Budget 2022: Expect More Borrowing to Fund N6.258tr Shortfall, According to FG | The Guardian Nigeria News
• Senate hastily approves revised budget framework and approves N16.39tr budget for 2022
• Buhari presents ambitious credits in a context of weak performance of the 2021 budget
• The N16tr spending plan is equivalent to a “surtrading”, says Adonri
Despite outcry and protests over the administration’s penchant for frequent borrowing, the federal government yesterday hinted at its intention to borrow more to fund the N6.2 trillion naira deficit in the 2022 budget proposal.
This was leaked after the Federal Executive Council (FEC) approved N16.39 trillion for the 2022 appropriation bill.
Finance, Budget and National Planning Minister Zainab Ahmed, who briefed reporters, said the administration would continue to borrow to finance infrastructure projects because the government is not getting much from its funds. sources of income.
Justifying the government’s position, Ahmed said Nigeria’s revenue could barely cover services, noting that despite concerns, its borrowing remains within acceptable limits, as the total amount borrowed as of July 22 was 23% of the proceeds. gross domestic (GDP).
“If we depend only on the revenues we get, even though our revenues have increased, the operational expenses of the government, including salaries and other overheads, are barely covered or swallowed up by the revenues. So we have to borrow in order to be able to build these projects that will allow us to develop in a sustainable way.
“Nigeria’s borrowing was of great concern and sparked much discussion. But if you look at the total amount of the loan, it is still within healthy and sustainable limits. In July 2021, total borrowing stood at 23% of GDP. When you compare our borrowing to other countries, we are the lowest in the region, the lowest compared to Egypt, South Africa, Brazil, Mexico and Angola.
“We have an income problem. Our income has increased. We just reported to the FEC that our non-oil revenue in July was 111 percent, which means a pro-rata budget overrun.
“But our expenses, especially staff fees, have grown at a very rapid rate, making it difficult to manage government funding.
“So what we need to do is a combination of reducing our costs, as well as increasing income to be able to cope with whatever the government has to do, including salaries, pensions, service. debt and capital spending. “
The Minister said that the Council also noted the changes in the 2022-2024 financial projections based on the implementation of the Petroleum Industry Act (PIA) 2021 and other necessary spending that should be taken into account. account in the 2022 budget.
She said the main assumptions and targets underlying the budget arrangements should include the price of oil at $ 57 per barrel; oil production at 1.88 mbpd; exchange rate at 410.15 N / USD; oil revenues at 3.15 trillion naira and non-oil revenues at 2.13 trillion naira.
Other assumptions are the independent federal government revenues of 1.82 trillion naira; total projected federal government revenue of 10.13 trillion naira; debt service of 3.61 trillion naira; statutory transfers of 768.28 billion naira (including the capital component of 462.53 billion naira) and personnel costs and pensions of 4.69 billion naira.
“The resulting deficit of 6.258 billion naira will be financed by new borrowing of 5.012 billion naira; drawdowns on multilateral / bilateral project-related loans – 1,156 trillion naira; and the proceeds of privatization of 90.73 billion naira, ”she said.
PRIOR to today’s budget presentation to the National Assembly by President Muhammadu Buhari, the Senate yesterday hastily approved the President’s revised submission of the Medium Term Expenditure Framework (MTEF) 2022-2024.
Senate Speaker Ahmad Lawan, after receiving the revised submission, sent it back to the finance committee on Tuesday for quick review within 24 hours. Thus, the approval of the revised framework yesterday followed the hasty examination of the report by the finance committee.
The Senate, in its recommendation, approved the aggregate expenditure of N16.39 trillion to N13.98 trillion for the next year.
Meanwhile, financial experts have described the ambitious expenditure of 16.45 trillion naira proposed that will be presented today in the National Assembly as “worthless and unachievable goals”. This, they staked, on the back of the weak budgetary performance, the contraction of the receipts and the rise of the budget deficits.
Financial analyst and economist David Adonri described budgets as academic exercises undertaken to do all justice to the economic development tools they were originally meant to serve.
Nigeria has adopted an expansionary fiscal policy in recent years as the capacity to raise revenue has either contracted or stagnated. In many cases, projected budget deficits exceeded projected deficits by almost 100% as revenues declined.
