In the evening of Tuesday, December 17, 2019, President Muhammadu Buhari appended his signature to the 2020 Appropriation Bill of N10.59 trillion (about $31 billion at black market rate or $35 billion at official exchange rate)
The budget was sent to the President last week by the national assembly for signing. Buhari who used the occasion of his 77th birthday to endorse the Appropriation Bill was surrounded by some members of his party administration.
Vice President Yemi Osibanjo; Senate President, Ahmed Lawan; House of Representatives Speaker, Femi Gbajabiamila; Secretary to the Government of the Federation, Boss Mustapha; Minister of Finance, Budget and National Planning, Zainab Ahmed and the Minister of State for Budget and National Planning, Clement Agba, all graced the occasion.
The 2020 Appropriation Bill was sent to the National Assembly on the 8th of October 2019, by Buhari. The 9th Senate led by Ahmed Lawal promised to pass the budget before the January 2020, to reset the nation’s fiscal year from January to December. Delay in passage of previous budgets has resulted in disruption of the fiscal year that it depends on whenever the budget was passed. The House of Representatives had on Thursday passed harmonized version of the Bill to ensure that it runs from January to December.
The budget proposal was N10.33 trillion but the national Assembly increased it to N10.59 trillion, a N263 billion addition, out of which N5 billion was added to the National Assembly budget, making it a total of N128 billion.
In the new budget, N110 billion was appropriated for the Judiciary while Niger-Delta Development Commission was given N80.8 billion. The National Assembly also increased oil benchmark price to $57 per barrel, from the $55 that was set by Buhari. But the daily crude oil production rate was maintained at the rate of 2.18 million per barrel, GDP Growth Rate at 2.93%. Inflation rate 10.81% and Exchange Rate N305/$1 as proposed by the president.
Other breakdown of the budget is as follows: Defence got the highest vote for recurrent expenditure with N784.589 billion. It also got the highest vote for capital expenditure with N116.181 billion. Education came second with recurrent expenditure of N490.303 billion and capital expenditure of N84.728.
Works and housing got the highest capital expenditure vote of N315. 563 billion and recurrent expenditure of N27.983 billion. Universal Basic Education (UBE) got N111.7 billion, Public complaints Commission got N4.7 billion, Independent National Electoral Commission got (INEC) N40 billion, National Human Rights Commission was given N38. 49 billion and Basic HealthCare Fund, N44.49 billion.
Meanwhile, inflation is on its highest in 2019 at the rate of 11.85%, a result of its consistency for the third consecutive month. According data released from National Bureau of Statistics (NBS), the rise in inflation remains consistent due to the rising cost of food items, a development attributed to the closed border.
On month on month basis, the headline index is 1.02% slightly lower than the rate reported in October at 1.07%. Core inflation moved upwards on a monthly basis at 0.79%.
The cost of staples indicated a continuous rise, pushing food index upward by 14.48% compared to 14.09% in October. The increase was instigated by rising cost of bread, cereals, oils and fats, meat, yam and fish.
The uptick inflation will weigh on the upcoming Treasury Bills and Bonds primary market auctions this week as investors are likely to demand higher yields to match rising inflation.
The 2020 budget’s inflation rate is 10.81% while inflation is currently at 11.85%, (over 1% higher), and it may likely go higher in the coming months due to the rising cost of staples as a result of the closed borders. This means the budget is already failing since the government appears not to have the intention to reopen the borders soon.
Other local businesses are being impacted too. The government is counting heavily on the recently increased 7.5% VAT to generate revenue to fund part of the budget. But with many businesses struggling to cope due to border-made inflation, the Inland Revenue Service will find it hard meeting its revenue target. Therefore, the only hope lies on the stability of oil prices. If it hovers around $57, or a miracle happens, and it goes far above; that means the naira will remain stable at around $1/N305 to keep inflation in check.