The Federal Government has predicted a N4.7 trillion shortfall in accretion to the Federation Account in 2020. Its projected amount for the year now stands at N3.9 trillion as against the N8.6 trillion previously proposed before the COVID-19 pandemic began.
Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, made the disclosure in a videoconferencing on Nigeria’s response to the fall in oil prices and the COVID-19 pandemic, held in conjunction with the Department for International Development (DFID).
The panel led by the Minister for Finance and supported by Mr Clem Agba, Minister of State, Budget and National Planning; also included Mr. Ben Akabueze, Director General, Budget Office of the Federation and Lade Jaiyeola, the Chief Executive Officer of the Nigeria Economic Summit Group (NESG).
The Minister’s disclosures came as the Nigerian Economic Summit Group (NESG) noted that the economy would require about N10.1 trillion in financial interventions to cope with the damage done by the coronavirus, stressing that current intervention capacity of N4.5 trillion was insufficient.
The meeting reckoned that the implied funding gap of N5.6 trillion was likely to be covered by medium to long term domestic borrowing, external borrowings possibly from World Bank, International Monetary Fund (IMF), International Finance Corporation (IFC), African Development Bank (AfDB).
Ahmed explained that the total economic stimulation liquidity from the Federal Government, Central Bank of Nigeria (CBN) and other donors currently stands at N4.5 trillion, representing 3.1per cent of the nation’s Gross Domestic Product (GDP).
She added that the Budget Office was already finalising a revised 2020-2022 Medium Term Expenditure Framework and Strategy Paper (MTEF/FSP) as well as an amendment to the 2020 Appropriation Act.
At the meeting, it was estimated that net oil & gas revenue available for Federation Account Allocation Committee (FAAC) distribution has dropped by 80 per cent from the hitherto N5.5 trillion to N1.1 trillion.
Similarly projected Federal Government receipt into the federation account for 2020 was now put at N2.4 trillion, as against N4.8 trillion previously proposed.
This is despite a N649 billion reduction in allowable fiscal deductions by the Nigerian National Petroleum Corporation (NNPC) for federally funded projects/expenditures.
Specifically, projected petrol under-recovery has been reduced from N457 billion to zero. At the meeting, the Finance Minister said oil production was now projected at 1.7mbpd as against 2.18mbpd previously estimated.
The 2020 budget revenue benchmark was also reduced from $57/barrel to $30/barrel and later to $20/barrel.Moreso, average production cost of Nigerian crude has been revised downward to $28 per barrel from $33 per barrel with implications for Petroleum Profit Tax.
Revenue of the Nigeria Customs Service (NCS) has been reviewed downwards from N1.5 trillion to N1.2 trillion this year.
The amount accruable to the Value Added Tax (VAT) pool account is expected to drop from N2.1 trillion to N2 trillion in 2020.
The revenue drop also cascaded to the states and local governments who are now likely to obtain N2.1 trillion and N1.5 trillion respectively from FAAC, compared to N3.3 trillion and N2.5 trillion, respectively, in previous estimates. The Finance Minister also noted that the Projected N5.6 trillion budget deficit would be financed through privatisation proceeds of N126 billion, drawdowns from FGN Special Accounts of N260 billion, bilateral/multilateral drawdowns of N387 billion, and new borrowings of N4.6 trillion.