EN 1 - ASSUMPTIONS ON THE REVISED BUDGET

1.0	KEY REVENUE PROJECTIONS

The Zamfara State 2020 budget signed into law on the 12th day of February, 2020 and the revised 2020 budget are based on the following macroeconomic assumptions in table 1.1

Table 1.1 Macro Economic Assumptions for initial and revised 2020 Zamfara State Budgets

S/N	INDICATOR	ORIGINAL

2020-2022

MTEF ASSUMPTION	REVISED

2020-

MINERAL SECTOR ASSUMPTIONS
1.	CRUDE OIL PRICE	57	25
2.	CRUDE OIL PRODUCTION	2.2	1.94
3.	NGN-USD EXCHANGE RATE	305	360
4.	INFLATION	10.81%	13.39%
5.	GDP GROWTH RATE (REAL)	2.93%	-3.50%
The revised Zamfara State 2020 Budget assumes a reduction in Crude Oil selling price from $57 to $25 per barrel in line with the Federal Government (FGN) Medium Term Expenditure Framework (MTEF) as approved by the Federal Executive Council. Similarly, Crude Oil production was reviewed downwards from 2.2 MBPD to 1.94 MBPD largely due to the global COVID-19 pandemic. The exchange rate was reviewed upwards of N360 to the USD (due to inflation rates and the subsequent adjustment in the value of the naira by the CBN) is also used for the revised 2020 budget compared to N305 to a USD in the 2020 budget passed into law.

This adjustment is in line with the decision taken by the Central Bank of Nigeria (CBN) on Monetary Policy. Annual Inflation is assumed to be at 13.39% compared to 10.81% in the original 2020 budget. It is projected that the State’s Economy will contract (about -3.5%) compared to the estimated growth of about 2.93% earlier projected in the original 2020 budget.

1.1	REVISIONS TO GROSS STATUTORY ALLOCATION

In cognizance with the fall in crude oil prices and a subsequent cut in production bench marks of countries by OPEC, the states Gross Statutory Allocations estimates for the revised 2020 budget have been reviewed downwards from N55 Billion to N31.2 billion. It is projected that Nigeria will face its worst recession since the 80’s, thus why the state found it exigent to review earlier fiscal projections. Similarly, the state has taken modest steps to cushion the effects of the recession (start of Cash transfers by both state & federal, BESDA, CARES intervention program, etc.) as well as protect the economy during the coming years.

The revised budget 2020 has a revenue outlay of N127.333 billion (67.53%) of the originally approved budget of N188.549 billion representing a reduction of 32.47% (amounting to N61.216 billion) of the initial financial year budget.

1.2	REVISIONS TO FEDERATION ACCOUNTS;

The state made no provision for Excess Crude in the initial budget however, the sum of N728.997 million was realized during the first half of the year 2020. Consequently, a moderate projection of N1 billion was made as receivable from the FGN in the revised budget.

Equally too, the sum of N758.6 million was received as Federal Government Grants in the first half of the year as against an initial projection of N100 million. As a result, the state made an upward review of its budgeted figures to N1.2 billion in view of supports expected from the FGN in the area of COVID-19.

1.3 OTHER FAAC TRANSFERS;

Zamfara state made a provision of N38.34 billion expected to accrue as outstanding re-reimbursement/payments on construction of Federal roads by the Zamfara state. The FGN last year paid N17.434 billion as re-reimbursement on construction of federal roads in the state, in consideration of the current economic realities, the projected figures were trimmed down to N20 billion.

The Federal Budget Office projected a decline in estimated receipts by States and Local Governments from the Federation Account (Main pool) from N3.335 Trillion to N2.497 Trillion while they also anticipate a decline in projected Customs Revenue from N1.50 Trillion to N1.156 Trillion. The World Bank projected a contraction on Nigeria’s economy by 3.2% (Nigeria faces worst recession in 4 decades, 26th July 2020 – source: World Bank). In this regard the state assumed a worst case scenario of 3,5% contraction on the economy in the revised 2020 budget for Zamfara State.

1.4	VALUE ADDED TAX

There is a slight increase of N200 million on projected VAT receivables between the original and revised 2020 budget. This is in consideration of the appreciable rising of the projected N1 billion monthly. The sum of N6.243 billion was received from VAT in the first half of the year.

The initial VAT projection was N12 billion in the original approved budget, this was reviewed upward to ₦12.2 billion in the amended budget indicating an increase of 1.66 %. This is in consideration of actual accruals to the state in the period under review amounting to ₦6.243 billion.

