By Chesa Chesa
Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, on Wednesday revealed that the drop in revenues occasioned by the Coronavirus pandemic might force the Federal Government to upwardly review the 2020 National Budget of N10.95 trillion.
She made this known while briefing journalists on the outcome of the week’s Federal Executive Council (FEC) meeting chaired by President Muhammadu Buhari at the Aso Rock Villa.
Responding to questions on the economic impact of the health challenge to the national economy, she said: “We are concerned because it does have an impact on revenue and at the current crude oil price of 53 percent is below the budget bench mark.
“Whatwe are doing is that we are studying the situation and when the Budget was passed we committed to do a midterm review. We will do the midterm review andif the revenues are so significantly affected, we will have to do some revisions in the budget by way of budget adjustment.
“I will want to inform that the crude production is now at two million barrels per day and in some days, it has moved up to 2.1 million barrels per day, so that in itself will be a cushion.
“All the same, we are not taking any measures now until we have a reasonable period when we make a review and then we may need to make an adjustment of budget though, working together with the National Assembly.”
Nonetheless,she announced the approval of contracted to be heavily funded by credit facility from China towards construction of a gas pipeline from Ajaokuta toKano, at a revised cost of $2.57 billion.
This will be jointly done with the Nigeria National Petroleum Corporation (NNPC), which will pay 15% of the sum.
She explained that the approval was for “the issuance of a sovereign guarantee to the tune of 85 percent of the Engineering Procurement and Construction (EPC) contract for the Ajaokuta-Kaduna-Kano project, which we call AKK.
“This is not a new contract, it was previously approved by council in 2017 in the sum of $2.89 billion. The memo of today is at a revised cost of $2.571 billion equivalent to a 10 percent discount of the original sum.
“The previous contract was a contractor financing model, the contract that has been approved today is an EPC lump sum contract with the NNPC required to pay 15 percent of the contract amount while the 85 percent will be provided by Sinosure of China in the form of loan facility with a sovereign guarantee.
“This is a facility that has an interest rate of NIBOR at plus 3.7 percent with a 12-year repayment period and three years moratorium period. We have done an extensive review of this project and we are satisfied that the cash flows from the Ajaokuta-Kaduna-Kano gas pipeline project is sufficient to pay the facility itself. This project is one of the cardinal policies of this administration and it is very strategic to national development.
“It has a lot of positive impact that we anticipate would be met. It will spur industrialization and industrial growth as gas-based industries and power generating companies be the key beneficiaries.
“It will also create employment opportunities, increase government revenue,encourage export and enhance the nation’s foreign reserves by reducing dependencies on import, it will be environmentally friendly as it will eliminate gas flaring.
“It will also improve the health of the communities of the oil producing are as where gas flaring currently takes place.
It will also reduce the carbon footprint and comply with the climate control treaties that Nigeria has committed to.”
She further spoke on the recently increased Value Added Tax (VAT) in the country,explaining that “we do have reports of big supermarkets not exempting food. When you buy meat for instance that has been cut and packaged, it has undergone some processes and so it doesn’t qualify for exemption.
“But if you go to the open market and by your garri, tomatoes, meat then there is no VAT to be paid. The supermarkets have some value addition, engaged staff, run different kinds of services and incur some cost.
“So they buy from the same market you buy and they do some processing, packaging and put in the shop. So if you choose to buy your foot items from the supermarket you will be paying VAT. Those Nigerians we are trying to protect will go to the market and will not be paying VAT.”