President Muhammadu Buhari on Tuesday laid the 2020 appropriation bill before a joint session of the National Assembly.
The President presented N10.7trillion for the year 2020 budget estimates.
Buhari, who arrived the National Assembly chambers at about 2 p.m.,
presented the budget to lawmakers under atmosphere free of rancour,
unlike last year.
Here is the full text of President Buhari’s speech during the budget presentation:
I will start by asking you to pardon my voice. As you can hear, I have a cold as a result of working hard to meet your deadline!
I am delighted to present the 2020 Federal Budget Proposals to this
Joint Session of the National Assembly, being my first budget
presentation to this 9th National Assembly.
Before presenting the Budget, let me thank all of you Distinguished
and Honourable Members of the National Assembly, for your avowed
commitment to cooperate with the Executive to accelerate the pace of our
socio-economic development and enhance the welfare of our people.
I will also once again thank all Nigerians, who have demonstrated
confidence in our ability to deliver on our socio-economic development
agenda, by re-electing this Administration with a mandate to Continue
the Change. We remain resolutely committed to the actualization of our
vision of a bright and prosperous future for all Nigerians.
During this address, I will present highlights of our budget
proposals for the next fiscal year. The Honourable Minister of Finance,
Budget and National Planning will provide full details of these
proposals, subsequently.
OVERVIEW OF ECONOMIC DEVELOPMENTS IN 2019
The economic environment remains very challenging, globally. The
International Monetary Fund expects global economic recovery to slow
down from 3.6 percent in 2018 to 3.5 percent in 2020. This reflects
uncertainties arising from security and trade tensions with attendant
implications on commodity price volatility.
Nearer to home, however, Sub-Saharan Africa is projected to continue
to grow from 3.1 percent in 2018 to 3.6 percent in 2020. This is driven
by investor confidence, oil production recovery in key exporting
countries, sustained strong agricultural production as well as public
investment in non-dependent economies.
Mr Senate President; Right Honourable Speaker; I am pleased to report
that the Nigerian economy thus far has recorded nine consecutive
quarters of GDP growth. Annual growth increased from 0.82 percent in
2017 to 1.93 percent in 2018, and 2.02 percent in the first half of
2019. The continuous recovery reflects our economy’s resilience and
gives credence to the effectiveness of our economic policies thus far.
We also succeeded in significantly reducing inflation from a peak of
18.72 percent in January 2017, to 11.02 percent by August 2019. This was
achieved through effective fiscal and monetary policy coordination,
exchange rate stability and sensible management of our foreign exchange.
We have sustained accretion to our external reserves, which have
risen from US$23 billion in October 2016 to about US$42.5 billion by
August 2019. The increase is largely due to favourable prices of crude
oil in the international market, minimal disruption of crude oil
production given the stable security situation in the Niger Delta region
and our import substitution drive, especially in key commodities.
The foreign exchange market has also remained stable due to the
effective implementation of the Central Bank’s interventions to restore
liquidity, improve access and discourage currency speculation. Special
windows were created that enabled small businesses, investors and
importers in priority economic sectors to have timely access to foreign
exchange.
Furthermore, as a sign of increased investor confidence in our
economy, there were remarkable inflows of foreign capital in the second
quarter of 2019. The total value of capital imported into Nigeria
increased from US$12 billion in the first half year of 2018 to US$14
billion for the same period in 2019.
PERFORMANCE OF THE 2019 BUDGET
Distinguished and Honourable Members of the National Assembly, you
will recall that the 2019 ‘Budget of Continuity’ was based on a
benchmark oil price of US$60 per barrel, oil production of 2.3 mbpd, and
an exchange rate of N305 to the United States Dollar. Based on these
parameters, we projected a deficit of N1.918 trillion or 1.37 percent of
Gross Domestic Product.
As at June 2019, Federal Government’s actual aggregate revenue
(excluding Government-Owned Enterprises) was N2.04 trillion. This
revenue performance is only 58 percent of the 2019 Budget’s target due
to the underperformance of both oil and non-oil revenue sources.
