…Pegs oil benchmark at $40
…Oil Production at 1.86m
…Exchange rate at N379/$
…GDP growth target 3%
…11.95% inflation target
By Johnbosco Agbakwuru
THE Federal Executive Council, FEC, on Wednesday approved a budget proposal of N13. O8 trillion for the 2021 fiscal year.
The Council also Pegged the oil benchmark at $40 per barrel, exchange rate at N379 per dollar and 1.86 million barrel per day including 400 thousand condensate as approved by the Organization of Petroleum Exporting Countries, OPEC
The Minister of Finance, Budget and National Planning, Dr. Zainab Ahmed, disclosed this while briefing State House correspondents at the end of the virtual FEC meeting presided over by President Muhammadu Buhari at the Council Chambers, Presidential Villa, Abuja.
She said about 29 percent of the aggregate budget size was budgeted for Capital Expenditure, while inflation is expected to be 11.95 percent.
The Minister said that the growth rate of Gross Domestic Product is expected at three percent, while there will be a deficit of N4. 48 trillion.
According to her, “Today (yesterday), the Ministry of Finance, Budget and National Planning presented to Council the proposal for the 2021 Budget. Before presenting the proposal, we also presented the performance of the 2020 Budget to July 2020.
“Just briefly, the performance of the FGN Budget as at July, for revenue, was 68%. We had a 68% revenue performance prorated to July. The performance of expenditure, on the other hand, was 92.3% and that is to say salaries were fully paid, pensions were paid, debt service was made, as well as transfers classified as statutory.
“In presenting the Budget 2020, we had to report to Council some slight changes that need to be made on MTEF 2021/2023, which has since July been sent to the National Assembly by Mr President.
“Specifically, the exchange rate is going to be changed from 360 that we initially presented and submitted to Council and to the National Assembly, up to 379. The reason why this is happening is due to the exchange rate movement that the CBN has put in place.
“Also, there were some slight changes on miscellaneous revenues and signature bonuses after interaction with DPR, which resulted in some increase in revenue.
“The total budget proposal that is made for 2021 is to enable us to attain a more inclusive growth and also to achieve the key objectives of government, which includes stimulating the economy, creating jobs, enhancing growth and creating infrastructural investment, also promoting manufacturing and local production.
“The budget assumptions that were presented to Council today include, one; crude oil price benchmark at $40 per barrel. Two, oil production at 1.86 million barrels per day. Exchange rate of N379 to US$1. Four, GDP growth target of 3%; and five, inflation rate of 11.95%.
“We do expect that Nigeria’s economy will recover to the path of growth early in 2021, so the total aggregate revenue that is projected for the 2021 Budget is N7.89 trillion and what is unique about the 2021 Budget is that we have brought in the budgets of 60 government-owned enterprises. If you recall, in 2020 we brought in 10, now we have brought in 60.
“These 60 exclude NNPC and the Central Bank and the reason being NNPC, a national oil company, internationally national oil companies are not included in the national budget. Also, the CBN is an autonomous body.
“Only those two are excluded, 60 government-owned enterprises included. That is to say their revenue and all categories of expenditure are now integrated in the Budget.
“We have a total aggregate revenue of N7.89 trillion and also an aggregate expenditure of N13.08 trillion for 2021. There’s a fiscal deficit of N4.489 trillion, this represents 3.64%, slightly above what is required by the Fiscal Responsibility Act of 3% and also to report that the total capital expenditure that is projected in the Budget is 29% of the aggregate expenditure.
“This is an improvement over the 24% that we had in the 2020 Budget, but slightly below the 30% that we targeted in the economic recovery.
“Just to clarify that the 1.86 million barrels per day crude oil production includes 400,000 condensate, so we have complied with the OPEC quota, which is placed at about 1.5 million barrels per day. So the 1.46 is in meeting with the OPEC quota.
“This is important to us because as you report, if you just report the 1.86, some members of the OPEC appear to think that we are exceeding OPEC quota, whereas we are reporting oil and condensate.”
Also contributing, the Minister of State, Budget and National Planning, Mr. Clement Agba said, “You talked about the growth rate to be very ambitious, first we have to use modern approach and this is done by NBS, when you consider the economic sustainability plan which is also going to run for another six months next year, remember we have the N2.3 trillion stimulus.
“The economy too has also now been opened, the lock downs been lifted, economic activities have picked up and we have also selected some sectors in the economy that we are putting in a lot money that will create activities and hen the multiplier effect of it.
“In terms of funding like the Honorable Minister mentioned there is a deficit of financing of N4.486 trillion and we also expect that oil prices will be much more stable. Recall that the revised 2020 budget was at $28 per barrel but now oil is averaging about $40 to $40 something and we have used an exchange rate that is higher N379, benchmark of $40 per barrel and then the production is also much more better. So we expect to have more revenues to fund the budget.
“There is also a lot of improvement on our revenue generation. Even though we haven’t gotten to where we want to be, but we have seen steady increase in revenue from 2018 till today and we expect that trajectory to continue as we implement the strategic revenue and growth initiative.”
On his part, the Director-General, Budget Office, Ben Akabueze said,
“As the Honourable Minister stated earlier on, the overall budget implementation expenditure wise as of July was 92.3%.
“And she pointed out items like debt service, personnel cost performed 100 %. Capital budget as of that day has reached 60% performance and that is what then brought down the overall average to 92%.
“As of now, every agency of government has received at least 50% of their 2020 capital budget released to them. And indeed, despite the challenges of this year, this might be one year we won’t record the highest level of capital budget performance for a while.
“It is also reflective of the switch to implementing January to December fiscal year despite interruption of COVID-19.”
Asked on what specific influence COVID-19 has on 2921 budget, the Minister of Finance, Dr. Zainab Ahmed said, “The 2021 budget has been able to make more provision for human capital development. So, the Ministry of Health for example has its provision almost doubled.
“The Ministry of Education has a significant increase. The details of the budget will be provided to the country after Mr President submits the budget which we hope might be on the 8th of October.
” So, the details will be out. And following Mr President’s submission, the Ministry of Finance, Budget, and National Planning will also engage in a world press conference to provide the details.
” But what is unique about this is that the provision for human capital development, especially health is doubled.”