President Buhari’s 2020 Budget Speech (full text) – TheNigerialawyer

2020 BUDGET SPEECH:

Budget of Sustaining Growth and Job Creation.

Delivered By: His Excellency, Muhammadu Buhari President,
Federal Republic of Nigeria

At the Joint Session of the National Assembly, Abuja

Tuesday, October 8, 2019

PROTOCOLS

1. 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!

2. 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.

3. 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.

4. 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.

5. 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

6. 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.

7. 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.

8. 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.

9. 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.

10. We have sustained accretion to our external reserves, which
have risen fromUS$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.

11. 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.

12. 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

13. 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.

14. 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 supply of premium
motor spirit (PMS), as well as higher expenditures on pipeline
security/maintenance and Frontier exploration.

15. 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.

16. 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.

17. The performance of non-oil taxes and independent revenues
such as internally generated revenues were N614.57 billion and
N217.84 billion,respectively.

18. 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.

19. 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 trillionhad
been spent by June 30, 2019.

20. In compliance with the provisions of the 2018 Appropriation
Act, we implemented the 2018 capital budget till 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.

21. Despite the delay in capital releases, a deficit of N1.35
trillion was recorded at end of June 2019. This represents 70
percent of the budgeted deficit for the full year.

22. Despite these anomalies, I am happy to report that we met
our debt service obligations, we are current 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

24. 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.

25. 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.

26. 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.

27. 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.

28. 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.

29. 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.

30. 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

31. 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.

32. 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

33. 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

34. 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.

35. 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

36. 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.

37. 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.

38. 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.

39. 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.

40. 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

41. 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.

.

42. 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.

43. 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.

44. 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.

45. Therefore, I will once again commend the 9thNational
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.

46. 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.

47. 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.

48. 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.

49. 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

50. Budget deficit is projected to be N2.18 trillion in 2020.
This includes drawdowns on project-tied loans and the related
capital expenditure.

51. 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.

52. 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

53. 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 theSinking Fund to retire maturing
bonds issued to local contractors.

54. 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

55. 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.

56. 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.

57. 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

58. 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.

59. 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.

60. 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.

61. 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.

62. 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.

63. 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

64. 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.

65. 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.

66. 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.

67. I thank you most sincerely for your attention.

68. May God bless the Federal Republic of Nigeria.