funds and we share what is realised, so it will affect the states as well. So we are expecting the states to take similar measures to amend the plans that we have made and bring them down to current realities.
On plans to scale back VAT and excise duty, I am not making any commitment on that right now because these are provisions in the law in the Finance Act and as you know, we will, even in the amendment to the MTEF and the budget, have to engage with the National Assembly. The fiscal authorities are working with the fiscal authority team and we will get the President’s approval before we come up with what we will announce to the public.” Ahmed added.
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