The Federal Executive Council (FEC), on Wednesday, approved a N1.5 trillion reduction in the N10.59 trillion 2020 budget due to the impact of coronavirus (COVID-19) pandemic on the crude oil price.
It has also suspended recruitments into Ministries, Department and Agencies (MDAs) except those into the security sector.
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The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, disclosed the approval of N1.5 trillion reduction in the N10.59 trillion 2020 budget while briefing State House correspondents on the outcome of the council meeting presided over by President Muhammadu Buhari at the presidential villa, Abuja.
She also said that government was looking at the worst-case scenario in the drop in crude oil price and would adopt $30 benchmark for the revised budget as against the $57 per barrel originally used.
Ahmed said the approved cut in the budget amounts to 20 per cent in capital expenditure and 25 per cent in recurrent expenditure.
She said the cut includes N457 billion from Premium Motor Spirit (PMS) under-recovery, adding that ministries have been given guidelines on how the adjustments will be made.
She added: “But I can just say that the bulk of the cut is about N1.5 trillion, the reduction in the size of the budget, and this includes N457 billion from PMS under-recovery.
“On how much it affects 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.”
Ahmed said there was already an instruction to stop recruitments, adding: “What the agencies have been doing is a replacement but even that is being suspended. When things improve, we will go back to the issue of recruitment but for now, our wage bill is already very high.
“The president has directed that salaries and pensions must be paid unfailingly. So, we are not looking at downsizing in any way. We are maintaining our workforce as it is but we are just stopping the increase in the size of the nominal roll.”
On the crude benchmark, she noted: “We are working on the worst-case scenario of $30 per barrel and also we are holding to the production numbers of 2.18 million barrels per day. This you will remember is approved by the National Assembly. This our own analysis and we will start engaging the National Assembly.”
Also speaking on the possibility of the nation’s economy slipping back into recession, she stated: “Of course we have concerns. This is resulting in about 40 to 45 per cent reduction and also it will affect the states because it means (Federal Allocation and Fiscal Commission (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.
“It is just a question of deferring some nonessential expenditure so that when things turn, we might actually go back to our plans.”
The minister also warned that the cut in the budget will increase its deficit, saying: “On the implications for the deficit, what this means is that our deficit will increase. Our current deficit in the 2020 budget is N1.8 trillion.
“With the decline in revenue and even with the adjustment in expenditure, the deficit increase. That is why we have to engage the National Assembly to ensure we stay fiscal the fiscal limits as defined in the fiscal responsibility act.
“It might go up by N1.5 trillion but it depends because the details of the cuts are not yet out.
“We might also decide to amend the threshold but on the fiscal side, we have decided to choose the worst-case scenario and that is $30 per barrel.
“You know that today the price has gone up to about $32 per barrel but we are still staying at $30 to be on the safe side.”
In his remark at the briefing, the Minister of Health, Dr Ehanire Osagie, revealed that testing centres for COVID-19 have risen to five in the country from the previous three.
He said he had not been contacted by the founder of the Chinese online shopping platform, Alibaba, Mr Jack Ma, who has promised to donate COVID-19 testing kits and other items to each of the 54 African countries.
Also speaking, the Minister of Aviation, Hadi Sirika, said that there was a major challenge of acquiring quarry dust for the rehabilitation of the Akanu Ibiam International Airport, Enugu.
However, he was hopeful that the project would be completed before Easter this year.