BENUE STATE 2020 BUDGET OF ADVANCEMENT, GROWTH AND EVELOPMENT

Andohol Jerome

Department of Economics (BSU Makurdi)

The presentation of the 2020 budget tagged ‘Budget of Advancement, Growth and Development’ by Governor Samuel Ortom to the tune of N189.5billion to the State House of Assembly for approval has recorded historic milestone since the return to democracy in 1999 via two fronts.

Firstly, it is the budget that has been passed and approved by the State House of Assembly in record time, to restrict the 2020 budget a one-year fiscal cycle; 1^st of January, 2020 to end by 31^st of December, 2020. This feat is commendable given that it will improve planning and forecast in both the public and private sectors, which is expected to provide an environment for economic growth.

Secondly, it is the first time that a budget proposal has undertaken a journey to the Benue State legislature, without recording any change in the estimates presented before it. This connotes that indeed the critical engagement in budgeting has cemented a smooth inter-governmental relationship between the Executive and Legislature. However, this feat is achieved given the worrisome nature that the budget did not taper through its channel of allowing Ministries, Departments and Agencies (MDAs) have interface with the various committees of the House. Despite this shortcoming, the Approved estimate of budget 2020 is N10.3billion short when compared with that of Budget 2019, which was tagged ‘Budget of Security, Peace and Prosperity” that had N199.8billion.

Performance of Budget 2019

S/No	Description	Approved Estimates	Actual Releases	Performance
1	Recurrent Expenditure	N106.4billion	N54.9billion	51.6%
2	Capital Expenditure	N93.4billion	N7.4billion	7.9 %
3	Total Expenditure	N199.8billion	N62.3billion	31.2%

Source: Governor’s 2019 and 2020 Speeches at Budget presentation before the Benue State Legislature.

A cursory look at the performance of 2019 approved estimates reveal that the budget performed below average at just about 31.2% given that only N62.3billion was documented as actual releases from the N199.8billion that was approved as estimates. The capital expenditure, which is supposed to serve as a hub for providing positive externalities to the private sector so as to boost growth performed abysmally poor at just 7.9%. The reasons adduced was the spillover lag effects of recession as well as the security challenges associated with the Herders attack on some parts of the Benue rural community. The recurrent expenditure, which is a composite of personnel cost, overhead cost, debts amortization, pensions and gratuities performed at an average of 51.6%.  This depicts that whatever loans were borrowed and revenue accrued within the 2019 fiscal year were channeled into consumption, which does not augur well for growth sustainability.

Budget 2020 in Perspective

The budget 2020 was presented on Tuesday November 12, 2019 and subsequently approved by the State House of Assembly on Friday December 27, 2019 and duly signed into Law by Governor Samuel Ortom on Monday December 30, 2019 with estimates of N189.5billion premised on the following breakdown:

S/NO	Description	Approved Estimates	% of Total Approval
1	Personnel Cost	N38.1billion	20.1%
2	Overhead cost	N48.4billion	25.5%
3.	Capital Expenditure	N74.9billion	39.5%
4.	Debts	N15.5billion	8.2%
5	Pension/Gratuities	N12.6billion	6.7%
6.	Total Budget	N189.5billion	100%

 

A critical analysis reflects that recurrent expenditure (i.e. personnel and Overheads cost) stands at N86.5billion or 45.6% of the total budget, while Capital expenditure or Development expenditure takes N74.9billion or 39.5% of the total pie, and the remaining N28.1billion or 14.9% is expected to be used on debts amortization, pensions and gratuities.

The government has indicated that to achieve this budget, the following economic fundamentals should be stable, namely:

2. That the exchange rate should be stable at N305 per dollar; the international price of oil should be stable at $55 per barrel; oil production should not fall below 2.18million barrels per day. These issues will facilitate an unchanged revenue sharing from the Federal Government consolidated account.
3. That relative peace will be maintained against the backdrop of sustained implementation of the Open Grazing Prohibition and Ranches Establishment

• That the State government borrowing plan, Aids and grants will not falter on demand.

Budget 2020 Sectoral Analysis

S/NO	Description	Approved estimates	% of Total Approval
1	Economic Sector	N73.9billion	39%
2	Social Sector	N64.6billion	34.1%
3	Administrative Sector	N48.2billion	25.4%
4	Law and Justice Sector	N2.8billion	1.5%
5	Total	N189.5billion	100%

 

Sectoral analysis has revealed that the topmost priority of government is to invest in commerce, agriculture, rural development and critical infrastructure such as roads, power and water, which are constituents of the economic sector with 39% of the sectoral pie.  Following is the social sector with a chunk of 34.1% of the pie, with variables such as education and health constituting activities within this sector. The Administrative sector stands at 25.4% of the total budget which include issues of housing and cost of running government. To ensure the rule of law and Justice, a pie of 1.5% of the total budget approval is provided.

