The Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari Wednesday approved N1.5 trillion reduction in the 2020 budget to fit into the present economic realities occasioned by COVID-19.
Briefing State House correspondents at the end of the weekly FEC meeting, Minister of Finance m, Budget and National Planning Mrs Zainab Ahmed said government was working on a worst scenario oil benchmark of $30 per barrel at 2.18 million barrels per day.
She said the president also approved far-reaching measures to face the current economic realities include a cut on the size of the federally funded upstream projects by N457 billion, reduction of projected revenue from excise duty, cut on capital expenditure by 20%, reduction of recurrent expenditure by 25%, ban on recruitment except for essential services and the review of social investment programmes, among others.
She said government was not considering downsising staff or a cut in the salaries of civil servants.
“What we have done is that we have written every ministry and given them guidelines on how these adjustments will be made to enable us have detailed imputes from the ministries. But I can just say that the bulk cut is about N1.5 trillion, the reduction in the size of the budget. And this includes N457 billion from PMS under-recovery,” she said.
On how much it affects the federally-funded upstream projects, the minister said: “It is about 25 percent cut. The exact amount we will work out when we get inputs from the ministries, departments and agencies.”
On concerns of the economy slipping back into recession, she said: “Of course we have concerns. This is resulting in about 40 to 45 percent reduction and also it will affect the states because it means FAAC will be significantly reduced.
“FAAC is just a pool of funds and we share what is realized, so it will affect the states as well. We are expecting the states to take similar measures to amend the plans that we have made and bring them down to current realities.
“It is just a question of deferring some nonessential expenditure so that when things turn we might actually go back to our plans.”
On plans to scale back VAT and excise duty, the minister said: “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 on it with the fiscal authority team and we will get Mr. President’s approval before we come up with what we will announce to the public.”
On recruitment, she said: “There is already an instruction to stop recruitment. What the agencies have been doing is replacement but even that is being suspended. When things improve we will go back to the issue of recruitment but for now, our wage bill is already very high.
“The president has directed that salaries and pensions must be paid unfailingly, so we are not looking at downsizing in anyway. We are maintaining our workforce as it is but we are just stopping the increase in the size of the nominal roll.”
On the oil benchmark, she said: “We are working on the worse case scenario of $30 per barrel and also we are holding to the production numbers of 2.18 million barrels per day. This you will remember is approved by the National Assembly. This is our own analysis and we will start engaging the National Assembly.”
On the implications of the cuts on deficit, the minister said: “What this means is that our deficit will increase. Our current deficit in the 2020 budget is N1.8 trillion. With the decline in revenue and even with the adjustment in expenditure the deficit will increase. That is why we have to engage the National Assembly to ensure we stay within the fiscal limits as defined in the fiscal responsibility act.
“It might go up by N1.5 trillion but it depends because the details of the cuts are not yet out. We might also decide to amend the threshold but on the fiscal side we have decided to take the worse case scenario and that is $30 per barrel. You know that today the price has gone up to about $32 per barrel but we are still staying at $30 to be on the safe side.”
