FG: We’ll Borrow to Finance N6.258trn 2022 Proposed Budget Deficit
The federal government has hinted of its readiness to secure both local and foreign loans to finance the N6.258 trillion deficit in the proposed 2022 budget.
This is just as the Federal Executive Council (FEC) has approved the 2022 Appropriation Bill with an aggregate expenditure of N16.39 trillion.
Also yesterday, the two chambers of the National Assembly approved President Muhammadu Buhari’s revised proposal of the 2022-2024 Medium Term Expenditure Framework (MTEF-FSP) and also okayed N16.39 trillion federal budget proposal for 2022.
On the same day, President Buhari’s letter requesting to present the 2022 Appropriation Bill to the federal legislators at a joint sitting tomorrow was read at both chambers by the presiding officers during plenary.
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, who disclosed government’s plan to borrow to finance the deficit in the 2022 proposed budget, while speaking to journalists after yesterday’s meeting presided over by President Buhari, maintained that government would continue to borrow to fund infrastructure projects as it does not generate enough resources from its revenues.
Nigeria’s public debt has risen to N33 trillion.
According to Ahmed, Nigeria’s revenues could barely accommodate services even as she emphasised that despite concerns about the country’s mounting debt profile, its borrowings were still acceptable limits.
She said: “If we just depend on the revenues that we get, even though our revenues have increased, the operational expenditure of government, including salaries and other overheads, is barely covered or swallowed up by the revenue.
“So, we need to borrow to be able to build these projects that will ensure that we’re able to develop on a sustainable basis.
“Nigeria’s borrowing, has been of great concern and has elicited a lot of discussions.
“But if you look at the total size of the borrowing, it is still within healthy and sustainable limits. As at July 2021, the total borrowing is 23 per cent of Gross Domestic Product (GDP).”
She further justified the plan for more borrowing, saying “government has been borrowing before this administration and continues to borrow and it is important that we borrow to provide developmental projects in the form of roads, rails, bridges, power and water for sustainable development in this country.
“If we just depend on the revenues that we get, even though our revenues have increased, the operational expenditure of government, including salaries and other overheads, is barely covered or swallowed up by the revenue.
“So, we need to borrow to be able to build these projects that will ensure that we’re able to develop on a sustainable basis.
“Nigeria’s borrowing has been of great concern and has elicited a lot of discussions, but if you look at the total size of the borrowing, it is still within healthy and sustainable limits.
“As at July 2021, the total borrowing was 23 per cent of GDP. When you compare our borrowing to other countries, we’re the lowest within the region, lowest compared to Egypt, South Africa, Brazil, Mexico, the very lowest, and Angola.
“We do have a problem of revenue. Our revenues have been increasing. We just reported to Council that our revenues from non-oil has performed, as July, at the rate of 111 per cent, which means outperforming the prorated budget.
“But our expenditure, especially staff emoluments have been increasing at a very fast rate making it difficult to cope with funding of government.
“So, what we have to do is a combination of cutting down our cost, as well as increasing revenue to be able to cope with all that is required for government to do, including salaries, pensions debt service, as well as capital expenditure.”
According to her, FEC noted the changes in the 2022-2024 fiscal projections based on implementation of the Petroleum Industry Act 2021 and other necessary expenditures that should be accommodated in the 2022 Budget.
She also disclosed the key assumptions and targets underlying the budget provisions including Oil price – $57 per barrel; Oil production – 1.88 mbpd; Exchange rate – N410.15/US$; Oil Revenue – N3.15 trillion and Non-Oil Revenue – N2.13 trillion.
Others, she said, are Federal Government’s Independent Revenue of N1.82 trillion; Total Projected Federal Government Revenue of N10.13 trillion; Debt Service of N3.61 trillion; Statutory Transfers of N768.28 billion (including N462.53 billion capital component) and
Personnel costs and Pensions of N4.69 trillion; (inclusive of N617.72 billion for the 63 GOEs).
The rest are Overhead costs of N792.39 billion (inclusive of N451.0 billion for the 63 GOEs); and Capital expenditure (inclusive of capital component of Social Investment Programme, capital in Statutory Transfers, capital of 63 GOEs, Capital Supplementation as well as Grants and Donor funding) of N5.35 trillion (inclusive of N647.08 billion for the 63 GOEs).
“The resultant deficit of N6.258 trillion which will be financed by new borrowings of N5.012 trillion (of which domestic – N2.506 trillion and foreign – N2.506 trillion); drawdowns on Project-tied Multilateral/Bilateral loans – N1.156 trillion; and Privatisation Proceeds of N90.73 billion,” she stated.
On the approved 2022 Appropriation Bill for an aggregate expenditure of N16.39 trillion for 2022, she gave the components as the adjustments to the Medium-Term Fiscal Framework 2022-2024; Statutory Transfers of N768.28 billion and Debt Service of N3.61 trillion and Sinking Fund for Maturing Debts of N292.71 billion Naira.
