The Federal Government allocated 2.6 per cent of its total expenditure totalling N272.9bn to settle pending contract obligations in the 2020 budget, the Minister of Finance, Budget and National Planning, Zainab Ahmed, has said.

This is 148 per cent higher than the provision made in the 2019 budgets

Ahmed said this in a presentation on, “Expectations for 2020: Budget 2020, strategic revenue growth initiatives & Finance Act 2020,” at Deloitte Economic Outlook made available to our correspondent in Lagos on Monday.

She said, “Provision to retire maturing bonds to local contractors of N272.9bn is 2.6 per cent of total expenditure, and 148 per cent higher than 2019.

“This reflects the Federal Government of Nigeria’s effort to resolve accumulated arrears of contractual obligations dating back to over 10 years.”

She said the 2020 FGN’s spending (inclusive of government-owned enterprises and project-tied loans) which was projected to be N10.59tn, was 18.8 per cent higher than 2019.

Recurrent (non-debt) spending expected to total N4.84tn was 45.7 per cent of total expenditure, and 10.3 per cent higher than 2019, (reflecting increases in salaries and pensions including provisions for implementation of the new minimum wage), she explained.

According to her, aggregate capital expenditure of N2.78tn was 26.2 per cent of total expenditure; and 12.6 per cent less than 2019 (inclusive of capital component of statutory transfers, GOEs capital & project-tied loans expenditures) as percentage of FGN expenditure was 26 per cent.

At N2.45tn, she said, debt service was 23.2 per cent of total expenditure, and was 14.5 per cent higher than 2019.

The minister also said the overall budget deficit was N2.175tn for 2020, 1.52 per cent of the GDP, which was within the threshold stipulated in the Fiscal Responsibility Act 2007.

Ahmed said the budget deficit was to be financed mainly by borrowings.

These included new domestic borrowing of N744.99bn; new external borrowing of N850bn; multilateral/bilateral loan drawdowns of N328.13bn; and privatisation proceeds of N252bn.

She recalled that the debt/GDP ratio as of June 30, 2019 was 18.99 per cent, down from 19.09 per cent as of December 31, 2018.

The minister said Nigeria had a ceiling of 25 per cent on the total public debt/GDP ratio compared to 55 per cent peer group threshold.

She noted that the debt service/revenue ratio for 2018 was about 51 per cent.

The debt service figures had grown as a result of the increase in the debt stock and relatively high domestic interest rates, she said.

According to her, the government was adopting several initiatives such as the recently launched Strategic Revenue Growth Initiatives that aimed to boost revenue generation in order to meet the targeted revenue to GDP ratio of 15 per cent as set out in the ERGP.

She said the Federal Inland Revenue Services achieved 82 per cent and 79 per cent of its target in 2017 and 2018 respectively.

The government conducts a debt sustainability analysis annually that reaffirms the sustainability of the public debt stock, according to the minister.