Oil Price: Due to the global effect of the COVID-19 Pandemic which led to a drastic drop in crude oil prices, the FG had reviewed downwards the oil price benchmark from $57 per barrel to $25 per barrel.
Though the oil price has picked up recently, it has also been observed that the COVID-19 Pandemic is still critical in certain areas, leading to a second lockdown in some countries.
The uncertainty occasioned by these happenings has led the AKS budget review team to peg the oil price benchmark at $20.
Oil Production: The state adopts the 1.7mbpd assumption of the Federal Government.
Exchange Rate: The official exchange rate has been affected by the COVID-19 pandemic and its attendant effects on global demand and supply of goods and services.
The exchange rate has been officially reviewed upwards from N305/$1 to N360/$1. Though the outlook is still bleak, the state adopts N360/$1 as given by the Federal Government.
GDP Growth: Data provided by the NBS pegs the real GDP growth rate at - 4.42%. Though the State conducted a State GDP survey in 2017, the time lapse and prevailing circumstances make it impossible to apply those figures here. Hence the state adopts the – 4.42% real GDP growth rate of the Federal Government.
Inflation: The state also adopts the 14.5% inflation rate, of the Federal Government as there is no current figure for inflation in the State.
Gross Statutory Allocation:
Gross Statutory Revenue which was initially projected at N52 billion in 2020 original Budget was reviewed to the sum of N33 billion due to the outbreak of COVID-19. This is based on the fact that the sum of N17.6 billion was actually realized within the first half (Jan – June) of the year 2020 which means if the same trend continues in the remaining half of the year the state may slightly exceed the projection of N33 billion.
The Derivation Projection which was initially pegged at N255 billion in 2020 Original Budget was reviewed to the sum of N110 billion in the proposed revised Budget. The revised projection is based on the actual collection of N52.9 billion within the first half of the year 2020. As the Economy is picking up slowly especially where the actual oil price is about $40 per barrel, it is hoped that the projection will be realized.
Other FAAC Transfer:
However, the sum of N15.0 billion has been provided in the revised Budget for other FAAC Transfer such as Excess crude, exchange rate gain, augmentation and others. This is in view of the fact that the sum of N10.1 billion has been collected from this source within the first half of 2020 and with that trend the revised provision may be exceeded.
VALUE ADDED TAX:
The Original sum of N20 billion projected for Value Added Tax in 2020 Original Budget was based on the 2019 full year collection in the sum of N13.3 billion and this was in view of the fact that economic activities will pick up in the year 2020 which will enhance the attainment of this revenue source beyond the achievement of 2019. But the outbreak of COVID-19 has warranted the downward review of this revenue source to the sum of N15 billion to meet with the current realities and also in consideration of the actual collection of N6.0 billion within the first half of year 2020.
Internally Generated Revenue:
IGR was originally projected at N55.6 billion for the 2020 fiscal year. This was in consideration of the actual performance in the year 2019 which stood at N35.5 billion. The projection was however reviewed to the sum of N30.6 billion based on the actual collection of N14.9 billion within the first half of the year 2020.
Grant: The actual receipts on Grants in the year 2019 was N14.6 billion and the projection for the year 2020 in the original Budget was N50 billion. Grants will be expected from different sources such as the SFTAS Programme and others, but not as previously projected. Based on this, the provision for grant in the amended Budget was reviewed to N30 billion taking cognizance of the aforementioned reason and with the expectation that collection from this source will actually come in the third quarter (see details in schedule 5 attached)
The Opening Balance for the year 2020 initially was projected at N9.9 billion. This was because as at the time of Budget preparation the financial statement of the state for the year 2019 was not finalized. The revised figure of N36.7 billion for 2020 is based on the closing balance of 2019 which is made up of cash balances at various Banks Operated by the State in the year 2019. Please see the Audited Account of the State (online) for confirmation. The relevant pages have been scanned and attached for ease of reference.
Personnel Cost (Salaries, Pensions):
The Actual expenditure on personnel costs and pensions for the year 2019 was N52.8 billion. In the year 2020 a provision of N81.8 billion was made for personnel cost and payment of pensions. Under personnel cost, provision was also made for employment of qualified personnel into various cadres, but due to the economic downturn as a result of COVID-19 Pandemic, the earlier proposal for recruitment was suspended and attention is now focused on payment of salaries and pensions to avoid accumulation of arrears. This warranted the downward review of the personnel cost component from the sum of N61.0 billion to the sum of N55.0 billion creating a savings of N6 billion in that regard. It is worthy of note that this reduction has not in any way affected the emoluments of Health workers and other essential workers in the state. See schedule 1 (item 1-3)
EN 2.1, 2.2 and 2.3
The Actual Expenditure on overhead cost in the year 2019 was N22.2 billion. In 2020 a provision of N50.2 billion was originally provided for but was thereafter readjusted to N49.2 billion due to the COVID-19 Pandemic. This review has made provision for essential overhead cost meant to respond to COVID-19 Pandemic such as provision of Consumables in Health Institutions, provision of Hand washing points in schools/Government owned facilities, sensitization of Pubic on COVID-19, fumigation of the entire state, provision of palliative etc. See schedules 2A & 2B attached
Public Debt Charges:
The actual payment in the year 2019 was N33.8 billion.
