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The positive, negative profile of Budget 2020 (1)

President Muhammadu Buhari presented the Federal Budget for 2020 to the National Assembly on October 8, 2019. It is expected that this early submission should give ample time for deliberations and final approval, especially as the current leadership of the Assembly seems in sync with the Executive.

Consequently, it can safely be assumed that the political leadership has turned a new leaf in terms of timeliness in fiscal planning and execution as well as a return to the January-December cycle. To the extent that this target is met we applaud the government.

 Budget,2020
Buhari presents 2019 budget

Our perusal of the content shows a four-dimensional focus: Fiscal Consolidation, Infrastructure and Human Capital Development, Incentives for the private sector and enhancing social investment programmes.

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Again, this focused agenda seem laudable at first glance, but budget allocations and the minuscule sizes suggest a shaky foundation that could affect progress.

We would have been slightly comforted by the bold effort to match expenditure with revenue but for the seeming over-reliance on cheap, easy target which burdens the tax payers with Value Added Tax, VAT, increase.

We, therefore, call on the government to quickly redress this with counterpart policy measures that would not only cushion the effect of the additional tax burden. They should widen the tax base to increase revenue from taxes. More people must be made to pay their taxes.

This brings us to the erroneous assumptions of a new dawn on revenue performance,  ignoring the lessons from the recent dire straits of the government over its revenue. On this, we note that Federal Government’s revenue projections underperformed actual collection by 47.8% in 2017. It went to 44.7% in 2018 and 41.6% as at first half of 2019.

Surprisingly, government expects revenue of N8.2 trillion in 2020, which is 17.1% higher than N7.0 trillion in 2019 and more than twice the actual collection of N4.0 trillion in 2018.   Where would the money come from?

It appears that this single inordinate ambition may become the budget’s greatest undoing. As usual the capital side of the expenditure profile would take the downside effect. Then how would it achieve economic growth without robust capital expenditure?

The government never exceeded 40% implementation level for capital expenditure in recent years. Obviously, 2020 might go the same way. But it could even be worse. The consequential adjustment for the implementation of the minimum wage is expected to gulp over N500 billion in the recurrent expenditure profile.

The implication is a sad devil’s alternative: either an abandonment of the minimum wage or its implementation to the detriment of other overhead items in the recurrent expenditure. This would eventually lead to total under-performance, or under-implementation of the recurrent expenditure.

 

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