Revised 2020 Budget: NIESV Doubts FG On Execution Over Debt Profile, COVID-19

By ABIODUN JIMOH

The Nigerian Institution of Estate Surveyors and Valuers (NIESV) has expressed serious doubt on Federal Government ability to adequately fund the budget especially with the effect of the ravaging coronavirus pandemic and the existing high level of government debt profile.

This was the position of the NIESV on 2020 Revised National Budget of N10.8 trillion recently passed by the National Assembly, and its effect on Estate Surveying and Valuation Profession.

While emphasising its position, they hinted that the budget as presented will overall not adequately stimulate and grow all sectors of the economy and will most likely impact on the real estate sector adversely.

“The budget review was informed by the catalytic impact of COVID-19 and its consequential effect on the World crude oil price and the revenue projections of the government. The revised budget applied benchmark of $28 per barrel as against the original $25 per barrel in November 2019.

“In signing the revised budget President Muhammadu Buhari restated that the Appropriation (Repeal and Amendment) Bill 2020 underscores his administration’s firm commitment to effectively contain the spread of COVID-19 and protect the lives and livelihood’ of Nigerians and safeguard the economy.

“The revised budget as contained in the Appropriation Act (Amendment) Bill 2020 is in the sum of N10.8 trillion which is N216 billion more than the revised budget plan that was originally submitted by the Executive to the National Assembly.

“The Appropriation expenditure heading is now made up of N2.5 trillion representing 23% of the budget for Capital Expenditure, Non-debt Recurrent of N4.94 trillion (46%), Debt Service at N2.95 Trillion representing (27%) and Statutory Transfers at N428 Billion, representing 4% of the total appropriation.

“The position of the Nigerian Institution of Estate Surveyors and Valuers (NIESV) is that the budget as presented would overall not adequately stimulate and grow all sectors of the economy and will most likely impact on the real estate sector adversely,” …

Furthermore, revealing on the issues in the budget that inform the institution’s position, they said: “Infrastructural development is a key indicator for real estate investment market. The percentage sectoral allocation to Development Fund for Capital Expenditure is 23% while Recurrent Expenditure (Debt and Non-debt) is 73%.

“This huge gap between allocation for Capital Expenditure and Recurrent Expenditure will have adverse effect on infrastructural development which is the bedrock of economic stimulation for the private sector.

“The Nigerian economy is highly public sector driven at the detriment of the private sector who needs adequate infrastructural development to encourage SME’s to thrive particularly with the current economic downtown caused by the COVID-19 pandemic.

“The result is that unemployment will continue to spike as some businesses will lay off staff while others may be compelled to close shop when the cost of running business becomes economically unsustainable.”

On comparatively low allocation for the health, they stated: “While the health sector got a budget of N186 billion the sum of N500 billion was earmarked as intervention fund for the fight against COVID-9. The health pandemic is the key factor responsible for the current economic crises in Nigeria and around the world.

“As such, this arrangement of allocating more funds for intervention than improvement of health infrastructure and facilities may not achieve a sustainable solution. One would have expected the reverse to be the case to enable a sustainable improvement of the health sector, safeguarding livelihood and stimulation of economic recovery.

“Furthermore, a budget with such high percentage of allocation for Debt Service at 27% shows the high level of indebtedness of our country Nigeria. This high level of indebtedness will not adequately support economic growth and needs to change.

“The budget allocation for housing is grossly inadequate. In the appropriation breakdown the sum of N265.5 billion is allocated to Works and Housing. Going by the Honourable Minister of Works and Housing submission, a maximum budget sum of N60.87 billion being 22.8 percent of the Ministry’s Capital budget allocation and 2.4 percent of the National Capital budget was allocated to housing under the erstwhile National Housing Programme in the 36 States of the Federation and the Federal Capital Territory Abuja.

“According to Babatunde Fashola SAN, the budget will be targeted at priority projects which includes the completion of 1,155 blocks of 2,383 housing units as well as the completion of ongoing secretariats in six states of the Federation.

“Nigeria is a nation of 200 million people with a current housing deficit of 17 million units. It is projected that the country would require a minimum of 1.7 million units annually for the next 10 years to solve its housing deficit.

“The World Bank projects the sum of N55.5 trillion as the estimated cost of solving the country’s housing deficit. The budgetary provision of N47.5 billion, (N17.5 billion for the federal government National Housing Scheme and N30 billion for Social Housing Scheme) is less than adequate.

