A review of the 2021 federal budget

The 2021 federal budget ( 2021 Appropriation Bill and its Schedule ) submitted as an estimate by the President, Major General Muhammadu Buhari (retd.), in October 2020 in accordance with Section 81 of the Constitution of the Federal Republic of Nigeria 1999 as amended has been approved by the National Assembly and assented to by the President. This paved the way for the budget implementation to start on the first day of January 2021 thereby maintaining the sanctity of the January 1 to December 31 financial year as provided in the Constitution and the Financial Year Act. This is good for planning and activities in both the public and private sectors of the Nigerian economy.

The Act provides that expenditure must be in accordance with appropriation and virements must be authorised by the National Assembly. Also, errors in the Act are to be amended by a corrigendum issued by NASS. All Ministries, Departments and Agencies are to provide information on their internally generated revenue and foreign and domestic assistance received to NASS on a quarterly basis. Curiously, the Act authorises the Economic and Financial Crimes Commission and the Nigerian Financial Intelligence Unit to utilise 10 per cent of the revenue they generate as penalties and sanctions.

The budget is made against the background of an economy in recession, a depreciating currency, inflation rate of close to 15 per cent and aggravated food inflation; youth unemployment never witnessed in our history, stagnated foreign reserves and Nigeria being rated the poverty capital of the world. Insecurity, insurgency, terrorism, etc. have become the norm and this has become a stumbling block to economic activities as agriculture particularly has been adversely affected.

It is imperative to analyse the budget as assented to discover whether it fits the Bill described as the “Budget of economic recovery and resilience”. It is for a total sum of N13.568tn, an increase of about N500bn from the estimates submitted by the President to NASS. The capital vote is in the sum of N4.125tn which is 30.3 per cent of the budget; N5.641tn being 41.5 per cent is for recurrent (non-debt) expenditure; debt service is in the sum of N3.324tn being 24.4 per cent of the budget while statutory transfers takes N496.5bn being 3.6 per cent. Using an exchange rate of N400 to $1, it is about $33.970bn. When divided over 200 million Nigerians, it comes up to N67,940 per capita, which is $169.8 per Nigerian.

The first point to note is that there are expenditures which cannot wait and cannot be delayed while others will only be spent after satisfying other demands. Salaries in the recurrent non-debt expenditure must be spent because if they are not spent, workers will go on strike and there will be an uproar. The second is that debts must be serviced, otherwise our creditors will downgrade our rating and our exchange rate and other macroeconomic indicators may take a tumble. Statutory transfers are first line charges and must be deducted and spent whether there is a paucity of resources or not. This is in accordance with constitutional provisions and the Fiscal Responsibility Act. It is the capital vote that may be delayed or not implemented at all, if there is paucity of resources. This is the background and context of these percentages and provisions.

The implication of the foregoing is that in an expenditure plan of N13.588tn and the expected revenue is N7.986tn, a deficit of N5.601tn emerges. This is to be financed by new debts of N4.686tn, assets sales/privatisation of N205.153bn and multilateral/bilateral project tied loans of N709.6bn. It is pertinent to point out that the expenditure projections appear to be overly optimistic and a good part of it may not materialise. If this is the case, the deficit may increase, and more borrowing may be required to fund the budget. When this is viewed from the background of the national debt of about $85bn, this is a troubling development.

From the depth of Nigeria’s development challenges, a budget of N13.5tn is a pittance and not adequate to begin the reversal of the underdevelopment rot. Nigeria needs to budget not less than the equivalent of $100bn annually to begin the process of development that can grow the economy and drastically reduce poverty to ensure that we are no longer the poverty capital of the world. But this is not possible if the economy is not diversified and if we do not take advantage of all our resources and programme them for the developmental challenge. These resources are beyond crude oil, gas and minerals. The greatest resource we have is the human resource which activates other resources using technology and information. It also creates the finances needed to pay for development.

Furthermore, moving beyond the figures in the review of the 2021 federal budget, the federal and state governments need to drastically curtail insecurity and insurgency. Can the budget provide economic recovery and strengthen resilience? This is seriously open to doubt. A budget to achieve these ends needs to be anchored on a new paradigm, a new orientation, coming out of the box and understanding our position in the comity of nations as a backward people who need to take the fastest route to join civilised humanity. We may likely come out of recession in the later quarters of 2021, not based on the budget or economic policy but on the strength and resilience of the Nigerian people.

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A review of the 2021 federal budget

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