President Buhari’s Federal Government Announces Plan To Borrow N5 Trillion To Finance The 2021 Overall Budget Deficit, Amid Shortage Of Funds

The President Muhammadu Buhari Federal Government, has on Tuesday, disclosed its plan to borrow at least N4.987 trillion, to finance the N13.58 trillion 2021 budget, Page 36 learnt.

The amount, according to the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, at the 2021 budget breakdown webinar, is part of the N5.196 trillion budget deficit built into the budget.

This, however, is aside the planned supplementary budget to finance purchase of Covid-19 vaccines.

Major highlights of the budget showed that aggregate expenditure, inclusive of Government Owned Enterprises, GOEs, and project-tied loans, is projected to be N13.08 trillion, which is 21 percent higher than revised 2020 Budget.

The recurrent (non-debt) spending, estimated to amount to N5.93 trillion, is 43.19 percent of total expenditure, and 14.32 percent higher than the 2020 revised estimates (reflecting increases in salaries and pensions).

The Aggregate Capital Expenditure of N3.85 trillion is 29.43 percent of total expenditure; and 43.4 percent higher than the 2020 Revised Budget (inclusive of capital component of statutory transfers, GOEs capital, and project-tied loans expenditures).

Debt servicing will gulp N3.12 trillion or 23.88 percent of total expenditure and 16.63 percent higher than the 2020 revised Budget.

A provision of N220 billion, which is 1.68 percent of the total expenditure, was made to retire maturing bonds to local Contractors/Suppliers.

The overall budget deficit is N5.196 trillion, for 2021, representing 3.64 percent of the Gross Domestic Product, GDP, and is to be financed mainly by borrowings at a ratio of 50 percent domestic, and 50 percent foreign.

In addition, multi-lateral/bi-lateral loan drawdowns would account for N709.69 billion; while privatisation proceeds are expected to yield N205.15 billion.

Ahmed disclosed that the dormant accounts and unclaimed dividend to be borrowed by government during the year, would be repaid from the Special Trust Fund to be set up by the Federal Government, once owners are properly identified.

“The unclaimed dividend and dormant accounts will be pooled into a Special Trust Fund. At any time that a bank or the registrar confirms that this is the true owner of such funds, the government will release such funds”, the Minister said in response to a question on whether the Federal Government wants to use the controversial funds to finance its budget deficit.

On the 2020 budget, she explained that N1.8 trillion has so far been spent on capital projects, and that the implementation of the capital budget would continue until March 31, 2021.

Minister Ahmed stated that government is working on the proposed $1.5 billion Budget Support Facility from the World Bank.

She disclosed that the government would have surpassed the N3.94 trillion it generated in the 2020 fiscal year, but for the N4.691 trillion tax waivers it granted to citizens and companies, to cushion the effects of the Covid-10 pandemic in the economy.

“We have included a Tax Expenditure Statement (TES) as part of documents accompanying the 2021 Budget to the National Assembly, which seeks to dimension the cost of tax waivers/concessions, and evaluate their policy effectiveness.

“Tax expenditures (TEs) are currently estimated to (1) CIT N1.18 trillion, (2) VAT N3.1 trillion, (3) Customs Duties N347 billion (4) VAT on Imports 64 billion. Going forward, we will set annual ceilings on TEs to better manage their impact on already constrained government revenues.”

Ahmed further disclosed that the Minister of Health and his team are still working on the details of what the Covid-19 vaccines would cost the nation, but that once that is finalised, a supplementary budget would be presented to the National Assembly, for the approval of the funds.

She declared that subsidy has finally been eliminated in the Petroleum sector, and that there had been accumulated subsidies in the electricity sector, and provisions are made for market players in the current budget to clear part of the arrears which would be finally wiped out in 2022.

More news later…

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