However the sum of N60.0 billion was provided for this service in the year 2020 to carter for debt services and other deductions. This provision was reviewed to N35.0 billion due to Federal Government moratorium on loans repayment as a result of COVID-19. As at June, 2020 the actual expenditure on public Debt Charges was N13.0 billion. The revised provision is meant for servicing of accumulated interest on loans. See schedule 3 attached
Consolidated Revenue Fund Charges:
Actual payment in the year 2019 was N18.3 billion but a provision of N36.9 billion was made in 2020 Budget originally and this was reviewed to the sum of N21.3 billion to carter for clearance of outstanding contractors arrears, gratuities and grant to Local Government Areas. The actual payment as at June, 2020 was N4.6 billion. It is hoped that more payment will be made in the second half of the year as Economic activities pick up. See schedule 3 attached
EN 2.1, 2.2 and 2.3
The Actual capital Expenditure for the year 2019 was N197.8 billion. The provision for the year 2020 was N369.6 billion originally and this was reviewed to N188.9 billion, with adequate provision made for COVID-19 responsive programmes/projects such as humanitarian and Social Development, Agricultural and Agric Inputs Subsidy, Renovation of Health Centres, provision for small and medium scale enterprises clusters, Ibom Enterprise Development Scheme, COVID-19 intervention etc. Most of the activities in the health, education, housing and agricultural sub-sectors, road construction, especially those utilizing Direct Labour intervention across the State, as well as other COVID-19 Intervention projects as can be seen in the detail budget, have been tagged COVID-19 Responsive. Provision has also been made in the revised budget for activities that will be used to achieve the DLIs in the Nigeria COVID-19 Action Recovery and Stimulus (CARES) programme, under Result Areas 1, 2 and 3. The following are some reasons behind the revisions made:
a) The health sub-sector is of course, the first port-of-call in the fight to contain and stop the spread of the pandemic.
b) The activities in the education sub-sector are geared at keeping our children safe and ensuring the reduction in the spread of the pandemic.
c) Activities in the Agriculture sub-sector are aimed at providing food for the people, thus increasing food security of the poor and vulnerable.
d) The MSME sub-sector has also received a boost to enable more Micro, Small and Medium scale enterprises to have access to needed funds that will enable them revamp their businesses after the negative impact of the COVID-19 pandemic.
e) The construction works will in the first instance, provide much needed jobs, complementing the 774,000 jobs proposed by the Federal Government. This will increase household income, protect livelihoods and facilitate revamping of local economic activities for household/micro enterprises. This will, through a multiplier effect, eventually stimulate economic activities in the State, while also providing the State with needed infrastructure. Resuscitating local businesses identified activities are those which will provide a stimulus package and; generate employment, especially to the women and youths. See details on Schedule 3 attached.
Commercial Bank Loans:
The actual collection during the year 2019 was N48.1 billion. The original provision for 2020 was N34.2 billion and this was to be sourced from Zenith Bank. Due to the decline in the expected revenue of the State and the need to complete on-going COVID-19 responsive projects, it became necessary for an upward review of this provision from the sum of N34.2 billion to N38.1 billion to facilitate the completion of key ongoing and other COVID-19 Intervention projects handled by the following creditors: VKS Coconut Refinery Project, VKS 21 Storey Building Project, VKS Airport Terminal Project, CCECC Eket/Etinan Road Project, WIZCHINCO Etinan/Ndon Eyo Project, AKS Project as highlighted in the Approved Amended Revised Capital Budget Expenditure.
No provision has been made.
No collection was made from this source in the year 2019, but the State is expecting the sum of N25 billion from the Federal Government, based on the recommendation and approval of Revenue Mobilization, Allocation and Fiscal Commission in favour of the State Government after verification and submission on the State of various ecological problems. This recommendation was made in 2017. With the assumption that this amount may not be paid in one year, a provision of N10 billion has been made.
The sum of N2.8 billion was actually collected in the year 2019. The provision of N1.0 billion was made for the year 2020 but was further reviewed to the sum of N0.6 billion due to the expected decline in the economic activities as a result of COVID-19 Pandemic.
Reimbursement from Federal Government on Roads:
The actual collection in the year 2019 was N24.6 billion, representing 40% of payment. However, the State is currently facilitating the release of the outstanding 60% due to the State. Therefore the sum of N16 billion has been projected in the amended Budget to accommodate this expectation.
Refunds from Excess Loan deduction and other exceptional Income:
The Actual Collection in the year 2019 was N34.2 billion which was made up of Paris Club Excess Loan deduction and excess Bank Charges. The State Government is currently in negotiation for the refund from Debt Management Office on excess interest charges of over N40 billion.
Refund of 13% derivation on excess crude oil money that was not paid to the state. FAAC has adopted recommendations by RMFAC to refund a total sum of over $600 million dollars to Akwa Ibom State. Based on these, the state has projected the sum of N30 billion to accommodate these expectation
The provision of N1 billion is provided for in the year 2020.
Sales of Government Assets:
No provision has been made.