President Muhammadu Buhari on Tuesday said the poor performance of the 2019 budget was due to decline in oil and non-oil sources and dwindling revenue from Value Added Tax (VAT).
Buhari stated this in Abuja when he presented the 2020 appropriation bill to the joint session of the National Assembly. The appropriation bill titled, “Budget of Sustaining Growth and Job Creation”,Buhari said the projected revenue for 2019 felt short of actual receipts.
“The 2019 ‘Budget of Continuity’ was based on a benchmark oil price of $60 per barrel, oil production of 2.3 mbpd and an exchange rate of N305 to the United States dollar. Based on these parameters, we projected a deficit of N1.918 trillion or 1.37 per cent of Gross Domestic Product.
“As at June 2019, Federal Government’s actual aggregate revenue (excluding government-owned enterprises) was N2.04 trillion. This revenue performance is only 58 per cent of the 2019 budget’s target due to the underperformance of both oil and non-oil revenue sources. Specifically, oil revenues were below target by 49 per cent as at June 2019.
“This reflects the lower-than-projected oil production, deductions for cost under-recovery on supply of premium motor spirit (PMS), as well as higher expenditures on pipeline security/maintenance and frontier exploration.”
Giving further details, the president noted: “Daily oil production averaged 1.86 mbpd as at June 2019, as against the estimated 2.3 mbpd that was assumed. This shortfall was partly offset as the market price of Bonny Light crude oil averaged $67.20 per barrel, which was higher than the benchmark price of $60.
“Additionally, revenue projections from restructuring of joint venture oil and gas assets and enactment of new fiscal terms for production sharing contracts did not materialise, as the enabling legislation for these reforms is yet to be passed into law.”
He also noted that “receipts from Value Added Tax were below expectations due to lower levels of activities in certain economic sectors, in the aftermath of national elections. Corporate taxes were affected by the seasonality of collections, which tend to peak in the second half of the calendar year.
“The performance of non-oil taxes and independent revenues, such as internally generated revenues, were N614.57 billion and N217.84 billion respectively.”
On the expenditure side, he said: “The 2019 budget implementation was also hindered by the combination of delay in its approval and the underperformance of revenue collections. As such, only recurrent expenditure items have been implemented substantially. Of the prorated expenditure of N4.46 trillion budgeted, N3.39 trillion had been spent by June 30, 2019” Buhari said.
Speaking further he said the nation “also succeeded in significantly reducing inflation from a peak of 18.72 per cent in January 2017, to 11.02 per cent by August 2019.
“This was achieved through effective fiscal and monetary policy coordination, exchange rate stability and sensible management of our foreign exchange.
“We have sustained accretion to our external reserves, which have risen from $23 billion in October 2016 to about $42.5 billion by August 2019. The increase is largely due to favourable prices of crude oil in the international market, minimal disruption of crude oil production given the stable security situation in the Niger Delta region and our import substitution drive, especially in key commodities.
“The foreign exchange market has also remained stable due to the effective implementation of the central bank’s interventions to restore liquidity, improve access and discourage currency speculation.”