The Revenue and Expenditure budgets are ₦8.15 trillion and ₦10.33 trillion, respectively, resulting in ₦2.18 trillion fiscal deficit. Below are the key assumptions behind the Budget and movements in the proposed fiscal parameters between the 2019 and 2020 Budgets:

The President also presented a Finance Bill along with the Budget, for passage with the 2020 Appropriation Bill by the National Assembly. The Finance Bill seeks to achieve five strategic objectives of:

• promoting fiscal equity by mitigating instances of regressive taxation;
• reforming domestic tax laws to align with global best practices;
• introducing tax incentives for investments in infrastructure and capital markets;
• supporting micro, small and medium-sized businesses in line with the Ease of Doing Business Reforms; and
• raising revenues for Government. 

The Finance Bill, among other things, proposes an increase in the Value Added Tax (VAT) rate from 5% to 7.5%. The additional revenue from increase in VAT rate would be used to fund healthcare, education and infrastructure. The Government intends to mitigate the impact of the VAT rate increase by introducing a VAT exemption threshold for businesses with a turnover of less than N25 million per annum, and expanding the list of VAT-exempt items to include the following:

1. brown and white bread;
2. cereals including maize, rice, wheat, millet, barley and sorghum;
3. fish of all kinds;
4. flour and starch meals;
5. fruits, nuts, pulses and vegetables of various kinds;
6. roots such as yam, cocoyam, sweet and Irish potatoes;
7. meat and poultry products including eggs;
8. milk;
9. salt and herbs of various kinds; and
10. natural water and table water.

We will publish our 2020 Budget Newsletter after the Minister of Finance, Budget and National Planning submits the detailed budget. 

For any enquiries on the above, please contact:

Wole Obayomi

ng-fmtaxenquiries@ng.kpmg.com