Nigeria Employers Consultative Association, NECA, yesterday critically appraised the 2020 national budget presented before the Joint session of the National Assembly, on October 8, and expressed reservations over its intentions.
In a statement by its Director-General, Mr. Timothy Olawale, among others, the umbrella body for private sector employers in the country, said there was no clear provisions to accommodate the consequential adjustment arising from the N30,000 new national minimum wage, which organised Labour is already gearing up for a showdown with government in the coming days.
According to him, “although this is an improvement over previous years, the budget should have been presented earlier to enable the National Assembly perform their duties thoroughly. The nation, therefore, expects the 9th National Assembly to expedite action to return the budgetary process to a January–December fiscal year as enshrined in the Constitution.”
He argued that “although the overall policy thrust of the 2020 Budget is to ensure economic growth and job creation, the document is clear of the inclusion of the consequential adjustment of the National Minimum Wage in the Appropriation Bill.
Consequently, there could be the possibility of the Federal Government, and even some State Governments embarking on massive retrenchment of workers and further threat of strikes by Labour movement.
“The Oil benchmark in the Budget proposed US$57 per barrel, which reflected a reduction from $60 per barrel in the 2019 approved Budget.
However, the benchmark price is just slight above the current average price of $58 witnessed in the course of 8months in 2019, that any further impact on the global economy could result in the crash of global oil price as there is reduced demand globally due to slow down in global economy, which the IMF and World Bank forecasted in their recent reports”.
The NECA D-G noted that “the exchange rate of NGN305/US$ remains unchanged, projected GDP growth of 2.93%, as against 7% project in ERGP; daily crude oil production of 2.18 million barrel per day, mbpd, including condensates as against 2.3 mbpd in 2019 Budget, reflects a decrease from 2018 and 2019.
All these indicators are departures from what was articulated in the Medium Term Plan, Economic Recovery and Growth Plan, ERGP. Furthermore, the President presented a N10.33 trillion budget with a projected Federal Government Revenue of N8.15trillion, reflecting a deficit of N2.18trillion.
“The growing Debt-Revenue ratio is becoming a critical issue for urgent consideration. Moreover, borrowings to finance the budget deficit will be sourced externally, in order to clamp down on the astronomical rise in debt serving. Although external debt provides ample room to decelerate the growth in interest expenditure; at the same time, the urgency to manage external shock better cannot be underemphasized as external debt is employed more frequently in debt management.
The Federal Government should as a matter of urgency commence disposing of government non-oil asset and gradual improvement in the output will increase non-oil revenue.”
He, however, applauded “the expansion of the items exempted in the VAT Act through the Finance Bill, which are essential items like white & brown bread, milk, flour, cereals, fish, fruits, etc that are items largely in the food index of the Composite Product Index.
With the exemptions of the listed food items, the increase in the VAT rate from 5% to 7.5% should not have a significant impact on Food inflation. Nevertheless, since citizen consumes more items other than food, which are VATable, consumption of the VATable items would still have a reflection in the movement of the inflation rate – led to further reduce the purchasing power of the citizens, leading to increase in the price of goods and service and further contract the economy.
NECA still maintains its earlier position on the VAT increase, as it will erode some of the gains recorded in recent times in economic growth. With 85% of VAT collection going to State and Local Governments, there is also need to focus closely on utilization of the additional funds accruing to States/Local Governments for actual developmental purpose.
In order to manage the budget efficiently, NECA advocates for a reduction in the cost of governance at all levels, promotion of efficiency and accountability and transparency of the budget process.”
Mr. Olawale added “with capital projects estimated to gulp N2.46trillion (N721.33billion or 23%) lower than the 2019 budget of N3.18trillion, we align with the intentions of Mr. President that it is expedient that priority should be given to on-going projects before new ones are started and a sound monitoring and evaluation mechanism clearly defined for successful implementation of the Budget.”