President Muhammadu Buhari on Tuesday formally presented a N10.33 trillion budget proposal for 2020 fiscal year. The proposed budget is about N40 billion less than the N10.729 Trillion approved by the National Assembly last week in the 2020-2022 Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) draft.
Although the national assembly is yet to review and approve the proposed increase of the Value Added Tax (VAT) rate from 5% to 7.5%, the new N10.33 trillion budget presented by the president before a joint session of the National Assembly is based on the proposed new VAT rate of 7.5%.
“The 2020 appropriation being presented today is predicated in the following parameters: Benchmark Oil Price $57 Production: 2.18m bpd FX: N305/$ Proposed increase of VAT from 5% to 7.5%,” Buhari said while presenting the 2020 budget to the National Assembly. “The proposed increase in VAT from 5% to 7.5% will be used to fund education, health & infrastructure,” he added.
The budget proposal was also prepared based on the following assumptions: Benchmark of $57 per barrel, daily oil 1.86 million barrel per day. Buhari said the increased revenues will be used to fund education, health, and infrastructure. He explained that the goal of presenting the 2020 Appropriation Act early to lawmakers is to ensure its passage into effect on January 1, 2020. He also stated that the main emphasis of the budget is on the completion of many ongoing infrastructure projects, instead of starting new ones.
According to the proposed budget, the Ministry of Works and Housing got N262 billion, transportation ministry got a budget of N123 billion, Agriculture ministry received N83 billion. UBEC got N112 billion, Defence ministry N100 billion, Water Resources was allotted N82 billion, Education sector got N48 billion, health has N46 billion. North East Dec Commission got N38 billion, SIPs was given a budget of N30 billion, FCT got N28 billion and the Niger Delta ministry got N24 billion.
The proposed increase of VAT rate from 5% to 7.5% by the federal government is still subject to review and approval of the National Assembly. Following the announcement of the plan to increase VAT, many critics, condemned the plan saying it will further squeeze and disadvantage the poor masses.
But the Minister of Finance, Budget and National Planning, Zainab Ahmed, said the proposed increase on VAT was based on the recommendation of the presidential technical advisory committee. The federal government on January 9 constituted a committee chaired by an Economist and Managing Director/ Chief Executive Officer of Financial Derivatives Company Limited, Bismack Rewane.
The committee was mandated to give advice on ways to realize alternative sources of raising funds for the implementation of the new minimum wage by the government. The committee submitted its report on March 21 with the increase in the VAT rate from 5% to 7.5% as one of its key recommendations to government to handle the issue.
The president, however, said the threshold for VAT registration will be raised to N25m turnover per annum, to bring relief to small businesses. Buhari said the proposed increased VAT will exempt pharmaceuticals, educational items and basic commodities. Presenting the Appropriation Bill at the chamber of the House of Representatives, the President told the federal lawmakers that he would soon send an Executive Finance Bill to the Assembly proposing the ban on importation of items like brown and white tea, maize, rice, meat, millet, fish of all kinds and flower.
Meanwhile, the House announced the suspension of plenary sessions from Wednesday till October 30, 2019 in order to achieve the objective of returning the budget calendar from January to December cycle.
The Chairman, House Committee on Media and Publicity, Hon. Ben Kalu, disclosed this Tuesday while addressing journalists after President Buhari presented the 2020 budget proposals to lawmakers. He said that the leadership of the National Assembly made it a prioritized duty to set up various committees and also inaugurating them, adding that the committees had started working and interacting with the Ministries Departments and Agencies (MDAs).
Kalu stressed that the committees were already appraising what happened with the 2018 and 2019 budget to compare with the 2020 budget. He said: “The House, in order to achieve this objective of reversing the calendar will be suspending plenaries, not suspending the House form Wednesday till October 30 to enable us go into our various committees to interact with the MDAs.” Against this background, the House has set up a road map to achieve it aims.
Kalu said that from October 9-10, 2019, the House would have debate on the general principle of the 2020 appropriation bill, as well as the second reading and referral to the committee. He explained that on October 10, there would be meeting with all the chairmen of all the committees to guide them on what is expected of them as regards 2020 budget.
Kalu noted that from October 10-29, 2019, the House would be having budget hearing and engagement with MDAs by appropriation sub committees, while on October 21 – 22, 2019, the House would organise public hearing on the 2020 appropriation bill. He stressed that the House had scheduled the submission and defence of budget reports to appropriation committee from October 30th to November 5th 2019.
Kalu stated: “It is important to note here that the determination date for submission of budget and defence of the same budget will be on the 5th of November. After the November 5, we will not accept any submission for any defence from any MDAs. Kalu stressed that the expectation of the House expectation is to be done with the budget on November 28, 2019.
Meanwhile, the Senior Special Assistant to the president on National Assembly Matters (Reps), Umar El-Yakub, said that the expeditious and adoption of the MTEF/FSP would facilitate the return to January -December budget cycle. El-Yakub while addressing journalists after the presentation of the 2020 budget by the president said that Nigerians would benefit from the budget, adding that the projects would be implemented in infrastructural areas such as education, agriculture, water, security and power.