THE Federal Executive Council (FEC) has approved a total expenditure of N10.07 trillion for 2020.
Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, revealed this while briefing State House correspondents on the outcome of the first post-inauguration meeting of the Federal Executive Council (FEC) presided over by President Muhammadu Buhari on Wednesday.
Giving details of the approval, she said the figure is three per cent less than the approved expenditure in the 2019 budget that has been passed unto the law.
She said the total expenditure includes statutory transfers, non-debt recurrent expenditure such as salaries and pensions and also the social intervention Programme.
According to her, the 2020 budget has a debt service estimated at N2.45 trillion and a sinking fund to retire maturing obligations issued to local contractors and other creditors in the sum of N296 billion.
She added: “So, there is a total sum of N3.43 trillion that is provided for personnel and pension cost inclusive of N218 billion for the top 19 government-owned enterprises in the country.
“This represents an increase of N453 billion over the 2019 approved budgetary expenditure. This also implies a 40 per cent of this recurrent expenditure to the projected revenue.
“The budget deficit is projected at N2.15 trillion in the year 2020 and this is lower than what was approved in the 2019 budget which was N2.47 trillion.
“Let me state that these projections include drawdowns on project tied loans and this represents 1.51 per cent of estimated gross domestic product (GDP). This is well below what is allowed by the Fiscal Responsibility Act of 2007 which is still put at three per cent.
“I want to add that council approved our presentation and so the next phase for us is to consult with the National Assembly and then the Medium Term Expenditure Framework (MTEF) to the National Assembly for their own view and subsequent approval.”
On Value Added Tax (VAT), the Minister announced that FEC approved an increase from 5 to 7.2 per cent, which she said may take effect in 2020.
She suggested that the increase was to help the states to pay the new National Minimum Wage.
Ahmed said the next step would be to have a consultation with the relevant stakeholders and the National Assembly for the amendment of the VAT Act for the increase to come into operation.
The minister said: “We also reported to council and council has agreed that we start the process towards the increase of the VAR rate. We are proposing and the council has agreed to increase the VAT rate from five per cent to 7.2 per cent.
“This is important because the Federal Government only retains 15 per cent of the VAT, 85 per cent is actually for the states and local government and the state need additional revenue to be able to meet the obligations of the minimum wage.
“This process involves extensive consultations that need to be made across the country at various levels and also it will involve the review of the VAT Act. So, it is not going to be implemented immediately until the Act is reviewed.
“So, accordingly, following these assumptions the total revenue estimate in the sum of N7.5 trillion for the year 2020 and N2.09 trillion that will be accruing to the Federation Account and the VAT respectively.
“There will, of course, be the distribution to the three tiers of government based on the statutory revenue sharing formula as defined in the constitution and to this effect.
“It means the Federal Government will be receiving a proposed aggregate of N4.26 trillion from the Federation Account and the VAT pool, while the states and the local government are expected to receive N3.04 trillion and N2.27 trillion respectively.”
On the recovery of bailout funds from states against the backdrop of lean resources to pay the new National Minimum Wage, the minister said it was dangerous for the states not to repay as it may render the Central Bank of Nigeria (CBN) insolvent.
She recalled that the bailout fund was a loan from the CBN, which the states knew they had to repay.
The Minister noted that the repayment ought to have commenced a year ago, but added that if there was anything to do to mitigate the effect of the repayment, the federal government would be willing to do it.
Also speaking at the briefing, Minister of Transportation, Rotimi Amaechi, said council approved the revised estimate total cost for the rehabilitation of Itakpe/Ajaokuta Rail line.
He said the contract was awarded $122 million but the ministry requested for a total of $56 million additional works which were broken down into $38.8 million additional works and 17.2 million variations, bringing the contract of Itakpe to Warri to a total of $178.7 million.
He said the ministry also requested for Lagos to Ibadan with extension to Lagos port complex in Apapa.
“We asked for additional works for $374 million with another variation of $282 million which totalled to $656.8 million added to $1.5 billion that the contract was initially awarded for,” he said.
Meanwhile, FEC a number of road and bridge projects in different parts of the country.