The Federal Executive Council (FEC) had at the virtual meeting from the Council chambers on Wednesday approved the review to the 2020 budget and the Medium-Term Expenditure Framework for 2020-2022 as recommended by the Ministry of Finance, Budget and National Planning.
Recall that President Muhammadu Buhari presided over the virtual meeting where a number of memoranda by a few ministers were presented for consideration. Other ministers who had no presentation participated virtually.
The budget has new benchmarks which now includes $25 per oil barrel, and a target production rate of 1.94 million barrels per day and then an exchange rate of N360 to $1, Mrs. (Dr.) Zainab Ahmed, the Honourable Minister of Finance, Budget and National Planning, said while briefing State House correspondents.
“The council has approved our recommendations and the approval has these key parameters: The crude oil price is approved at $25 per barrel, crude oil production is at 1.94 million barrels per day and then an exchange rate of N360 to $1,” she said.
According to her, the revised budget is now in the total sum of N10.523 trillion, a difference of just about N71.5 billion when compared to the approved budget. She also said: “This is because, as we cut down the size of the budget, we also have to bring in new expenditure previously not budgeted, to enable us adequately respond to the COVID-19 pandemic.”
Ahmed’s position is that the federal government in this budget will have direct revenue of funding the budget of N5.158 billion. “The deficit to this budget is N5.365 trillion and this will be financed by both domestic as well as foreign borrowing. The foreign borrowing that we are doing for 2020 are all concessionary loans from the IMF which has already been approved and has crystallised, from the World Bank, Islamic Development as well as Afro EXZIM bank.
On previously committed loans, in her words: “There will also be some drawdown of previously committed loans for major ongoing projects that we will be drawing from both existing facilities as well as some special accounts with the approval of Mr. President and the National Assembly, and also revenue that we are expecting to realise from privatisation. “So, the borrowing, the multilateral loans drawdown coming from special accounts and also from the privatisation will fund the fiscal deficit of N5.365 trillion that we have in the proposed amendment of the 2020 budget.
In addition to the loans that the minister of agriculture mentioned, “we request on behalf of Ebonyi State Government for a loan of $80 million from the Islamic Development Bank, for the construction of Abakalike ring road project. While the federal government is the one borrowing from the bank, federal government will be unlending this loan to Ebonyi State Government. We have done our debts sustainability analysis that proves that Ebonyi State has the capacity to repay this loan…and also considering its long tenure for repayment.”
Speaking on the importance of the project, Ahmed explained that the Ebonyi ring road connects 13 local governments in the state as well as the neighbouring Cameroon Republic. “It is a major road that will provide access to the citizens in the state, to farmers, markets and will enhance economic activities in the state. And the neighbouring states will also benefit from this project.
We also got approval today for the Nigeria Customs Service (NCS) to purchase boats which are manufactured here in Nigeria for its surveillance and anti-corruption activities on the maritime waters.
Also speaking on prioritisation of made-in-Nigeria products, she said: “As you know, the President has set up an economic stimulus committee chaired by the Vice President. The work of the committee is to develop a 12-month economic stimulus plan, and we are at the final stage of that work. We have prioritise spending in that plan to use and consume made-in-Nigeria. For example, some of the public works projects that will employ a lot of our youths are to be done using strictly our raw materials, so that we do not have to import bitumen, for example, to build our roads. We have got approval from Mr. President that spending as much as possible should be on made-in-Nigeria goods and products; that are goods and products produced in Nigeria, so that it saves our foreign exchange and also helps to grow the economy.
Meanwhile, the executive council also approved N683 million for the purchase of 19 operational vehicles by the Nigeria Port Authority (NPA).
The transport minister, Rotimi Amaechi, disclosed this to journalists, adding that the approval came because it “was the first time in four years that NPA is buying any vehicle. These are operational vehicles; not for management staff or any other thing. They are all Toyota,” he said, adding that the contract was awarded to Globe Motors Holding Nigeria Limited.
In the same vein, power minister, Mr. Sale Mamman, said N47 billion was approved for the provision of additional 40 megawatts of electricity to the national grid. Nigeria’s electricity generation capacity is about 12,500 MW — of which 12.5 percent is hydropower and 87.5 percent thermal — but only between 3,500 MW to 5,000 MW is distributed.
Mr. Mamman said the planned 40 megawatts would be evacuated from “Kashimbilla Dam (in Taraba State) via Takum, Wukari and Yandev, to the national grid.” This evacuation, he explained, was necessary to save Nigeria about 120 gigawatts of power, equivalent to $9 million in a year. He added that the move was targeted at boosting power supply in Taraba and Benue states as well as the entire north-eastern region of the country.
Accordingly, Sabo Nanono, Minister of Agriculture and Rural Development, said: “We presented a joint memo with the ministry of finance, in which we sought the approval of a loan facility of about €950,000 (euros) translated to about $1.2 billion. This loan is for the purposes of agricultural mechanisation in this country that will cover about 632 local governments plus 140 processing plants. This is going to be a major revolution in the agricultural sector, like we have never seen before. I think the Executive Council has done the right thing and has approved this.
According to him, the key to mechanisation is the establishment of 632 tractor serving centres across the country. These serving centres will constitute tractor hiring skill, IT and admin office and a chemical workshop and store for storing inputs for agriculture, and even output arising from agricultural sector. Explaining further he said the key to the tractor hiring skill is that every tractor will have a tracking system, so that wherever it is working in this country, you will know on your fingertips where it is and which area it has covered and how much revenue it is generating.
In his view, the serving centres are going to be privately owned by the indigenes of those local governments. So, it is imperative for everybody now to key into this programme. It is going to be a competitive bid that will involve selection in terms of your experience in agriculture, your finance position, your investment of between N10 million and N70 million. This is because you may probably be handed an asset or over N150 million. So, we will not take that chances. So, it is going to be a wholly privately owned affair. The loan will be generated by these service centres and they will also be in charge of repayment of these loans.
“We have made our calculation, and we have come to the conclusion that if your tractor works for between N65,000 and N75,000 per day, if you know the operational cost of about N30,000 to N35,000, you will have a net profit of about N40,000. Our calculation is that between the period of three and four years, you will pay off the loan completely. And then you will have these assets worth over N150 million. You have to understand that this country, in terms of agricultural mechanisation, is at lowest level.
“We have only about seven tractors per 100 square kilometers, while Kenya has 27 tractors per100 square kilometers. In fact, the standard is 127 tractors per 100 square kilometers. In most developed countries it, is about 1000 tractors per 100 square kilometers. We have to move agriculture forward in this country.
“We have estimated 84 to 92 million hectares of land, we are only cultivating about 34 hectares, even that is not done at optimum level, because of lack of mechanisation. But we trying to change that narrative to be more productive and a sustainable, and where it will affect every part of this country. We anticipate direct job from this in the region of seven million, indirect job will be in the region of 20 million or so. So, that is the essence of this. There will be 140 agro-processing attached to these service centres across the 36 states of the federation.
For example, Kaduna, Kano Jigawa axis that is the processing centre for rice; Nassarawa, Benue is cassava processing, and so on and so forth, depending on the commodities available to that axis.
Information Minister, Alhaji Lai Mohammed, said the government’s activities will continue by leveraging on technology. He also said that the decision by the FEC meeting to hold via virtual platform has proven to be far more economical in running the affairs of government.
