Experts worried about 2021 budget parameters

By Tunde Shorunke

In the wake of the signing of the 2021 budget by President Muhammudu Buhari, industry experts have raised concerns over what they described as some unrealistic parameters featured in the appropriation bill.

For instance, the budget featured an increase in capital expenditure from N3.6 trillion to N4.1 trillion with N496.5 billion for Statutory Transfers.

This is just as Nigeria’s daily oil production rate is put at 1.86 million per barrel, oil benchmark price to $40 per barrel, exchange rate at N379 per dollar and 3.00 per cent proposed Gross Domestic Product (GDP) growth rate, among others.

Considering the state of Nigeria’s economy, which is believed to be on the path of recovery, experts who spoke with The Daily Times argued that some of the aforementioned parameters were unrealistic.

A developmental economist and Chairman, Board of Amaka ChiwuikeUba Foundation (ACUF), Dr Chiwuike Uba, argued on fiscal transparency specification on the power of the national assembly to increase the estimated proposed budget presented by the executive.

He commended the timely presentation of the budget by the President and its speedy passage by the National Assembly.

However, he noted that the increase in the budget by the national assembly from N13.08 trillion to N13.5 trillion has again brought to fore the weaknesses of the fiscal transparency framework.

According to him, the constitution and other subsidiary legislations on fiscal transparency are not clear/specific on the power of the national assembly to increase the estimates presented by the executive.

Also, given the inherent weakness in our legislation on citizens’ engagement in budget planning, implementation, monitoring and evaluation, the national and sub-national budgets rarely reflect the input and aspirations of the citizens.

“Some of the budget parameters are realistic, while others are overambitious. Some of the budget assumptions were not evidence-based.

For instance, projecting an inflation rate of 11.95per cent when the current rate is 14.23per cent is unrealistic.

The prices of goods and services are going higher by the day and this is expected to continue till around June 2021.

“The fiscal deficit is still on the increase, which shows that the government would continue on the borrowing party to fund consumption.

The trend also shows that non-oil revenue has never met the yearly projections; actual debt service is always above the budgeted amount, sometimes up to 113per cent above the budget.

“At face value, the budget may appear very wonderful, but, the budget will suffer credibility issues during implementation.

Nigeria has always had ambitious and aggressive revenue and expenditure projections. Unfortunately, repeatedly, revenue has always been under-collected while expenditures were under-spent.

“I am also very uncomfortable with the government’s plans to sell some of its assets to raise money to fund the 2021 budget.

It is not a sustainable approach when it is evident that some of the monies would end up on personal bank accounts.

“If the funds proposed are spent as purposed, it will have a positive impact on the economy. What we should be concerned about is the level of impact.

I will like to make a more informed contribution when I have access to the approved budget,” he added.

Head, Investment Research at PanAfrican Capital Holdings, Moses Ojo said that the passage of the 2021 appropriation bill by the National Assembly in December 2020 is a welcome development.

He stressed that the estimated GDP growth rate of 3.00 per cent might be too optimistic because the economy is still struggling to exit recession.

On the assumptions of the budget, he said, “Oil production of 1.86 million barrel per day seems achievable even with the OPEC+ production cut rationing which will exclude condensates for Nigeria.

He added that the oil benchmark of US$40 per barrel seems realistic as well because Brent Crude Oil is presently trading at around US$50 per barrel.

“The exchange rate of N379/US$ might not be difficult to achieve if the current improvement in the prices of crude oil can be sustained, then it will lead to an increase in foreign exchange inflow during the year.

“Estimated GDP growth rate of 3.00 per cent might be too optimistic because the economy is still struggling to exit recession.

Certainly, 2021 is expected to be a year of recovery, yet the nation’s economic output in the coming year is expected to stand at around 2.00 per cent.

“Furthermore, the greatest risks to the implementation of the 2021 budget are the achievement of the revenue estimates.

The budgeted revenue for the oil sector and the non-oil sector seems too optimistic considering that the economy is just on the path of recovery.

READ ALSO: N’Assembly raises 2021 budget by N505.607bn, appropriates N13.588trn

For example, quite several businesses were affected by the pandemic and they have experienced a fall in revenue. This will affect their taxable profit.

“Also, another major risk to the implementation of the budget is the second wave of COVID-19 that is currently ravaging the country.

Although, this is not expected to lead to a total lockdown of the economy this time around.

Yet, the resurgence will have a negative impact on the performance of the economy by leading to a reversal in the prices of crude oil in the global market,” he explained.