The Senate on Thursday passed the 2020-2022 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) submitted to it by President Muhammadu Buhari last week.
This followed the presentation and consideration of the report of the Senator Solomon Adeola-led Senate Committee on Finance by the Red Chamber in Abuja.
The upper chamber in the approved MTEF/FSP for 2020-2022 increased the Federal Government’s proposed expenditure for 2020 from N10.002trillion to N10,729.4trillion.
The Senate also increased the oil benchmark from $55 per barrel to $57 per barrel, representing a $2 increase.
The Senate also increased the 2020 revenue target by the Nigeria Customs Service (NCS) by N557.4billion, that is, from N942.6 billion to N1.5trillion.
It, however, retained the exchange rate at N305 per dollar and oil production benchmark at 2.18mbpd as proposed in the MTEF/FSP by the executive.
The Committee also recommended the adoption of N1.5 trillion as the amount for new borrowing by the Federal Government in 2020, as a result of reduction of N200 billion which was sourced from the increase of revenue target of the Nigeria Custom Service.
The Committee further called for an urgent review and amendment to the Fiscal Responsibility Act (FRA Act) and the various laws of the revenue generating agencies to align with current realities.
This information form part of the recommendations of the National Assembly Joint Committee on Finance report on 2020-2022 MTEF/FSP which was considered by the Senate in Abuja yesterday.
The Committee’s recommendations which were approved by the Senate are as follows:
“The Committee recommends the adoption of $57/barrel as crude oil benchmark price for the fiscal ear 2020.
“The revenue target of Nigeria Customs Service (NCS) of N942.6 billion for 2020 should be increased to N1.5 trillion, as a result of the performance of NSC in last 9 months with 3 months still outstanding.
“The NCS revenue as at September stood at N1 trillion against the budget figure of N969. 8 billion for the year 2019. The Joint Committee commends the NCS for exceeding the targeted revenue despite the global economic challenges and closure of the Nigerian borders.
“The sum of N557.4 billion from the revenue increment of NCS be used to reduce borrowing by N200 billion and increase capital expenditure thereby decreasing the size of the budget deficit from N1.7 trillion to N1.5 trillion and also increase the total capital available to MDA by N357 billion, from N1.01 trillion to N1.367 triilion.
“The exchange rate of N305/$ should be maintained for economic stability. While more work should be done by the Honourable Minister of Finance and all economic advisers and her team on improving the economic growth by increasing the GDP and reducing the inflation rate to single digit.
“The saving on income accruing from the increase of the benchmark amounting to N172 billion which represent the Federal government potion of the $2 added to the benchmark be used to pay salaries and emolument of the proposed 30,000 new employees.
“Proper investigation be carried out on the e-collection stamp duties domicile with Central Bank of Nigeria for the past years so as to show probity and accountability and of course increase the revenue base of the country.
“Immediate amendment of the National Assembly Act on Production sharing Contracts (PSC) with lOCs. Proper investigation be carried out on NNPC so as to ascertain the actual cost associated with the Joint Venture agreements.
“More Government Owned Enterprises budget be added to the nation’s budget to ensure proper checks and balances among all Federal Government agencies.
“Debt Management Office (DMO) should put more efforts and strategies in managing foreign and local debts.
“Total estimated expenditure of the Federal Government should be increased from N10.002 trillion to N10,729.4trillion.
“National Assembly should expedite action on the passage of the finance bill which will be brought along with the National Budget into Law for easy implementation of the 2020 budget, most especially in the area of VAT.
“The Committee calls for an urgent review/amendment to the FRA Act and the various Laws of the revenue-generating agencies to align with current realities.
“The Committee recommends earmarking 1% of the Consolidated Revenue Fund to finance the Basic Healthcare Provision Fund to be classified as Statutory Transfer.
“The Committee recommends the adoption of N1.5 trillion as the amount for New Borrowing as a result of reduction of N200 billion which was sourced from the increase of revenue target of the Nigeria Customs Service.
