The Senate on Thursday reconvened to consider President Muhammadu Buhari’s request for approval of the revised 2020-2022 Medium Term Expenditure Framework/Fiscal Strategy Paper, and revised Appropriation Bill 2020.
The bill to amend the 2020 Appropriation Act which scaled second reading on the floor was considered immediately after a letter to that effect from President Buhari was read during plenary by the Senate President, Ahmad Lawan.
The revised 2020 Appropriation Act (Amendment) Bill as submitted by the Executive to the National Assembly for approval proposed an estimated N10.51 trillion budget for the 2020 fiscal year.
The revised figure reflects a downward cut by the federal government from the N10.59 trillion passed in December last year.
Leading debate on the 2020 Appropriation Act (Amendment) bill, the Senate Leader, Yahaya Abdullahi, said out of the revised N10,509,654,033,054 budget, N398,505,979,362 is for Statutory Transfers; N2,951,710,000,000 is for Debt Service; N4,928,525,467,849 is for Recurrent Expenditure; while N2,230,912,585,842 is for contribution to the development fund for Capital Expenditure.
Senator Yahaya stated that Personnel and Pension cost was retained at N2.83 trillion and N536.72 trillion respectively.
He added that the aggregate amount available for the Capital Expenditures – exclusive of Capital in Statutory Transfers – in the revised 2020 budget is N2.23 trillion.
The amount, according to him, consists of N1.264 trillion for Ministries, Departments and Agencies of Government; N100.3 billion for COVID-19 expenditures, N20 billion for Capital component for the Special Intervention Programme; N274.85 bullion for other Capital supplementation; N141.17 billion Capital budget for Ten GOEs; N42.96 for Donor Grant funded expenditures and N387.30 billion funded by project-tied loans.
He disclosed that in view of the cut to the national budget, the 2020 Appropriation Act (Amendment) bill is now predicated on Oil production of 1.93 million barrels per day and a benchmark oil price of $35 dollar per barrel.
On the exchange rate, Senator Yahaya said an upward adjustment was made by the Central Bank of Nigeria to N360/US$1, adding that, “while the CBN continues to make strenuous efforts to stabilize the exchange rate, it is generally expected that the naira will suffer further devaluation as Nigeria is projected to lose about US$26 billion in oil revenues.”
Explaining the decision of the Federal Government to review the 2020 budget, President Buhari in his letter to the National Assembly noted that same became imperative in view of the sharp decline in crude oil prices and the cut in Nigeria’s crude oil quota occasioned by the COVID-19 pandemic.
The President’s letter reads: “It is with pleasure that I forward the revised 2020 – 2022 Medium Term Expenditure Framework and Fiscal Strategy Paper, and Revised Appropriation Bill 2020 for the kind consideration and approval of the Senate.
“Let me seize this opportunity to express my deep gratitude for the patriotism, cooperation and support of the leadership and Distinguished members of the Senate in our collective effort to amend the Appropriation Act 2020 and accelerate its implementation.
“It has become necessary to revise the 2020 – 2022 MTEF/FSP and amend the Appropriation Act 2020 in view of the sharp decline in crude oil prices and the cut in Nigeria’s crude oil quota occasioned by the COVID-19 pandemic. In effect, the assumptions underlying the 2020 appropriations act are no longer sustainable.
“It is also imperative to adjust expected revenues considering the widespread disruptions in other domestic economic activities, as well as international trade and transportation due to the measures implemented across the world to curtail the spread of the COVID-19 pandemic.
“Furthermore, it is necessary to allocate resources in the Appropriation Act 2020 to ensure effective implementation of required emergency measures and other interventions necessary to mitigate the negative socio-economic effects of of the COVID-19 pandemic.”
In a related development, President Buhari in a separate letter requested the approval of the Senate for External Borrowing to the tune of N5.513 billion.
He explained that the amount is expected to finance the proposed revised 2020 budget; implementation of priority projects of the Federal Government; and projects to support the State Government.
According to him, the request by the Executive arm of Government is “in accordance with the provisions of Section 21 of the Debt Management office Establishment Act 2003, and Section 41 of the Fiscal Responsibility Act 2007.”
“As the Senate may be aware, the COVID-19 pandemic has resulted in economic and fiscal challenges for many countries. Nigeria has also being affected in this regard, especially with the lower demand for crude oil which has affected our sales, and the sharp decline in the price of oil below $25 USD per barrel, which is much lower than the $57 per barrel benchmark in the 2020 Appropriation Act.
“The COVID-19 pandemic has also created the need for additional expenditure in the health sector. All of these have necessitated the review of the 2020 budget and the Medium Term Expenditure Framework 2020-2022.
“Following from paragraph 2, the draft revised budget proposed by the Executive for 2020 has a higher deficit. In order to finance this deficit, the Federal Government is planning to raise funds from both domestic and external sources.
“For the External component, the government is negotiating with multi-lateral institutions for funding on concessionary terms. The facilities totaling $5.513 billion being arranged in this regards are detailed in table 1.”
The President explained further that the Proposed External loans to finance revised 2020 budget deficit are from the International Monetary Funds (IMF) $3.4 billion; World Bank, $1.5 billion; African Development Bank, $500 million; and Islamic Development Bank $113 million.
“In addition to the financing required for the revised 2020 budget, financing is also required for some priority projects of the federal government to address the COVID-19 pandemic and improve Nigeria’s food security”, President Buhari explained.
Giving a breakdown on how the $5.513 loan would be applied, Buhari disclosed that the proposed $600 million loan from the Islamic Development bank would be used to fund projects to support of Nigeria’s response to challenges caused by COVID-19; while the sum $125 million from the African Development Bank would be used for strengthening of Healthcare system to improve response to COVID-19.
He added that Financing Small Farmers to mitigate food security impact of COVID-19 would cost $23 million; while $500 million from the African Export Import Bank would be used for the Provision of critical medical supplies to combat COVID-19.
On a proposed loan of €995 million loan from the Export Import Bank of Brazil, he stated that the amount would be used to enhance mechanization of Agriculture and Agro-processing in Nigeria.
“The Islamic Development Bank has indicated that only $113 million of financing will be available to the Federal Government of Nigeria in the 2020 fiscal year to enhance the government’s COVID-19 response, which will come from restructuring of previously approved but inactive facilities for Nigeria,” the President added.
He further disclosed that a loan request to the World bank between $500 and $750 million would be used to fund State fiscal transparency, accountability and sustainability Programme; and to implement COVID-19 Action Recovery and Economic Stimulus Programme to support state level efforts to protect livelihoods, ensure food security and stimulate economic activity.
Both requests for the consideration and approval of the 2020 Appropriation Act (Amendment) Bill, as well as the loan $5.513 loan request were referred by the Senate President, Ahmad Lawan, to the Committee on Finance; Local and Foreign Debts.
The Committees are expected to report back to the upper chamber during plenary next Tuesday.