The Federal Government says it plans to deduct as much as N1.5 trillion from the 2020 budget.
The disclosure was made by the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, while briefing State House correspondents at the end of the Federal Executive Council, (FEC) meeting presided over by President Muhammadu Buhari at the Council Chamber, Presidential Villa, Abuja.
Ahmed said that there will be a cut of 20% from the capital expenditure of the 2020 budget while recurrent expenditure will be reduced by as much as 25%. Recall that She had earlier in the month hinted at the possibility of reducing the 2020 budget due to the coronavirus outbreak.
According to the Minister, Buhari had approved other far-reaching measures in the face of the current economic realities occasioned by COVID-19. One of those measures is the cut in crude oil benchmark from $57 per barrel to $30 per barrel in the revised budget. The global crude oil prices are now less than $30 per barrel.
“We should cut down on the size of the federally funded upstream projects of the Petroleum sector. The reason being that we want to be able to receive more revenue by less reduction from NNPC.
“The reduction of the crude oil price from $57 per barrel to $30 means that we are going to get so much less revenue, almost 45 percent loss as we planned. And because of that, we have to amend a number of projections in the budget as well as in the MTEF to reflect our current reality.
We also need to adjust Customs revenue which has been budgeted at N1. 5 trillion but we are adjusting it downwards because we anticipate that trade volumes will reduce and once trade volume is reduced, Customs revenue will be significantly impacted as a result.”
On concerns of the economy slipping back into recession, Ahmed said the budget cut would result in about 40 to 45% reduction and also it will affect states because it means FAAC will be significantly reduced.
“FAAC is just a pool of funds and we share what is realized, 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.