Specifically, oil revenues were below target by 49 percent as at June
2019. This reflects the lower-than-projected oil production, deductions
for cost under-recovery on the supply of premium motor spirit (PMS), as
well as higher expenditures on pipeline security/maintenance and
Frontier exploration.
Daily oil production averaged 1.86 mbpd as at June 2019, as against
the estimated 2.3 mbpd that was assumed. This shortfall was partly
offset as the market price of Bonny Light crude oil averaged US$67.20
per barrel which was higher than the benchmark price of US$60.
Additionally, revenue projections from restructuring of Joint Venture
Oil and Gas assets and enactment of new fiscal terms for Production
Sharing Contracts did not materialize, as the enabling legislation for
these reforms is yet to be passed into law.
The performance of non-oil taxes and independent revenues such as
internally generated revenues were N614.57 billion and N217.84 billion,
respectively.
Receipts from Value Added Tax were below expectations due to lower
levels of activities in certain economic sectors, in the aftermath of
national elections. Corporate taxes were affected by the seasonality of
collections, which tend to peak in the second half of the calendar year.
On the expenditure side, 2019 Budget implementation was also hindered
by the combination of delay in its approval and the underperformance of
revenue collections. As such, only recurrent expenditure items have
been implemented substantially. Of the prorated expenditure of N4.46
trillion budgeted, N3.39 trillion had been spent by June 30, 2019.
In compliance with the provisions of the 2018 Appropriation Act, we
implemented the 2018 capital budget until June 2019. Capital releases
under the 2019 Budget commenced in the third quarter. As at 30th
September 2019, a total of about N294.63 billion had been released for
capital projects. I have directed the Ministry of Finance, Budget and
National Planning to release an additional N600 billion of the 2019
capital budget by the end of the year.
Despite the delay in capital releases, a deficit of N1.35 trillion
was recorded at the end of June 2019. This represents 70 percent of the
budgeted deficit for the full year.
Despite these anomalies, I am happy to report that we met our debt
service obligations, we are currently on staff salaries and overhead
costs have also been largely covered.
2020 BUDGET PRIORITIES
23. Distinguished Senators, Honourable Members, let me now turn to the 2020 Appropriation, which is designed to be a budget of:
a. Fiscal consolidation, to strengthen our macroeconomic environment;
b. Investing in critical infrastructure, human capital development
and enabling institutions, especially in key job-creating sectors;
c. Incentivising private sector investment essential to complement
the Government’s development plans, policies and programmes; and
d. Enhancing our social investment programs to further deepen their impact on those marginalised and most vulnerable Nigerians.
PARAMETERS & FISCAL ASSUMPTIONS UNDERPINNING THE APPROPRIATION BILL AND THE FINANCE BILL
Distinguished and Honourable Members of the National Assembly, the
2020-2022 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy
Paper (FSP) set out the parameters for the 2020 Budget. We have adopted a
conservative oil price benchmark of US$57 per barrel, daily oil
production estimate of 2.18 mbpd and an exchange rate of N305 per US
Dollar for 2020.
We expect enhanced real GDP growth of 2.93% in 2020, driven largely
by non-oil output, as economic diversification accelerates, and the
enabling business environment improves. However, inflation is expected
to remain slightly above single digits in 2020.
Accompanying the 2020 Budget Proposal is a Finance Bill for your kind
consideration and passage into law. This Finance Bill has five
strategic objectives, in terms of achieving incremental, but necessary,
changes to our fiscal laws. These objectives are:
a. Promoting fiscal equity by mitigating instances of regressive taxation;
b. Reforming domestic tax laws to align with global best practices;
c. Introducing tax incentives for investments in infrastructure and capital markets;
d. Supporting Micro, Small and Medium-sized businesses in line with our Ease of Doing Business Reforms; and
e. Raising Revenues for Government.
The draft Finance Bill proposes an increase of the VAT rate from 5%
to 7.5%. As such, the 2020 Appropriation Bill is based on this new VAT
rate. The additional revenues will be used to fund health, education and
infrastructure programmes. As the States and Local Governments are
allocated 85% of all VAT revenues, we expect to see greater quality and
efficiency in their spending in these areas as well.
