Exchange rate assumption in 2020 budget not realistic ― LCCI
• Says debt service commitment overcrowding capital expenditure
The Lagos Chamber of Commerce and Industry (LCCI) has faulted the N305 to a Dollar assumption embedded in the 2020 budget presented by President Mohammadu Buhari to the National Assembly on Tuesday, stating that such assumption is difficult to justify due to issues associated with declining revenue profile of the country.
This is even as it warned that debt service commitment and recurrent spending are beginning to crowd out capital expenditure, which according to the advocacy group, is not in alignment with the aspiration to build infrastructure and a competitive economy.
According to a statement signed on Wednesday by the Director-General of the LCCI, Muda Yusuf, a copy which as made available to the Tribune Online, “it is laudable that the Executive arm of government and the National Assembly have demonstrated an unequivocal commitment to the return to the January – December cycle for the federal government budgets. This is good for planning by key players in the economy. It would also reduce the uncertainty that has characterized the late presentation and passage of the budget in recent years.
“The key assumptions underpinning the budget are realistic except for the exchange rate assumption of N305 to the dollar. This is one assumption that is difficult to justify, especially at a time when declining revenue has become a major issue both for the government and the citizens. The 2020 budget numbers underscore the need to be more innovative in boosting revenue, reducing leakages and ensuring that revenue-generating agencies of government remit what is due to government. We need to do things differently if we must get a different result.
“In view of the critical revenue situation reflected in the budget numbers and previous revenue performance, no effort should be spared to attract private capital for investment in key infrastructures that may be considered bankable. This would reduce the financing gaps that currently exist.
“The private sector looks forward to the details of the finance bill proposed by the government in order to ensure appropriate engagement with the legislature before its passage into law. We believe that there should be a window of opportunity for stakeholders to make their inputs into the budget consideration process.
“We note that the total budget size is N10.3trillion. The recurrent component is N4.88 trillion, debt service is N2.45 trillion. Together, these two budget items amount to 7.33 trillion, which is 90% total revenue estimates. And from the track record of revenue performance, the percentage may be much higher when related to the actual numbers. All of these indicate that the hope for an impactful investment in infrastructure is dim and would remain so for some time to come.
“This underlines the imperative of appropriate policy choices to attract domestic and foreign private-sector capital for infrastructure financing. The government needs to look beyond tax credit in its quest for more complementary funding sources for infrastructure. We should be looking more in the direction of equity financing. But for this to happen the policy and regulatory environment must be right.
“It is heartwarming that the president is proposing to present an Executive Petroleum Industry Bill in a short while. This would hopefully address the key reform expectations in the oil and gas sector. The truth is that the sector has not been able to attract desired level investment because of grave policy limitations and the associated uncertainty in the sector. It is important to make the crafting of the new bill an inclusive process, taking into account the perspectives of key stakeholders.
“We welcome the decision of government to put in place a framework for government-owned enterprises to contribute better to revenue. The introduction of benchmarks within a cost to revenue ratio framework is a move in the right direction. We believe the many government-owned enterprises can do better in their remittance of surplus to the federation account.
“Debt service commitment and recurrent spending are beginning to crowd out capital expenditure. This scenario is not in alignment with the aspiration to build infrastructure and a competitive economy. Debt service of N2.46 trillion is more than the capital budget of N2.14 trillion.
“We welcome the indication given by the president to ensure the creation of a single window to strengthen trade facilitation process in the country. The provision of the single window has been curiously elusive over the years. We hope that this time, the necessary political will be mustered to ensure that the single window project becomes a reality. Related to this is the absence of scanners at the nation’s ports and border posts. It is unfitting that with our stature as the biggest economy on the African continent; we have grossly failed in the use of technology to facilitate our international trade process.
“Meanwhile, we look forward to the details of the Finance Bill referenced by the President in the budget presentation to the National Assembly. It is important to ensure appropriate engagement with stakeholders before the passage of the bill into law. We believe that there should be a window of opportunity for stakeholders in the economy to make their inputs into the budget consideration process.”