EXPLANATORY
NOTES
EN
1.1
Assumptions:
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.
EN 1.1
Oil
Production: The state adopts the 1.7mbpd assumption
of the Federal Government.
EN 1.1
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.
EN 1.1
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.
EN 1.1
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.
EN 1.2
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.
EN 1.3
Derivation:
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.
EN 1.4
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.
EN 1.4
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.
EN 1.5
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.
EN
1.6
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)
EN 1.7
Opening Balance:
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.
EN 2.2
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
Overhead
Costs:
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
EN 2.4
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
EN 2.4
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
Capital Expenditures:
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.
EN 3.1
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.
EN 3.2
External
Loans:
No provision has been made.
EN 3.3
Ecological
Fund:
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.
EN 3.4
Investment
Income:
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.
EN 3.5
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.
EN 3.6
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
EN 3.7
Stabilization
Account:
The provision of N1 billion is provided for in the year
2020.
EN 3.8
Sales
of Government Assets:
No provision has been made.