The VAT Act already exempts pharmaceuticals, educational items, and
basic commodities, which exemptions we are expanding under the Finance
Bill, 2019. Specifically, Section 46 of the Finance Bill, 2019 expands
the exempt items to include the following:
a. Brown and white bread;
b. Cereals including maize, rice, wheat, millet, barley and sorghum;
c. Fish of all kinds;
d. Flour and starch meals;
e. Fruits, nuts, pulses and vegetables of various kinds;
f. Roots such as yam, cocoyam, sweet and Irish potatoes;
g. Meat and poultry products including eggs;
h. Milk;
i. Salt and herbs of various kinds; and
j. Natural water and table water.
Additionally, our proposals also raise the threshold for VAT
registration to N25 million in turnover per annum, such that the revenue
authorities can focus their compliance efforts on larger businesses
thereby bringing relief for our Micro, Small and Medium-sized
businesses.
It is absolutely essential to intensify our revenue generation
efforts. That said, this Administration remains committed to ensuring
that the inconvenience associated with any fiscal policy adjustments, is
moderated, such that the poor and the vulnerable, who are most at risk,
do not bear the brunt of these reforms.
FEDERAL GOVERNMENT REVENUE ESTIMATES
The sum of N8.155 trillion is estimated as the total Federal
Government revenue in 2020 and comprises oil revenue N2.64 trillion,
non-oil tax revenues of N1.81 trillion and other revenues of N3.7
trillion. This is 7 percent higher than the 2019 comparative estimate of
N7.594 trillion inclusive of the Government Owned Enterprises.
The increasing share of non-oil revenues underscores our confidence
in our revenue diversification strategies, going forward. Furthermore,
in our efforts to enhance transparency and accountability, we shall
continue our strict implementation of Treasury Single Account (TSA) to
capture the domiciliary accounts in our foreign missions and those
linked to Government-Owned Enterprises.
PLANNED 2020 EXPENDITURE
An aggregate expenditure of N10.33 trillion is proposed for the
Federal Government in 2020. The expenditure estimate includes statutory
transfers of N556.7 billion, non-debt recurrent expenditure of N4.88
trillion and N2.14 trillion of capital expenditure (excluding the
capital component of statutory transfers). Debt service is estimated at
N2.45 trillion, and provision for Sinking Fund to retire maturing bonds
issued to local contractors is N296 billion.
STATUTORY TRANSFERS
The sum of N556.7 billion is provided for Statutory Transfers in the 2020 Budget and includes:
a. N125 billion for the National Assembly;
b. N110 billion for the Judiciary;
c. N37.83 billion for the North East Development Commission (NEDC);
d. N44.5 billion for the Basic Health Care Provision Fund (BHCPF);
e. N111.79 billion for the Universal Basic Education Commission (UBEC); and
f. N80.88 billion for the Niger Delta Development Commission (NDDC),
which is now supervised by the Ministry of Niger Delta Affairs.
We have increased the budgetary allocation to the National Human
Rights Commission from N1.5 billion to N2.5 billion. This 67 percent
increase in funding is done to enable the Commission to perform its
functions more effectively.
RECURRENT EXPENDITURE
The non-debt recurrent expenditure includes N3.6 trillion for
personnel and pension costs, an increase of N620.28 billion over 2019.
This increase reflects the new minimum wage as well as our proposals to
improve remuneration and welfare of our Police and Armed Forces. You
will all agree that Good Governance, Inclusive Growth and Collective
Prosperity can only be sustained in an environment of peace and
security.
Our fiscal reforms shall introduce new performance management
frameworks to regulate the cost to revenue ratios for Government-Owned
Enterprises, which shall come under significant scrutiny. We will reward
exceptional revenue and cost management performance, while severe
consequences will attend failures to achieve agreed revenue targets.
We shall also sustain our efforts in managing personnel costs.
Accordingly, I have directed the stoppage of the salary of any Federal
Government staff that is not captured on the Integrated Payroll and
Personnel Information System (IPPIS) platform by the end of October
2019. All agencies must obtain the necessary approvals before embarking
on any fresh recruitment and any contraventions of these directives
shall attract severe sanctions.
