Business - News - January 8, 2021

How to make 2021 budget realistic, sustainable, say Economists

NAN – The 2021 Federal budget proposal would realistic and sustainable if the government could cut down on the provision for debt servicing and ensure adequate funding for the programmes and projects proposed for execution during the year, two economists said on Thursday.
On December 31, 2020, President Muhammadu Buhari gave assent to the N13.588 trillion “Budget of Economic Recovery and Resilience”.
On October 8, 2020 when the President presented the proposed budget to the National Assembly for appropriation, he said the objective was to accelerate the pace of the Nigerian economic recovery, promote diversification, enhance competitiveness and ensure social inclusion.
At the end of deliberations on the provisions of the Budget, the National Assembly retained the proposed benchmark price of $40 per barrel for crude oil during the year and increased the final budget figure by over N505.61 billion from the initial proposal of N13.082 trillion submitted by the executive.
The increment by the National Assembly included the President’s wish for the provision for the Nigeria Social Investment Programme to be raised to about N365 billion to help provide succour to some vulnerable Nigerians affected by the negative impact of COVID-19 pandemic.
In assenting to the Appropriation Act, the President is quoted to have said that his expectation was to, among other things, stimulate domestic economic activities and create employment opportunities, especially for the youth.
Also, he said the government was intensifying efforts towards mobilization of revenue from domestic sources to provide adequate funding for the 2021 Budget.
He challenged revenue generating agencies, all ministries, departments and government-owned enterprises to step up their efforts to realize their revenue targets, control their cost-to-revenue ratios and ensure prompt and full remittance of collected revenues.
Besides, the President also announced that being a deficit budget would be forwarded to the National Assembly for approval the specific borrowing plan on where the country would get funding to support the deficit in the budget.
Although the Chief Executive Officer of ARVO Finance, Ayotunde Bally, noted that the budget targets looked realistic and achievable, his worry was on its sustainability, in view of the constant changes in the market conditions a s a result of the impact of the COVID-19 pandemic.
Mr Bally described as realistic the decision of the National Assembly to retain the benchmark crude oil price at $40 per barrel pegged by the executive, apart from the positive outlook of the non-oil sectors despite the challenges facing them.
He said with funding expected to come from internally generated revenue sources, aids and grants from external sources, the budget appears realistic and achievable.
For the Chairman, Foundation for Economic Research and Training, Lagos, Akpan Ekpo, the targets in the budget could be realised if the government could muster sufficient political will and resources to execute the programmes outlined for the year.

“If the government has the will and resources to implement the programmes of the budget; then it will be sustainable,” Mr Ekpo a former member of the Board of the Central Bank of Nigeria (CBN) said.
However, his only worry was that the provision in the budget for debt servicing was too high, pointing out that this would create a problem for the budget implementation.
The Founder/Chief Executive Officer of Cowry Asset Management, Johnson Chukwu, was of the view that the 2021 budget as prepared by the executive and passed by the National Assembly looked good.
However, Mr Chukwu see challenges in terms of his assessment of the government revenue projections to meet its targets.
For instance, apart from the government projection of about N9.2trillion as revenue, there is a provision of N5.6trillion in non-debt recurrent expenditure, and N3.2trillion as debt service costs in addition to about N4.1trillion provided for capital expenditure.
He said on paper, those provisions looked good. However, Mr Chukwu said the challenge was in the ability of the government to achieve a reasonable projection.
“if the government fails to achieve these projections, then the budget will fail,” he said. MEDIATRACNET.

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