| Budget and Plans |    1667 VIEWS  |
| Budget and Plans | |
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Thursday, June 04, 2020 / 05:26
AM / by Honourable Minister of Finance, Budget & National
Planning / Header Image Credit: @FinMinNigeria
Introduction
1. His Excellency, Mr. President, on Monday, 9th March 2020, set up a Committee
comprising senior government officials, including:
2.
Pursuant to the meeting with Mr. President, the Committee was mandated to
recommend fiscal measures for Mr. President's kind consideration and approval.
In this regard, the Committee recognised that Nigeria is currently facing
significant fiscal risks due to the current global economic disruption caused
by the COVID-19 crisis. Furthermore, Nigeria is exposed to the risks of both a
pronounced decline in oil prices and spikes in risk aversion in the global
capital markets.
3.
Although similar challenges were experienced in 2008/2009 as well as in
2015/2016, Nigeria has considerably lower fiscal buffers now than in previous
economic downturns. The decline in international oil prices and domestic
production may be magnified if a severe outbreak of COVID-19 occurs, despite
ongoing efforts to curtail the spread of the Pandemic through compulsory
lockdown of Lagos and Ogun States, as well as the Federal Capital Territory
('FCT').
4.
To directly address these health and economic challenges, Mr. President has
approved the following Fiscal Stimulus Package, as part of an Integrated Policy
Framework to ensure that Nigeria's healthcare system, fiscal position and economy
are sufficiently supported to weather these shocks. This Fiscal Stimulus
Package comprises various measures as indicated in greater detail below.
Establishment of a N500Billion COVID-19 Crisis Intervention Fund
5.
Mr. President has approved the establishment of a N500 billion COVID-19 Crisis
Intervention Fund. The establishment of this COVID-19 Crisis Intervention Fund
will involve drawing much-needed cash resources from various Special Funds and
Accounts, in consultation with and with the approval of the National Assembly.
The N500 billion is proposed to be utilized to:
6.
With regards to the Special Public Works Program, Mr. President had previously
approved a Pilot Special Public Works Programme in eight (8) States to be
implemented by the National Directorate of Employment ('NDE') from February
2020 to April 2020. Mr. President has now approved that this Programme be
extended to all 36 States and the FCT from October 2020 to December 2020. The
selected timeframe is to ensure that the Programme is implemented after the
planting season is over, and it will result in the employment of about 774,000
Nigerians (that is, 1,000 people per each Local Government). N60 billion in
allowances and operational costs has been earmarked from the COVID-19 Crisis
Intervention Fund for this initiative.
7.
The Federal Ministry of Finance, Budget and National Planning is also
evaluating how best to extend the Special Public Works Programme, to provide
modest stipends for iterant workers to undertake Roads Rehabilitation, Social
Housing Construction, Urban and Rural Sanitation, Health Extension and other
critical services. This intervention will be undertaken in conjunction with the
key Federal Ministries responsible for Agriculture, Environment, Health and
Infrastructure, as well as the States, to financially empower individuals who
lose their jobs due to the economic crisis.
8.
Further details regarding the operation of the N500 billion COVID-19 Crisis
Intervention Fund will be announced once the consultations with the National
Assembly and the key Ministries are concluded.
Enhanced Financial Support to The States for Critical Healthcare
Expenditure
9.
The Nigeria Centre for Disease Control ('NCDC') has access to a Regional
Disease Surveillance Systems ('REDISSE') facility from the World Bank in the
sum of US$90 million, out of which US$8 million has been drawn. We have
requested to fully draw down on the outstanding balance of US$82 million. The
Government has also requested for additional financing in the sum of US$100
million from the REDISSE project to meet COVID-19 emergency needs in all the 36
States and the FCT, through the NCDC and Federal Ministry of Health. This will
enable us to expand the capacity of intensive Care Units ('ICUs'), enhance
laboratory capacity, accelerate the procurement of test kits, strengthen
surveillance mechanisms as well as improve information management.
10.