Overhead costs are projected at N426.6 billion in 2020. Additional
provisions were made only for the newly created Ministries. I am
confident that the benefits of these new Ministries as it relates to
efficient and effective service delivery to our citizens significantly
outweighs their budgeted costs.
That said, the respective Heads of MDAs must ensure strict adherence
to government regulations regarding expenditure control measures. The
proliferation of Zonal, State and Liaison Offices by Federal Ministries,
Departments and Agencies (‘MDAs’), with attendant avoidable increase in
public expenditure, will no longer be tolerated.
CAPITAL EXPENDITURE
As I mentioned earlier, investing in critical infrastructure is a key
component of our fiscal strategy under the 2020 Budget Proposals.
Accordingly, an aggregate sum of N2.46 trillion (inclusive of N318.06
billion in statutory transfers) is proposed for capital projects in
2020.
.
Although the 2020 capital budget is N721.33 billion (or 23 percent)
lower than the 2019 budget provision of N3.18 trillion, it is still
higher than the actual and projected capital expenditure outturns for
both the 2018 and 2019 fiscal years, respectively. However, at 24
percent of aggregate projected expenditure, the 2020 provision falls
significantly short of the 30 percent target in the Economic Recovery
and Growth Plan (ERGP) 2017-2020.
The main emphasis will be the completion of as many ongoing projects
as possible, rather than commencing new ones. MDAs have not been allowed
to admit new projects into their capital budget for 2020, unless
adequate provision has been made for the completion of ALL ongoing
projects.
Accordingly, we have rolled over capital projects that are not likely
to be fully funded by the end of 2019 into the 2020 Budget. We are
aware that the National Assembly shares our view that these projects
should be prioritised and given adequate funding in the 2020
Appropriation Act.
Therefore, I will once again commend the 9th National Assembly’s firm
commitment to stop the unnecessary cycle of delayed annual budgets. I
am confident that with our renewed partnership, the deliberations on the
2020 Budget shall be completed before the end of 2019 so that the
Appropriation Act will come into effect by the 1st of January.
Some of the key capital spending allocations in the 2020 Budget include:
a. Works and Housing: N262 billion;
b. Power: N127 billion;
c. Transportation: N123 billion;
d. Universal Basic Education Commission: N112 billion;
e. Defence: N100 billion;
f. Zonal Intervention Projects: N100 billion;
g. Agriculture and Rural Development: N83 billion;
h. Water Resources: N82 billion;
i. Niger Delta Development Commission: N81 billion;
j. Education: N48 billion;
k. Health: N46 billion;
l. Industry, Trade and Investment: N40 billion;
m. North East Development Commission: N38 billion;
n. Interior: N35 billion;
o. Social Investment Programmes: N30 billion;
p. Federal Capital Territory: N28 billion; and
q. Niger Delta Affairs Ministry: N24 billion.
Although Government’s actual spending has reduced, our plans to
leverage private sector funding through our tax credit schemes will
ensure our capital programmes are sustained.
For example, we launched the Road Infrastructure Tax Credit Scheme,
pursuant to which I have approved the construction and rehabilitation of
19 Nigerian roads and bridges of 794.4km across 11 States. Indeed, the
Scheme has attracted private investment of over N205 billion and the
first set of tax credits are being processed by the Federal Ministry of
Finance, Budget and National Planning.
As I mentioned during my Independence Day Speech, under the
Presidential Power Initiative, we will modernise the National Grid in 3
phases; starting from 5 Gigawatts to 7 Gigawatts, then to 11 Gigawatts
by 2023, and finally 25 Gigawatts afterwards in collaboration with the
German Government and Siemens.
BUDGET DEFICIT
The budget deficit is projected to be N2.18 trillion in 2020. This
includes drawdowns on project-tied loans and the related capital
expenditure.
This represents 1.52 percent of estimated GDP, well below the 3
percent threshold set by the Fiscal Responsibility Act of 2007, and in
line with the ERGP target of 1.96 percent.
