Adopts $28pb, 1.8mbpd Of Oil
The Nigerian Senate, on Tuesday, approved a request by the Federal Government to borrow $5.513bn from external sources for funding its 2020 spending plan, as requested by President Muhammadu Buhari through a letter read during plenary last week.
The approval followed consideration and adoption of the report of the Senate Committee on Local and Foreign Debts, which in its report regretted that revenue projections contained in the earlier passed Appropriation Act of 2020 had become adversely impacted by revenue shortfalls due to the Coronavirus (COVID-19) pandemic.
A breakdown of the loan into the sources by the Committee Chairman, Senator Clifford Ordia (PDP – Edo Central), according to a statement by Ezrel Tabiowo, Special Assistant (Press) to President of the Senate, showed that while $3.4bn at 1.0% interest is expected from the International Monetary Fund (IMF) for Rapid Financing Instrument to part finance the 2020 proposed revised budget.
The Federal Government, he said, also plans to source another $1.5bn from the World Bank for Development Policy Financing of the revised 2020 budget at 2.38% interest; and another $500m from the African Development Bank (AfDB) as budget support operation as part of the COVID-19 crises response to finance the country’s revised budget deficit at 1.315% interest.
The Islamic Development Bank (IsDB) is also expected to grant the nation a loan of $113m to part finance the 2020 revised budget deficit at 0.4% interest.
The committee further observed that the pandemic led to dwindling Government revenue from oil sales, as well as sharp drop in global oil prices below $20 (USD).
The committee noted that as a consequence, the Federal Government found it expedient to seek amendment to the Appropriation Act of 2020 as well as review the 2020-2022 Medium Term Expenditure Framework (MTEF).
According to the report, “the Appropriation Act (Amendment) Bill 2020 contains a revised total budget of N10.594tr with a deficit of N4.563tr which will be part financed by proposed domestic borrowing of N2.188tr and external borrowing of N1.984tr.”
The Committee, however, added that the first component of the request of the President to seek the approval of the Senate to embark on external borrowing to the tune of $5.513bn was to facilitate the financing of the revised 2020 budget deficit.
The budget deficit request of the President, it stressed, is aimed at bridging the revenue shortfalls for the 2020 fiscal year and to access immediate funds required to deal expeditiously and decisively with the ravaging impact of the COVID-19 pandemic.
The report further stated that the Local and Foreign Debts Committee, in agreement with the attending Ministries, Departments and Agencies of Government, agreed to “conclude the consideration of the other two outstanding components of Mr. President’s External Borrowing request relating to Funding of Priority Projects of the Federal Government to be captured in the Budget estimates for 2021 and Facilities to support State Government to face the challenges of the COVID-19 pandemic.”
In a related development, the Senate, also on Tuesday, passed the amended 2020-2022 Medium Term Expenditure Framework/Fiscal Strategy Paper.
The passage was preceded by consideration and adoption of the recommendations of the Senate Committee on Finance.
Chairman of the Committee, Senator Olamilekan Adeola (APC – Lagos West), in his presentation disclosed that as at March 2020, the Federal Government’s retained revenue was N950.56bn, out of which N464.03bn was from oil revenue.
The lawmaker added that N129.72bn and N42.23bn made up amounts from Company Income Tax (CIT) and Value Added Tax (VAT); while Customs collection was N97.47bn.
Accordingly, the Senate while adopting the Committee’s recommendations increased the price of crude oil to $28 per barrel as against the $25pb proposed by the Executive.
The upper chamber also reviewed oil production output from 1.9 million barrel per day (mbpd) proposed by the Executive arm of government to 1.8 mbpd.
Retaining the exchange rate of N360/US$1 as proposed in the MTEF amendment, the Senate resolved that the N500bn intervention fund drawn from various accounts, for the purpose of funding projects already added to the proposed revised 2020 budget be sent to the National Assembly for approval.
The Senate further insisted that the budget deficit of N4.95tr be financed from new borrowings estimated at N4.17tr, while expecting that N1.98tr of the new borrowings will be from external concessional sources. It gave the external multilateral sources as mainly the International Monetary Fund, World Bank, African Development Bank, and Islamic Development Bank.
The Senate while retaining the Federal Government’s reduction of budgeted revenue figure for Customs from N1.5tr to N950bn resolved that the Federal Government’s portion of the N360bn from first-line Nigerian National Petroleum Corporation (NNPC) deductions go straight to the revenue coffers for funding of the 2020 amended budget.
The upper chamber also resolved that the non-oil revenue which includes the Capital Gaines Tax, Stamp Duty, and Company Income Tax be sustained as contained in the proposed MTEF/FSP amendment with serious supervision with a view to blocking revenue leakages.