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FG to Cut 2020 Budget by N1.5tn, Deregulates Petrol Pricing

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The federal government wednesday in Abuja announced its decision to reduce the N10.59 trillion 2020 budget by N1.5 trillion.

It also said it would reduce capital budget allocation by 20 per cent across the ministries, departments and agencies (MDAs) as well as 25 per cent cut in both the recurrent and capital budgets of government enterprises.

The federal government also deregulated petrol pricing, directing the Petroleum Products Pricing and Regulatory Agency (PPPRA) to modulate pricing in accordance with prevailing market dynamics and further oil market development.

Subsequently, the Nigerian National Petroleum Corporation (NNPC) announced that its outlets would sell petrol at N125 from today, an N18 reduction from the N143 it sold up till yesterday.

These decisions were taken in reaction to the drastic fall in the price of crude oil in the international market caused by the outbreak of COVID-19 and trade war between Russia and Saudi Arabia.

Making the disclosure while briefing State House reporters after the weekly Federal Executive Council (FEC) meeting, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said the guidelines on how the budget reduction would be carried out had been sent to every ministry.

“On the expenditure side, the president has approved that we should cut down the capital expenditure budgeted by 20 per cent across ministries, departments and agencies and also a 25 per cent cut of all government-owned enterprises and these include the ones that are in the national budget.

“The ones that we included in the 2020 Budget, and also the ones that we didn’t include in the 2020 budget. What we have done is that we have written every ministry and given them guidelines on how these adjustments will be made to enable us to have detailed inputs from the ministries. But I can just say that the bulk cut is above N1.5 trillion – the reduction in the size of the budget, and this includes N457 billion from PMS under-recovery.

“On how much it affects the federally funded upstream projects, it is about 25 per cent cut. The exact amount we will work out when we get inputs from the ministries, departments and agencies,” he said.

According to her, the budget cut will affect upstream projects with 25 per cent cut adding that the exact figure in monetary value would be worked out when inputs are received from the MDAs.

She said President Muhammadu Buhari had directed the reduction of capital budget allocation by 20 per cent across the MDAs as well as 25 per cent cut in both the recurrent and capital budget of government enterprises.

“On the expenditure side, the president has approved that we should cut down the capital expenditure budgeted by 20 percent across ministries, departments and agencies and also a 25 percent cut of all government-owned enterprises and these include the ones that are in the national budget.

“The ones that we included in the 2020 Budget, but also the ones that we didn’t include in the 2020 budget,” she submitted.

Ahmed also said the government was concerned about the possibility of the country slipping back into recession, pointing out that states would also be affected as funds flowing into the Federal allocation Account Committee (FAAC) would be affected.

According to her, instructions had already been given to government institutions to stop both further recruitments and replacements of staff until the situation improves to avoid shooting up the wage bill.

However, she said there is no plan to downsize as the president had issued a directive that salaries and pensions should be promptly paid.

She also said the states are also expected to follow the path of the federal government by adjusting its fiscal plans.

“Of course, we have concerns (about going into recession). This is resulting in about 40 to 45 per cent reduction and also it will affect the states because it means FAAC will be significantly reduced. FAAC is just a pool of funds and we share what is realised..So, it will affect the states as well.

“So, we are expecting the states to take similar measures to amend the plans that we have made and bring them down to current realities. It is just a question of deferring some non-essential expenditure so that when things turn, we might actually go back to our plans…

“On recruitment, there is already an instruction to stop recruitment. What the agencies have been doing is a replacement but even that is being suspended. When things improve, we will go back to the issue of recruitment but for now, our wage bill is already very high.

“The president has directed that salaries and pensions must be paid unfailingly. So, we are not looking at downsizing in any way. We are maintaining our workforce as it is but we are just stopping the increase in the size of the nominal roll,” she said.

Ahmed also spoke on oil benchmark, saying the federal government was planning to reduce the benchmark from the current $57 per barrel in the budget to $30 per barrel but with the hope of ensuring the production of the projected 2.18 million barrels per day is achieved.

She added that the implication of such a drastic reduction is that budget deficit would increase from the N1.8 trillion in the budget, adding that the National Assembly would be engaged on the developments.

“On benchmark, we are working on the worse case scenario of $30 per barrel and also we are holding onto the production numbers of 2.18 million barrels per day. This you will remember is approved by the National Assembly. This is our own analysis and we will start engaging the National Assembly.

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