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FG Begins Deduction Of N614bn Budget Support Funds From States

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The federal government has said it will begin deduction of the N614 billion bailout funds disbursed to 35 States of the federation (excluding Lagos) under the National Budget Support Loan Facility.

The government said it will make the deductions at source from statutory allocations to the various States by the next Federation Accounts Allocation Committee (FAAC) meeting that will be held this September.

Stating that the N614 billion bailout funds to states is not going to form part of the revenue for funding its 2020 budget, Minister of Finance, Budget and National Planning, Zainab Ahmed said “the recovery process for us is to deduct from the FAAC allocation to the states and remit to the CBN. We are going to start this remittances by the next FAAC. So, there will be no requirement for us to consider the FSP implementation. We do that as a matter of wanting the states to stay on the path of fiscal sustainability but it will not be a condition for the deduction. We will deduct direct at source and remit to the CBN.”

The fund was a conditional budget support provided by the CBN to help states pay salaries, gratuities and pensions. CBN provided N650 billion in loans at 9% with a grace period of two years. The Federal Ministry of Finance helped in disbursements with documented approval by the presidency.

The Finance Minister also announced that the Ministry is currently reviewing the quantum of waivers and incentives to businesses operating in the country. She said the idea is to “see which one we can begin to pull back and throw away from the pool to reduce the cost of government,” but emphasised that some of the waivers are essential to encourage businesses and to make Nigeria competitive.

“We agree from the finance side that we have too many incentives and too many waivers. But our partners in the trade will not necessarily agree with us. We also agree that there has to be a review of the pioneer status certificate issuance process because the waivers and the incentives are really costing us a lot. But when a decision has been made and approvals have been given, and a private business makes an investment decision based on those incentives, you can’t pull it out overnight. So, there has to be a period within which the commitments that have been made are allowed to exit before you impose new conditions,” the Minister said while presenting the draft 2020-2022 Medium Term Expenditure Framework and Fiscal Strategy Paper in Abuja, yesterday.

In the draft 2020 budget, the federal government projected a total revenue of N7,634,592,983,557 trillion against the NN7,594,019,036,171 trillion revenue in the 2019 budget.

Also, the federal government said it is proposing a total expenditure sum of N9,789,243,849,466 trillion for 2020, including the budgets of all government agencies and parastatals. From that figure, only the federal government’s budget (excluding Government Owned Enterprises budget & project-tied loans) would gulp N8,907,940,657,001 trillion.

A breakdown of the figures shows that aggregate capital expenditure was cut from 32% in 2019 to 21% in 2020, reflecting a downward slope of capital expenditure from N3,184,195,688,124 trillion in 2019 to a proposed N2,053,311,650,127 trillion in 2020.

On the flip side, recurrent (non-debt) expenditure is being moved to N4,749,971,894,031 trillion from the N4,385,591,096,996 trillion it was in the 2019 budget.

Another N350 billion has been proposed for government’s special interventions for the year.

In the draft 2020 budget, the federal government will borrow the total sum of N1.7 trillion. The plan is to borrow N850 billion each from the domestic and foreign market to fund the deficit in the proposed budget. If passed, the budget would have N2.154 trillion deficits to be financed by borrowings and proceeds from privatization proceeds.

Similarly, the federal government will spend NN2,144,014,113,092 trillion on debt service. While N110 billion has been earmarked for settlement of maturing debts.

Personnel cost (inclusive of Pension Costs) at over N3.0 trillion has continued to rise. The federal government is however taking steps to contain the rising personnel costs, including an October 2019 deadline by Mr. President for all MDAs to implement Integrated Payroll and Personnel Information System (IPPIS). Based on the directive, any agency of government that refuses to enrol its payroll in IPPIS will no longer get their salaries from October this year.

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