“However borrowing must be project tied. ln borrowing more government must remain focused and ensure that it used to fund critical projects that will increase productivity and contribute to finance financing such debt.”
The Committee in its findings observed that crude oil receipt accounted for over 50% of Federal Government revenue and about 90% of Nigeria’s foreign exchange earnings.
“Therefore crude oil production and export will continue to have important implication on Federal fiscal operation.
“Over the last 3 years crude production average 1.92mbpd however, following consultations with stakeholders, crude oil production is estimated at 2.18mbpd, 2.2mbpd and 2.3mbpd in 2020, 2021 and 2022,” the committee said.
The committee also noted that oil prices had generally been rising since April 2016 as Bonny light crude oil price rose from an average of $43 per barrel in 2016 to $56.2 in 2017 and $72.1 in 2018 partly due to geographical tensions.
It said that 2019, bonny light crude oil price increased steadily from January average of $60/barrel (to) a six-year high well above $70/barrel between April and May 2019.
“It is noteworthy, that volatility of crude all markets and fluctuating price requires constant review and forecast.
“The non-oil revenue for 2020, 2021 and 2022 is budgeted to be as follows: N1,836,693,720.000; N2,205,807,930,754 and N2,337,091,481,680 respectively,” the committee said.
The Committee further said it observed during the public hearing on the 2020-2022 MTEF & FSP, that the salaries and remunerations for the proposed recruitment of 30,000 personnel in Police, Army, Immigration and Civil defence was not captured.
It also said that the total VAT proposed in the 2020-2022 MTEF/FSP amounting to N23trillion can be realized only after the amendment of the Finance bill is passed into law by the National Assembly.
The Committee however frowned at the attitude of Central Bank of Nigeria (CBN) for the under disclosure of the e-collection of stamp duties.
The Committee further observed that the activities of NNPC as it relates to cost of production is shrouded in secrecy, “the direct deduction of cost from revenue without recourse to relevant agencies of government is unacceptable.”
It also noted that 10 Government Owned Enterprises (GOEs) budget would be presented along with the 2020 National Budget
“These GOES include FAAN, NCAA, NlMASA, NPA, NAMA, Shippers Council, NDIC, NCC e.t.c.,” the Committee said.
The findings read in part: “The Committee observed that the exchange rate of N305/$ is maintained over the past three years. Also noted that the GDP growth rate is currently standing at 2.93% and an inflation rate at 10.81%
“That most of the revenue-generating agencies have failed to comply with relevant extant law of the Fiscal Responsibility Act which stipulates payment of 80% of Operational surpluses to the Consolidated Revenue Fund.
“The Committee observed that the Federal Government is stepping up investment in health and education to fill the skills gap in the economy, and meet the international target set under the UN’s Sustainable Development Goals (SDGs).
“The Federal Government is earmarking 1% of the Consolidated Revenue Funds to finance the Basic Healthcare Provision Fund to be classified as Statutory Transfer. Federal Government believes that investing in people is a core objective of ERGP.
“Government is taking steps to enhance human capital development particularly in health, education and social intervention programs in other to reduce poverty.
“Based on the joint IMF-World bank debt sustainability framework which has a Debt/GDP threshold of 56% for Countries in Nigeria’s Peer Group, Nigeria’s debt is expected to remain sustainable within the MTEF period.
“This implies that Nigeria Debt/GDP ratio of 19.39% can afford it to expand its borrowing limits. As at 31st December, 2018 Nigeria public debt stock is valued at N24.387 trillion ($79.436 billion), rising at an average of 12.24% per annum.
“With regard to 2020 fiscal year, the estimated budget deficit is N1.70 trillion and it will largely be financed through borrowing as it has been the tradition while also additional financing of N252.08 billion will be derived from Privatization Proceeds and N328.13 billion from loans secured for specific developmental projects.
“The Committee further observed that Nigeria’s current debt profile is not alarming as expressed in some but within the threshold of 3% as contained in the Fiscal Responsibility Act.”
Each of the recommendations were unanimously adopted by the Senate when they were put to voice vote by the President of the Senate, Ahmad Lawan.
