Budget proposal presented by President Muhammadu Buhari has continued to generate controversy particularly as it relates to the Fiscal Responsibility Acts 2007. Many financial experts who commented on it yesterday described the budget proposal as unrealistic.
The President presented a budget proposal of N13 08trn up by 22.9 per cent from the N10.8trn 2020 budget, with revenue projected at N7.5trn, while the deficit amounts to N5.1trn.
However, while commending the Executive arm for submitting the budget proposal in good time that would allow the National Assembly sufficient period to consider and pass the appropriation Bill Professor Uche Uwaleke has declared that the deficit to GDP is very high given the Fiscal Responsibility Act 2007 position.
According to him, “I must add however, that new borrowings of over N4 trillion to part finance a deficit of over N5 trillion is worrisome given the already huge amount of over N3 trillion allocated to debt servicing alone.”
“COVID’19 notwithstanding, the deficit to GDP should have been kept within the 3% threshold stipulated in the Fiscal Responsibility Act 2007.”
He said that the real GDP growth rate projected at 3% is a little ambitious in view of the impact of COVID’19 on the economy expected to linger till next year.
Also Chief Executive Officer of Cowry Assets Management, Mr Johnson Chukwu, said the “budget is overly optimistic.”
According to him, “In the current year, the government said by the end of June they will achieve 60 per cent of their revenue projections for the 2020 budget which it has struggled to measure-up with.
“Looking at this year, I don’t see how much revenue change we are going to see next year.
“Aside from revenue from the country’s oil export, the major revenue will be coming from other independent revenue sources.
“I do not think the economy will have fully recovered as it will lead to the achievement of the budget proposal.”
He said increasing the revenue projection to about N7.5trn was “highly optimistic”
He added, ” I think the government needs to be more realistic in its projections and if it does that, it will also help us to review our approach to managing our finance or building infrastructure.”
The 2020 budget deficit was N4.97trn and the government had borrowed $3.4bn from the International monetary fund and raised N1.54trn from domestic investors through bond auctions to fund the deficit.
Nigeria’s budget projection for next year which is 21 per cent up from the 2020 budget of N10.8trn has a deficit amounting to 3.62 per cent of 2021 projected Gross Domestic Product.
The Fiscal Responsibility Act of 2007 stipulated that “The aggregate expenditure and the aggregate amount appropriated by the National Assembly for each financial year shall not be more than the estimated aggregate revenue plus a deficit, not exceeding three per cent if the estimated Gross Domestic Product or any sustainable percentage as may be determined by the National Assembly for each financial year.”
The deficit in the 2021 budget estimate is higher than the three per cent threshold provided by the Act.
It would be recalled that the Nigeria’s former Vice President, Atiku Abubakar had said that the deficit threshold violated the Fiscal Responsibility Act and it portends danger for the economy.
Also former Deputy Governor, Central Bank of Nigeria, Dr Obadiah Mailafia, said that the overall budget is ambitious, adding that a deficit of N5.20trn is on the high side which may not be sustainable considering the current economic realities of the nation.
He said, “Right now with the economic realities, coupled with the COVID-19, we are heading towards recession and the only solution is to pump in money into the economy to restore confidence.”
Mailafia stressed on the need for the government to exercise control over expenditure, adding that no one can tell where the government spending is going to.
News9 hours ago
Fear grips police formations in Enugu
Headlines9 hours ago
Buhari bares fangs!
Headlines10 hours ago
Air patrols, gunshots as Angry youths invade NYSC Camp in Kubwa Abuja
News9 hours ago
IPOB cancels planned clean up exercise, protest in Anambra
Editorial8 hours ago
POLITICISATION OF LEKKI TOLL GATE SHOOTING
News8 hours ago
NSCDC arrests 2 vandals and 14 rape suspects in Kaduna
Business and Economy14 hours ago
UN to assist Nigeria eradicate poverty by 2021
News9 hours ago
Femi Falana and his strange mission in #EndSARS shootings