Revenue Sources for 2020 Budget

S/NO	Sources	Amount	% of Total Revenue
1	Statutory Allocation	N42.9billion	22.6%
2	VAT	N13.9billion	7.3%
3	Excess Crude	N2billion	1.1%
4	FAAC Special allocations	N1.9billion	1%
5	Tax and Non-tax Revenue	N31.9billion	16.8%
6	Deficit Financing	N96.9billion	51.2%
7	Total	N189.5billion	100%

 

Analysis of the revenue sources has revealed that half of the 2020 budget depicted as 51.2% is to be financed from deficit sources, which are considered as non-recurring or unstable items. This is curious and worrisome given the volatility of these sources and the likelihood of the budget been dead on arrival, unless with careful budget management and coordination.  The other stable, consistent and recurring sources represent the remaining 48.8%.

Positives of Budget 2020

1. The strategic thinking associated with the program District Economic Expansion Development Strategy (DEEDS), which is expected to identify and develop critical infrastructure peculiar to the 276 Council Wards of the 23 Local Government Areas is new and commendable.
2. The expectation to curtail post-harvest losses through the Rural Agricultural Access and Marketing Programme (RAAMP) is a step in the right direction, which can leverage on the opportunities guaranteed from the current border closure policy of the Federal Government of Nigeria.

• The import of reengineering the Health Insurance and Pension schemes for the average Benue worker cannot be overemphasized. This will provide the impetus for higher workers’ productivity that will galvanize economic growth.

Likely Pitfalls of Budget 2020

62. Given the 2019 performance of actual revenue accrual of N3billion representing 31.2% of the approved estimates of N199.8 billion, it could have been logical if the 2020 budget estimates were pegged at N70billion. This is to say that the 2020 budget is overambitious.
63. A critical look at the sources of funding reveals that the expected deficit financing of the budget is at an outrageous figure of N9billion. This is almost 50% of the total budget.

• The cost of running government is extremely high, given that about a quarter of the budget or 25.5% will be used for this item.

1. Global best budgeting practices suggest that Capital- Recurrent expenditure ratio be at 70:30 in favour of capital expenditure. But the 2020 budget has a 40:60 skewed against capital expenditure.
2. Given wages, overhead costs, debts amortization, Pensions and gratuities provisions, it connotes that about 10% of borrowed funds will be allotted for consumption rather than into investments that should have positive externality on the private sector, in order to stimulate growth. This does not augur well for future generation.
3. Closely related is that borrowing that is not structured to pay back itself via investments that neither bring monetary returns to government nor have positive impact on the private sector, such borrowings will in due season crowd-out or lead to the closure of shops by private investors.

Likely Challenges of Budget 2020

1. The issue of the minimum wage consequential adjustments will kick in, couple with outstanding arrears of salaries and pension.
2. The problem of financial leakages and uncoordinated budgetary feedback

• Communal crisis are likely challenges expected to unfold in year 2020.

1. The volatility of global oil prices is an indeterminate variable
2. Given International Monetary Fund (IMF) projection of a slowdown of global economic recovery from 3.6% to 3.5%, we should not be expecting so much, more so that the national growth rate is targeted at 2.93%.
3. The passage of the financial bill which encapsulates the upward review of Value Added Tax (VAT); the payment of stamps on electronic transfer of N10,000 and above; the Taxing of Dividend, which hitherto were exempted; bringing more imported goods into the excise duties bracket after collection of custom duties for same products; and couple with the payments associated with minimum wage consequential adjustments. These issues will ensure that the targeted Headline inflation index at 10% will be an onerous task to achieve. It is worthy to note that these national and global issues have budgetary implementation implications for Benue State.

What should be done

1. There should be prioritization of projects to ensure value for money given the overambitious nature of the 2020 budget.
2. The State Government should strive not to convert any borrowed monies into recurrent expenditure. In essence all borrowed funds must be channeled into capital projects that should have positive externality effects on the private sector.

• Oversighting and monitoring should be strengthened by the government, in addition to closing financial gaps.

1. The government should take the lead through her relevant agencies towards informing and incentivizing the Benue public to take advantage of the border closure policy of the Federal Government so as to enhance their farm gate prices.
2. The issues of the implementation of the Contributory Pension Scheme and the Benue State Health Insurance Agency Law are long overdue.