By Mathew Dadiya, Abuja

The Federal Government, Wednesday,  announced that it would reduce the 2020 Budget by N1.5 trillion and crude oil bench mark down to $30 against the $57 in the Appropriation Act.

President Muhammadu Buhari had in December 2019, signed the 2020 budget of N10.

The downward review of the annual expenditure came on the backdrop of falling crude oil prices in the international market.

The government also urged the ministry of petroleum and the Nigerian National Petroleum Corporation to intensify effort at ensuring increase in crude oil production to 2.1 million barrel per day in view of the current realitiesand shore up the shortfalls.

This, Minister of Finance, Zainab Ahmed said that the Federal Government was embarking on a number of expenditure cuts in Customs revenue to reduce, 50% cut on revenue from privatization proceeds.

The Minister disclosed this while briefing State House correspondents after the Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari, at the Presidential Villa, Abuja.

She said that the Council approved reductions in capital budget by 20%, 25% cut in enterprises expenditures.

Mrs Ahmed added that FEC also placed an embargo on all recruitments in MDAs except in essential services, security, including Armed Forces and the other security agencies.

Other measures, according to the Minister, include review tax policies, hoping that reduction in recurrent expenditures will allow for the operational surplus increase that could help increase the revenue of government.

Ahmed stated that Presidency would be engaging the National Assembly as soon as possible to give legal backing that will enhance the new policies.

The Minister explained: ”What we have done is that we have written every ministry and given them guidelines on how these adjustments will be made to enable us have detailed imputes from the ministries. 

”But I can just say that the bulk cut is about N1.5 trillion reduction in the size of the budget. This includes N457 billion from PMS under-recovery. 

”It affects the federally funded upstream projects with about 25 percent cut. We work out the exact amount when we get inputs from the Ministries, Departments and Agencies (MDAs).”

On concerns of the economy slipping back into recession, she acknowledged that the government have concerns, saying: ”This is resulting in about 40 to 45 percent reduction and also it will affect the states because it means the Federation Account Allocation Committee (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. 

”It is just a question of deferring some nonessential expenditure so that when things turn we might actually go back to our plans.

On plans to reverse the recently increased Value Added Tax (VAT) and excise duty, Mrs Ahmed said that she would not make any commitment on that right now because ”these are provisions in the law in the Finance Act and as you know we will even in the amendment to the MTEF and the budget have to engage with the National Assembly.”

”The fiscal authorities are working on with the fiscal authority team and we will get Mr. President’s approval before we come up with what we will announce to the public.”

On the directive to stop recruitment into government jobs, the minister said: ”What the agencies have been doing is replacement but even that is being suspended. 

”When things improve, we will go back to the issue of recruitment, but for now, our wage bill is already very high. 

”The President has directed that salaries and pensions must be paid unfailingly, so we are not looking at downsizing in anyway. 

”We are maintain our workforce as it is but we are just stopping the increase in the size of the nominal roll.”

On benchmark, she said that the Federal Government was working on the worse case scenario of $30 per barrel ”and also we are holding to the production numbers of 2.18 million barrels per day.” 

”This you will remember is approved by the National Assembly. This our own analysis and we will start engaging the National Assembly, ” she added.

On the implications for deficit, she said, ”what this means is that our deficit will increase. Our current deficit in the 2020 budget is N1.8 trillion. 

”With the decline in revenue  and even with the adjustment in expenditure the deficit increase. That is why we have to engage the National Assembly to ensure we stay fiscal the fiscal limits as defined in the fiscal responsibility act.”

She further explained that the budget deficit might go up by N1.5 trillion but it depends because the details of the cuts were not yet out. 

”We might also decide to amend the threshold but on the fiscal side we have decided to care the worse case scenario and that is $30 per barrel. You know that today (Wednesday) the price has gone up to about $32 per barrel but we are still staying at $30 to be on the safe side, ” the Minister said.