Buhari will present the allocation amid what many saw as a poor performance scorecard for the 2021 budget, as revealed by the National Budget Office, a government agency.
According to the performance document just released by the office, real half-year earnings were 20 percent lower than the estimated 4.2 trillion naira the federal government aspires to achieve.
During the six months, the total revenue generated by the government was 3.38 trillion naira. Without the amount of value added tax (VAT) payable, which was 8% above the target of 1.7 trillion naira, the shortfall would be worse.
The result of federal government revenue and expenditure resulted in a budget deficit of 3.5 trillion naira (4.4% of pro rata GDP) in the first half of 2021. It was 1,038 trillion naira (42.5 trillion naira). %) above the planned semester. deficit of 2.4 trillion naira.
It was also higher than the deficit of 2.8 trillion naira posted in the first half of 2020. The budget office said the deficit was financed by domestic borrowing of 1.2 trillion naira, reflecting negative net financing of 2.2 trillion. from naira. This is the trend of recent years.
In 2020, less than 51% of the 10.8 trillion naira of total targeted income has been achieved. The 49.4% shortfall pushed up the forecast budget deficit by 6.6 trillion naira. The amount was N2 trillion or 43 more than the projected budget deficit of N4.6 trillion for the year. The 2020 budget deficit was also higher than the 4.2 trillion naira recorded in 2019.
The same source of TVA that contributed a large chunk of revenue to the government faces a huge challenge after a Federal High Court sitting in Port Harcourt ruled in favor of the Rivers State government on who, between the State and federal government, should control and retain VAT.
The Federal Inland Revenue Service (FIRS) appealed the ruling, with some northern and southern states lining up appropriately. But there are fears that the federal government’s current fragile financial situation could deteriorate if the southern states prevail in the Supreme Court.
The southern states have decided to continue the litigation to a logical end with Lagos state governor Babajide Sanwo-Olu, claiming that the federated states’ demand for a fair, just and equitable sharing formula n was not controversial but reflected the contribution of states to the common stock exchange.
ALSO, the national debt swelled, following the expanding budget deficit, to reach N35.5 trillion at the end of the second quarter. Of the total value, 83.07 percent was held by the federal government, while loans from the 36 states and the Federal Capital Territory (FCT) accounted for 16.93 percent.
The percentage of FG’s share in the national debt rose from 81.94% in December 2020 to its current share.
Experts, including the Director General of the Debt Management Office, Patience Oniha, have expressed concern that unless the revenue profile increases significantly, the country would face debt sustainability issues. debt.
“We need to focus on income. The good thing about this is that the Minister of Finance, Budget and National Planning has launched a program to raise the revenue profile. We must discipline ourselves to continue to increase our income. If we keep borrowing and do nothing to increase our income base like other countries have done, we could have a problem with debt sustainability, ”she said.
The federal government is proposing new borrowing of at least N15 trillion as part of the 2022-2024 Medium Term Expenditure / Fiscal Stability Document (MTEF / FSP).
Already, there is a 10,000 billion naira Ways and Means Facility (WMF) with the Central Bank of Nigeria (CBN), which the DMO says would be converted into a long-term debt instrument.
The country’s debt service-to-income ratio fell from 54.7 percent in 2019 to 72 percent in 2020, and experts said that figure could rise before the end of the year, unless urgent action is taken. be taken to consolidate revenues.
While experts have called on the government to reduce the cost of governance, government officials, including the Director General of the Budget Office, Dr Ben Akabueze, have insisted that the problem lies more in low income. than in extravagant spending.
Speaking on the story of failed goals yesterday, Adonri dismissed the annual budget as only good for the academic year. He said the government may have made its estimates on the basis of hope, without in-depth analysis.
“The target for 2022 itself is an extravagant, unrealistic, and worthless target because the current situation cannot generate income other than debt to support it. If this is to be achieved, it means that the current borrowing will be increased, which will be an albatross of economic destruction, ”he said.
An economics professor at Olabisi Onabanjo University, Sheriffdeen Tella, said the 20 percent shortfall in revenue mobilization for the first half of the year was not too bad a performance. He said more income could be made from sources to be offset in the coming months before the end of the year.
“We can improve budget efficiency if past projects and projects start producing returns if we minimize waste and linkages in implementation. Budgets should not be too ambitious, rely on loans, ”he advised.