“Housing investment has the potential for stimulating the expected economic growth but the actual funding and implementation model leaves much to be desired.

“The sector has the potential to generate employment, increase productivity, raise the standards of living, improves social security, alleviate poverty and improve health benefits and it remains the only way out of the present economic challenges.

“The government needs to substantially increase the investments in housing, infrastructure development and provide better enabling environment for the housing sectors to thrive, being the bedrocks of the economy and considering its importance as tools for stimulating the expected growths.

“However, housing as a critical sector of the economy needs a better funding model to stimulate the desired socio-economic impact including bridging the housing deficit. In the real sense of the word, housing should be a distinct budgetary head with separate budgetary allocation rather than being lumped together with works.”

Moreover, they posited that the revised Appropriation Act 2020 has Unique Selling. “On the flip side of the coin, the revised budget could have some unique selling points for the real estate Industry and the profession but this can only be the case if properly funded and implemented.

“The total revised appropriation for the 2020 Budget is N10.8 Trillion. A breakdown of the of the budget indicates N265.5 billion allocation to the Federal Ministry of Works and Housing for infrastructure development.

“This includes N17.5b for the Federal Government National Housing, N30b for Social Housing Scheme (Family Homes Fund, Federal Housing Authority) and N210b for construction and rehabilitation of roads. This is expected to make a positive impact on the real estate industry.

“The Estate Surveyors and Valuers are expected to play key roles especially in the area of housing delivery which resides in the Ministry of Works and Housing (MW&H), the supervising Ministry for the real Estate Surveying and Valuation Profession.

“Apart from the Federal Ministry of Works and Housing which incorporates housing provision, the Estate Surveying and Valuation Profession also has huge potential and relevance in providing consultancy services in other housing delivery booster MDA’s like Ministries of Transportation, Finance, Budget and National Planning, Industry, Trade and investment, Power, Environment, Mines and Steel, Water Resources, Communication Technology, Labour and Employment, FCT (Development in the Federal Capital), Niger Delta etc.

“The combination of the capital expenditure of these MDA’s hovers around 70% of the Appropriation Capital Budget and this presents huge potential for the real Estate Surveying and Valuation Profession.

“Ordinarily, the opportunity presented by the functions of estate surveyors and valuers in the budget implementation of the various special focus areas should be unique selling points for the profession but this can only be actualized if the budget is adequately funded.

“However, there is serious doubt that government can adequately fund the budget especially with the effect of the ravaging coronavirus pandemic and the existing high level of government debt profile.

“Corruption is also a bane of effective implementation of the housing sector budget considering the high level of corruption in the construction industry including housing. These factors will hinder effective funding of the budget, economic recovery and stability particularly in a public sector driven economy like Nigeria.”

They however concluded that a critical evaluation of the revised 2020 budget of N10.8 trillion, aimed at effectively containing the spread of health pandemic, preserving the livelihood of Nigerians and safeguard the economy reveals some factors that may hinder the effective actualization of the budget goals.

“The factors include, low sectoral allocation to Development Fund for Capital Expenditure in a public sector driven economy, high level of government debt profile, comparatively low allocation for the health sector considering the current health pandemic and its impact on the economy, low budgetary allocation for housing and the funding strategy.

“A nation whose main thrust of the revised budget is to sustain and steer the economy away from recession through developmental growth and job creation cannot afford to neglect housing as a major economic drive.

“This goes to reemphasize our position that the budget as presented would not adequately stimulate and grow the economy. The budgetary allocation for housing is grossly inadequate and this factor will adversely impact on the real estate sector and the estate surveying and valuation profession.

“Housing is the bedrock of the economy and a veritable catalyst for employment, income generation and economic growth. The capital budget for housing and funding model needs to be revisited.

“Consequently, the profession advocates for better funding and better synergy, collaborations and partnerships between the government, the private sectors and the appropriate professional inputs of the estate surveyors and valuers and other professionals in the built industry in the subsequent budgeting, monitoring and the implementation of housing policies and programmes.

“Estate surveyors and valuers should be properly involved in all the delivery stages of the national and social housing schemes to derive value for money. Government alone, according to experience, cannot adequately manage this housing schemes.

“In the collaboration, the government should limit its direct involvement in housing construction and focus more on the provision of infrastructure and enabling environment for private sector investment in housing.”