The Federal Government on Wednesday announced that it was cutting the 2020 budget by N1.5trn as part of measures to respond to the impact of Coronavirus and fall in Crude oil price, on the Nigerian economy.
It has also reduced the Crude oil benchmark from $57 to $30.
Part of N1.5tn removed from the budget is the over N457bn the government spends on petroleum products importation under the name of “under-recovery.”
The recommendation, which was made by a government’s committee set up to assess the impact of coronavirus on the economy, has been approved by President Muhammadu Buhari
The committee chaired by the Minister of Finance/Budget/National Planning, Mrs Zainab Ahmed, received the assignment from Prtesident Buhari last week.
Ahmed, who with State House Correspondents after the Federal Executive Council meeting in Abuja, was optimistic that the measures would help stabilise the economy in the time-being.
The minister also said that the recurrent expenditure would be cut by 25 per cent across all federal government agencies, while the capital budget would drop by 20 per cent.
She stated, “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 have detailed inputs from the ministries.
“But, I can just say that the budget cut is about N1.5trn; the reduction in the size of the budget. And this includes the N457bn from PMS under-recovery.
“On how much it will affect 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.”
She also disclosed that the new benchmark was now $30 per barrel, instead of the budgeted $57.
The federal government, Ahmed added, had also adopted other measures, which include; the suspension of the funding of upstream projects by the Nigerian National Petroleum Corporation (NNPC); the reduction in the revenue projection of the Nigeria Customs Service by N1.5tn; and the suspension of all ongoing recruitment by Ministries, Departments and Agencies.
She, however, said that the NNPC had been directed to sustain the daily crude production of 2.18m barrels, in addition to reducing projected privatisation revenue by 50 per cent.
“By these measures, we expect that the economy will stabilise and we will be able to sustain services in such a way as not to adversely affect our people”, the minister said.
She added that the National Assembly had its own role to play to make the measures come into effect. .Ahmed said they would have to be passed by the National.
She stated, “These measures mean that we are going to engage the National Assembly to look into the MTEF and to reduce the budget as already stated.
She warned the governments of the 36 states to begin their own budget adjustments as allocations from the Federation Account, through the Federation Account Allocation Committee (FAAC) to the states, would be affected.
She stated, “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.”
Other members of the committee are the Minister of State, Petroleum Resources, Mr. Timipre Sylva; Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele; and the Group Managing Director of NNPC, Mr. Mela Kyari.