1.5 REVISIONS TO INTERNAL GENERATED REVENUES

An upward review amounting to N4.7 Billion representing 42% of the IGR component has been made between the Original 2020 and revised 2020 budgets. This increase is due measures taken in reorganizing the State Internal Revenue Board of SIRB (change in management, introduction of new rates, blockages in revenues etc,) which led to a contrast increase in revenue receipts in the original budget.

An estimate of N11.22billion was made in the FY budget; however the sum of N7.08billion was realized representing an increase of N1.47billion over the pro-rated estimate in the half year period. This is attributed to this administration’s reforms on the Independent Revenue Generation in an attempt to reduce dependent on federation account.

1.6 EXTERNAL GRANTS

The initial provision was N3.35billion which was revised to N2billion due to the anticipation of non performance on some existing heads.

B. INTERNAL GRANTS

Initial budget estimate for internal grants were N22.871 billion. The revised budget estimate for all the internal grants is N12.273 billion. These revisions have been made as a result of suspension of some grants as a result of COVID-19.

1.7 OPENING BALANCE

The state had an opening balance of N1.94billion in its initial budget and this is reflected in both the original and revised budgets. In addition to this the sum of N3.055billion was included as receipts from subsidiary accounts in the state, totaling to N5billion.

OBERSVATIONS

The original projected Zamfara State 2020 budget was estimated at N188.549 billion. Sequel to the global COVID-19 pandemic and its attendant effect on economies of the world the state had to review its anticipation downwards in reality with shortfalls in revenue and the consequent effect on people across the state. In light of the above a downward review of 32.47% representing N61.216 billion was made on the budget. This reduces the budget to 67.53% or N127.333 billion of the initial budget for the 2020 fiscal year.

EN 2 - KEY EXPENDITURE ITEMS

MAINTAINING CRITICAL (NON-COVID) EXPENDITURE

2.0 Salaries for public servants with the exception of the ministry of Health are considered critical NON-COVID expenditure. This categorization is essential to Safeguard Jobs of Public Servants who make up a significant proportion of jobs in the state, thus making it imperative to continue with their salary payment in a bid to avoid compounding the state’s economic woes. A reduction of N129.49 million representing 0.6% was made on personnel cost expenditures.

2.1	CRITICAL (NON-COVID-19) EXPENDITURE

The proposed capital spending for critical NON-COVID response in the revised 2020 budget stands at N48.315 billion equivalent to 70% of capital expenditure.

The classification of critical Non-COVID spending has been given to ongoing projects and projects for which contractual agreements have been finalized.

CAPITAL EXPENDITURE REVIEW

The initial capital expenditure was ₦117.544 billion in the approved budget 2020, this was reviewed downward to ₦69.018 billion in the proposed amended budget, indicating a reduction of 40%.

This became necessary in view of the dwindling resources accruing to the state resulting from the COVID-19 pandemic and its attendant effect on the national economy. As a result, the state had to re-prioritize its investments on capital development in the state. The revised budget focus on completion of critical ongoing projects that are near completion with impact on pro-poor and stimulate economic growth.

2.2 Overhead cost expenditures were equally reviewed downwards in reflection of amounts derivable during the course of the FY, thus N8.764 billion was reduced to free money for capital development in the review exercise. This is made possible because of the slowdown in economic activities and the lock-down imposed by the COVID-19 pandemic between February and June 2020.

2.2	COVID RESPONSE EXPENDITURES

Zamfara State has had relatively few cases of COVID-19 making its response strategy focus on spread prevention and control of already imported cases. Contact tracing of identified cases is at the fore of its response strategy.

Zamfara state made a provision of N21.703 billion in its revised budget 2020 to address COVID-19 issues. These provisions cut across four sectors as spelt out below:

CAPITAL SPENDING BY SECTOR FOR COVID-19 RESPONSE

S/No	SECTOR	% COVID SPENDING
1	Economic	50.0
2	Social	24.2
3	Law and Justice	34.5
4	General Administration	9.3
The line items categorized as COVID-19 projects includes; purchase of Fertilizer, Agro-equipment, loans, purchase of grain and seed multiplication program. As expected, the bulk of COVID-19 capital spending is in the economic sector as Zamfara has had fewer cases of COVID-19 pandemic.

A new World Bank intervention project – state CARES project, has been introduced to cushion the effect of the pandemic and its attendant negative effect on the state economy. As a result, the ministries of Commerce, Budget and Planning (CSDP) and Agriculture (FADAMA III) all have spending components under the CARES program. It is expected that the CARES program will spend an estimated ₦3 billion in the state between July and December, 2020.