The deficit will be financed by new foreign and domestic borrowings,
Privatization Proceeds, signature bonuses and drawdowns on the loans
secured for specific development projects.
DEBT SERVICE
Nigeria remains committed to meeting its debt service obligations.
Accordingly, we provided the sum of N2.45 trillion for debt service. Of
this amount, 71 percent is to service domestic debt which accounts for
about 68 percent of the total debt. The sum of N296 billion is provided
for the Sinking Fund to retire maturing bonds issued to local
contractors.
I am confident that our aggressive and re-energised revenue drive
will maintain debt-revenue ratio at acceptable and manageable levels. We
will also continue to be innovative in our borrowings by using
instruments such as Sukuk, Green Bonds and Diaspora Bonds.
SOCIAL INVESTMENT PROGRAMME
Our government remains committed to ensuring the equitable sharing of
economic prosperity. Our focus on inclusive growth and shared
prosperity underscores our keen interest in catering for the poor and
most vulnerable. Accordingly, we are revamping and improving the
implementation of the National Social Investment Programme through the
newly created Ministry of Humanitarian Affairs, Disaster Management and
Social Development.
The National Social Investment Programme is already creating jobs and
economic opportunity for local farmers and cooks, providing funding to
artisans, traders, youths, and supporting small businesses with business
education and mentoring.
The provision of N65 billion for the Presidential Amnesty Programme
has been retained in the 2020 Budget. Furthermore, to fast track the
rebuilding efforts in the North East region, a provision of N37.83
billion has been made for the North East Development Commission.
OTHER STRATEGIC PRIORITIES IN 2020
The 2020 Budget is expected to accelerate the pace of our economic
recovery, promote economic diversification, enhance competitiveness and
ensure social inclusion. We are optimistic of attaining higher and more
inclusive GDP growth in order to achieve our objective of massive job
creation and lifting many of our citizens out of poverty.
The efficiency of port operations will also be enhanced by
implementing a single customs window, speeding up vessel and cargo
handling and issuing more licenses to build modern terminals in existing
ports, especially outside Lagos.
Furthermore, completing the reforms to the governance and fiscal
terms of the Petroleum Industry will provide certainty and attract
further investments into the sector. A consequence of this will be
increase in jobs and in government’s take. I therefore seek your support
in passing into law two Petroleum Industry Executive Bills I will be
forwarding to you shortly.
In addition, we need to quickly review the fiscal terms for deep
offshore oil fields to reflect the current realities and for more
revenue to accrue to the government. The Deep Offshore and Inland Basin
Production Sharing Contract (Amendment) Bill 2018, was submitted to the
8th National Assembly in June 2018 but was unfortunately not passed into
law.
I will be re-forwarding the Bill to this Assembly very shortly and
therefore urge you to pass it. We estimate that this effort can generate
at least 500 million US dollars additional revenue for the Federal
Government in 2020, and over one billion dollars from 2021.
Whilst the Budget is our principal fiscal tool to achieve these
socio-economic development targets, we remain committed to prudently
planning for our future economic prosperity. In this regard, I have
directed the reconstituted Ministry of Finance, Budget and National
Planning to commence preparations towards the development of successor
medium – and long-term economic development plans, particularly as the
Nigeria Vision 20-2020 and the ERGP expire next year.
CONCLUSION
Mr Senate President, Mr Speaker, Distinguished and Honourable Members
of the National Assembly, this speech would be incomplete without, once
again, commending the patriotic resolve of the 9th National Assembly to
collaborate with the Executive in the effort to deliver inclusive
growth and enhance the welfare our people. I assure you of the strong
commitment of the Executive to deepen the relationship with the National
Assembly.
As you review the 2020-2022 Medium Term Expenditure Framework (MTEF)
and Fiscal Strategy Paper (FSP), as well as the 2020 Budget estimates,
we believe that the legislative process will be quick, so as to restore
the country to the January-December financial year.
It is with great pleasure therefore, that I lay before this
Distinguished Joint Session of the National Assembly, the 2020 Budget
Proposals of the Federal Government of Nigeria.
I thank you most sincerely for your attention.
May God bless the Federal Republic of Nigeria.