We deeply appreciate the support we have received so far from our partners at
the World Bank. We are continuing our engagements with the World Bank, the
African Development Bank and the Islamic Development Bank to access
concessional funding to support the implementation of the 2020 Budget. We have
also applied for funding from the International Monetary Fund's COVID-19 Rapid
Credit Facility to draw from our existing holdings with the World Bank Group /
International Monetary Fund. This loan will not be tied to any
conditionalities. However, it is important to clarify that Nigeria does not
intend to negotiate or enter into a formal programme with the International
Monetary Fund, at this time, or in the foreseeable future.
11.
The Federal Government has provided N102.5 billion in resources to be available
for direct interventions in the healthcare sector. Of this sum, N6.5 billion
has already been made available to the NCDC for critical expenditure. The
Federal Government remains committed to supporting the States in these
difficult times, particularly those States that are currently battling with the
COVID-19 Pandemic. Lagos State has already been provided N10 billion in
emergency funding. As the situation in the FCT and other States at the
forefront of our efforts unfolds, explicit criteria are to be agreed with the
Federal Ministry of Health and the NCDC to determine when funds would be
released to the affected States and the FCT. More funds are to be provided from
the proposed COVID-19 Crisis Intervention Fund to address emerging and priority
funding needs as these arise.
12.
To complement these initiatives, we are taking steps to activate, release and
(where necessary) enhance the hazard allowances provided in the remuneration
structure of the Federal health sector workers. The Federal Government enjoins
the affected States to take similar measures.
13.
We take this opportunity to recognise the patriotism and sacrifice of our
frontline healthcare workers, whose critical roles in combatting the COVID-19
Pandemic place their health and lives at risk. We thank all of you for your
heroic efforts to protect your fellow citizens from disease and death. The
Federal Government hereby assures our frontline healthcare workers of adequate
insurance, compensation and support during, and in the aftermath of the
COVID-19 Pandemic.
Augmentation to The States' Faac Allocations & Moratorium on States' Debts
14.
Based on the fiscal assumptions underpinning the 2020 Appropriation Act,
monthly Federation Account Allocation Committee ('FAAC') disbursements to the
Federal and State Governments were projected at N888.5 billion. However, due to
the significant drop in international oil prices, FAAC monthly disbursements
have declined in recent months to N716.3 billion in January and N647.4 billion
in February 2020. Our experience shows that monthly average FAAC receipts must
average at least N650 billion for the Federal and State Governments to meet
their current obligations. Unfortunately, we project that monthly receipts may
decline to below N400 billion, over the next 3 to 6 months.
15.
To address these emerging fiscal risks, Mr. President has approved that the sum
of US$150 million be withdrawn from the Nigeria Sovereign Investment Authority
('NSIA') Stabilization Fund to support the June 2020 FAAC disbursement. The
Stabilization Fund was created for such emergencies and is to be utilized for this
purpose. We are also exploring other options to augment FAAC disbursements over
the course of the 2020 fiscal year.
16.
Mr. President has also approved that the Federal Ministry of Finance, Budget
and National Planning should engage with the CBN to agree on a Debt and
Interest Moratorium for States on Federal Government and CBN-funded loans, in
order to create fiscal space for the States given the projected shortfalls in
FAAC allocations. Accordingly, once monthly average FAAC receipts fall below a
specific threshold, interest and capital payments by States, shall be suspended
till monthly average FAAC receipts exceed the threshold. The details of this
Moratorium will be expeditiously worked out with a view to submitting the final
proposals for Mr. President's guidance and final approvals. This intervention
is vital to create fiscal space for the States, as they deal with the health
and economic impact of the crisis. States will also be encouraged to explore
similar arrangements for their outstanding debts to Commercial Banks.
Ensuring Adequate Supplies of Essential Food Items & Critical
Medical Supplies, As Well Appropriate Stewardship of Donated Items & Funds
17.
The responses to the COVID-19 Pandemic and the impact of the 14-days lockdown,
will have a significant impact on the transportation, distribution and
availability of essential food items and medical supplies. Furthermore, the
Government recognises the adverse implications of these extraordinary decisions
on our market women, farmers, traders and smaller businesses.
18.
