The Lagos State government has commenced a downward review of the year 2020 budget as a result of the negative economic and social effects of the coronavirus (COVID-19) pandemic.
The Commissioner for Economic Planning and Budget in Lagos, Sam Egube, disclosed this on Thursday, noting that the review was approved by the State Executive Council.
He explained that the process aimed to reduce the N1.168 trillion budget approved by the Lagos State House of Assembly to N920.5 billion.
Egube said the initial budget figure contained a capital expenditure of N711 billion and N457 billion recurrent budget, showing a strong preference of 60 per cent ratio for capital projects.
He revealed that the first quarter of 2020 recorded a budget performance of 56 per cent (N163.28 billion), which was in absolute terms higher than the 68 per cent (N148.38 billion) recorded for the same period in 2019.
The commissioner pointed out the negative effect of the fall in crude oil prices on statutory allocation expectations, the downward pressure on Internally Generated Revenue (IGR), devaluation of the naira, reduced public and private investment and increased inflation rate as reasons for the overhaul of the projected figures of the 2020 budget.
He listed other factors to include the decline in demand for goods and services, as well as a reduction in manufacturing activities which he said indicated lower GDP growth and increased unemployment.
Egube explained that Lagos has adopted a holistic approach to the shocks induced by COVID-19, adding that the strategies included the maintenance of a strong pandemic response, restarting the economy, and reimagining the way the state has been operating.
According to him, the strong pandemic response will enable the state government to engender food security and safety net mechanisms, in addition to economic stimulus.
“To restart the economy, we are going to optimise the state’s budget for investments in jobs and priority sectors through job creation, economic stabilisation, and fiscal consolidation,” Egube said.
He added, “In reimagining the state economy, we will prepare the state to operate and thrive within the new reality with digitisation, business environment reforms, improved economy and diversification of revenue sources.”
The commissioner disclosed that the revised budget has a reduction of the total budget size by 21 per cent from N1,168.562 billion to N920.469 billion, with the financing deficit increasing slightly by 11 per cent from N97.533 billion to N108.005 billion.
The recurrent expenditure (debt and non-debt) in the revised budget, according to him, will decline by 10 per cent from N457.529 billion to N411.608 billion and 28 per cent reduction has been proposed for total capital expenditure from N711.033 billion to N508.861 billion.
“The revised total revenue represents a drop of 24 per cent in the previous projections from N1,107.029 billion to N812.46 billion,” Egube said.