The sum of ₦4.38 billion in Ministry of Health has been made to accommodate spending in response to the COVID-19 pandemic. Similarly, line items for the purchase of Ventilators, Hospital Beds, Monitors, Polymerase Chain Reaction and Personal Protective Equipment (PPE) have been included in the budget as part of the COVID-19 response. Overall 49.49% of the capital budget for health is allocated to COVID-19 spending.

2.3 Non-Essential Capital spending cuts amounted to N48,526,000,000 and ₦21,703 billion represent COVID-19 responsive expenditure while ₦47,315,000,000 is for essential expenditure. The cut in non-essential Capital spending amounts to a 41.28% reduction on the original 2020 budget of N117,544,000,000 (One Hundred Seventeen Billion, Five Hundred and Forty-Four Million Naira).

Reductions in capital expenditure of some MDAs are depicted in the table below:

S/No	MDA	% Capital Spending cuts
1	Cabinet and Political affairs	40.33
2	Ministry of Information	45.2
3	Education	56.70
4	Directorate of Housing	41.2
5	Road and Transport	60.5

2.4 The Consolidated Revenue Fund Charges component was equally reviewed downward from an initial allocation of N8.810billion to N4.541 billion representing a downward review of 48.45% in real terms.

2.4 Interest repayment is broken down into two major headings, ie principal and interest repayments. This provision was reviewed upward from an initial N6.95 billion to N7.42 billion representing a 6.8% increase over the initial budget.

COVID RESPONSE EXPENDITURES

Zamfara State has had relatively few cases of COVID-19 largely due to strong measures adopted by the state. Government took proactive measures and was quick in adopting both curative and preventive approaches to the pandemic, subsequent to which a new isolation centers was built and established in Damba area of Gusau. The state had four (4) isolation centers at the Yariman Bakura Specialist Hospital, Damba Isolation Center, General Hospital Kasuwar Daji as well as the Federal Medical Centre Gusau. Similarly, it paid all related bills in favor of COVI-19 patients in the state, whilst providing drugs, tools and medical equipment on the cure and prevention of the pandemic in the state. Similarly health workers involved in the fight against the pandemic were paid daily allowances.

CAPITAL REVENUE

COVID-19, which was declared by the World Health Organization (WHO) as global health emergency has virtually affected the socio-economic environment across the globe. Beyond tragic health and human hazard, uncertainties and destruction in socio-economic sphere that has resulted from the virus comes at a significant cause to the global economic outlook. The World Bank, UNCTAD and IMF all forecasted the global economy to contract by the year end.

The Nigerian economy is likely to be heading for another recession with the price of oil and gas which contribute about 65% of the nation’s revenue and 90% foreign exchange earning drastically declining. This sharp falls in price will certainly impact on the states revenues and therefore affect many economic activities including funding the budget, especially, payment of salaries, overall management of government and physical infrastructure. These among other reasons, necessitated the review of the capital budget.

CAPITAL TRANSFER

In effect, assumption underlying the 2020 Appropriation Law are no longer sustainable as such the capital revenue of ₦117.544 billion in the original approved budget was revised to ₦69.018 billion in the proposed amended budget, representing a downward review of 41.3 % of the original capital budget. This arouse from the decrease of Internal Loan, Domestic grants and Capital Transfers from ₦32.509 billion in the original 2020 budget to ₦17.257billion representing 53.08% of the original estimates.

3.0	FINANCING GAP

The financing gap of the amended budget 2020 is ₦24.8 billion against N46.313 billion in the original budget depict 53.5% decline. State DMO has documented Debt Sustainability Analysis to avoid being running into the risk of accumulating expenditure arrears at the end of the fiscal year and the loans are within the drawn down life circles. It is classified as follows:

Internal Loans:	19,500,000,000;

External Loans:	5,287,000,000.

DMO has discussed, processed and documented internal and external Loan facilities transaction between state government and Zenith Bank, UBA and Fidelity Bank and the financier of IFAD, CSDP, RAAMP and SAVING ONE MILLION LIVES for the state developmental and combating of COVID 19 crises to the tone of ₦19. 5billion.

3.1	COMMERCIAL BANK LOANS

The state revised downward its provisions on domestic loans from N42.9billion to N19.5billion. This is as a result of the Covid-19 pandemic and the resultant effect on global economies.

3.2	EXTERNAL LOANS

This increase is as a result of anticipated accruals from WB borrowings on the CAREs program.