The Finance Act, 2019 fortuitously provided significant tax relief for Micro,
Small and Medium-sized Enterprises ('MSMEs'). Corporate tax rates for
Medium-sized Enterprise were cut from 30% to 20%, and Small / Micro Enterprises
are completely exempt from corporate taxation. This tax relief will be
invaluable for businesses in the large informal sector that earn N25 million or
less in a financial year. The Finance Act, 2019 has also expanded the VAT
Exemption List for essential food, medical supplies and other basic items that
are critical in our efforts to address the COVID-19 Pandemic.
19.
We deeply appreciate the overwhelming show of solidarity by public-spirited
individuals and corporate bodies towards combating the COVID-19 Pandemic
through financial and material contributions. In this regard, the Government
recognises its responsibility to put an adequate framework in place for the
collection, management and reporting of these donations. Accordingly, the
Federal Ministry of Finance, Budget and National Planning is developing a
comprehensive framework for the transparent management of the contributions.
20.
In the interim, Mr. President has approved the restructuring of the Treasury
Single Account ('TSA') in order to better mobilize cash donations from the
generality of our people and corporate bodies across the nation, create
flexibility and build a coalition with financial institutions while maintaining
the sanctity of the TSA. Going forward, the COVID-19 Donor Accounts, which will
form part of the existing TSA arrangement shall be opened with the following
banks:
21.
These accounts will be linked to the main TSA for ease of monitoring and
reporting.
22.
I will be issuing circulars and Ministerial Orders to ensure that charitable
donations by benevolent companies to support our COVID-19 Pandemic efforts are
tax deductible, pursuant to Section 25 of the Companies Income Tax Act.
Amendment of 2020 Appropriation Act
23.
The 2020 Appropriation Act was based on certain fiscal assumptions, which we
have been compelled to revisit given the emerging economic realities.
Specifically, projected Oil Revenues have been significantly affected in that:
24.
We are therefore revising the benchmark oil price for 2020 to US$30/barrel and
oil production to 1.7mbpd. We have similarly had to adjust downwards our
Non-Oil Revenue projections including various tax and customs receipts, as well
as proceeds of privatisation exercises. In this regard, the Budget Office is
currently working on a revised 2020 - 2022 Medium-Term Expenditure Framework /
Fiscal Strategy Paper ('MTEF/FSP') as well as an Amendment to the 2020
Appropriation Act.
25.
The proposed Amended Budget will provide for the COVID-19 Crisis Intervention
Fund and other adjustments required due to the decline in international oil
prices. We have also commenced engagements with the Leadership and key
Committees of the National Assembly to discuss our plans, such that once the
Executive's 2020 Amendment Budget is completed, we shall expeditiously seek the
requisite Presidential and Legislative approvals.
Concluding Remarks
26.
The emerging health and economic risks resulting from the COVID-19 Pandemic and
decline in international oil prices pose existential threats to Nigeria's
economy, healthcare system, national security, as well as the lives of our
citizens. Accordingly, extra-ordinary measures will be required, as the
situation evolves, to address these challenges.
27.
I will continue to work closely with my colleagues at the Ministries of
Finance, Budget and National Planning; Industry, Trade and Investment;
Petroleum Resources; Health; as well as the CBN, to pursue greater coherence
and coordination of Nigeria's fiscal, monetary as well as trade policies,
during the difficult days and months ahead. The Economic Sustainability
Committee chaired by His Excellency, the Vice President, will continue to
coordinate our efforts and strategies, as well as provide regular updates to
Mr. President.
28.
In closing, I wish to reassure our citizens and residents that the Federal
Government remains committed to working closely with the National Assembly, the
State Governments, Multilateral Organisations, the Donor Community, and the
International Community at large, to alleviate the suffering of our people due
to the ongoing economic and healthcare challenges.
29.
I would like to particularly appreciate the extensive understanding and support
that we have received from our development partners, especially the World Bank,
the International Monetary Fund, the African Development Bank and the Islamic
Development Bank in our efforts to grapple with the COVID-19 crisis.
30.
Thank you for your time and attention, as well as your continued cooperation with
the various measures Government has taken, at this time, to protect the health
and lives of our citizens, our economy, as well as our national security.
Download Here - Ministerial
Press Statement on Fiscal Stimulus Measures in Response to the COVID-19
Pandemic & Oil Price Fiscal Shock
Related News - Honourable
Minister of Finance
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and Plans
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