Other were Recurrent Expenditure (Non-Debt) of N6.83 trillion, inclusive of N350.0 billion for the recurrent component of Social Investment Programme; and Aggregate Capital Expenditure of N5.35 trillion, inclusive of GOEs’ capital expenditure, multilateral/bilateral loan funded projects, Capital Supplementation and Grants/Aid funded projects.
According to her, this represented 33 per cent of the expenditure budget.
Ahmed said President Buhari was more concerned about leaving improved agriculture production as legacy, adding: “Currently, agriculture sector contributes 23 per cent of the GDP. We have record of expanding the agricultural value chain; we’ve had very little or no processing in agriculture until this administration.
“We now have a very large number of fertiliser blending plants, about 42, that are operating at full capacity. We also have a large number of rice mills that didn’t exist before.
“We have a lot of Nigerians that have taken up agriculture as a business, but apart from agriculture, the President is also rolling out rail lines, some of which had been started several years ago, have been completed.
“The Lagos/Ibadan rail line is now put to use. We all know about the Abuja/Kaduna and also the Itakpe/Warri rail line has been completed. Work has kicked off on the Kano to Kaduna end of the Lagos/Kano/Ibadan rail line.
“So, Mr. President wants to leave these rail lines. Rail is very important because it is a major means of moving goods across the country. When the rail lines are completed, it will provide much needed relief in terms of movement of goods that our roads now suffer by use of trucks.
“We are also investing in deployment of major roads. Some of them are completed, some are at various levels of completion. There’s also the 2nd Niger Bridge that is also going to be completed during the tenure of this administration.
“The major projects that I just mentioned are fully provided for in the budget. The Federal Ministry of Works and Housing has a provision of N388 billion; the Power sector has about N377 billion; the Ministry of Agriculture has N98 billion; the Transportation Ministry has N189 billion.
“So, all the major projects are being provided for. The target is to make sure that we have some of these key projects completed and commissioned during Mr. President’s tenure.”
On the difference between the price of crude oil and the $57 benchmark for the 2022 budget, the Minister pointed out: “You know that the crude oil price in the international capital market is not stable, it goes up and it comes down.
“Our assessment is that $57 per barrel is a safe zone to be in and we did this after extensive consultations with CBN, we checked the research work of the World Bank and other institutions, whose concern is investigating and researching on crude oil prices. But you know, the revenue in the budget for oil and gas is a function of the level of production as well as the price.
“We had suffered some setbacks in terms of level of production, occasioned by the limits that the OPEC set. But thankfully, OPEC has changed our quota and that will also soon ramp up.
“In the event that revenues from oil and gas outperform the budget, there is always the safeguard that the excess goes into the Excess Crude Account.
“If that happens, we have not witnessed that in the past one and a half years because the revenues have been very cyclical.”
Meanwhile, at the National Assembly yesterday, the two chambers approved the president’s revised proposal of the 2022-2024 MTEF-FSP.
President Buhari had on Tuesday sought lawmakers’ approval to increase the 2022 budget estimate from N13.98 trillion to N16.45 trillion.
The revised framework was received and referred to both chambers Committee on Finance for expeditious consideration ahead of Thursday’s budget presentation to the National Assembly.
Consequently, the approval of the revised framework yesterday followed the consideration and adoption of a report by both chambers Committee on Finance, chaired by Senator Olamilekan Adeola and Hon. James Faleke respectively.
Both chambers in their recommendation approved the aggregate expenditure of N16.39 trillion from the previous N13.98 trillion for the year 2022. They also gave its approval to the retained revenue of N10.3 trillion; and N635.4 billion fiscal deficit. The upper and lower chambers also commended the Budget Office of the Federation and the Federal Ministry of Finance, Budget and National Planning for insisting that MDAs submit their revenue profile as premise for being captured in the 2022 budget proposal.
In his presentation, Chairman of Senate Committee on Finance, Senator Adeola, disclosed that the new increase to the federal government’s expenditure was N5.241 trillion.
On his part, Faleke said, “that the aggregate expenditure of N16. 39 trillion be approved. That the retained revenue of N10.3 trillion be approved. That the fiscal deficit of N635.4 billion be approved. That the Budget Office of the Federation and the Federal Ministry of Finance, Budget and National Planning be commended for insisting that Ministries Department and Agencies (MDAs) submit their revenue profile as premise for being captured in the 2022 budget proposal.”
President Buhari had in the request letter to the National Assembly dated October 4, 2021, explained that the revision was necessitated by the need to reflect the new fiscal terms in the Petroleum Industry Act, 2021, as well as other critical expenditures in the 2022 budget.
Meanwhile, President Buhari has written formally to the two chambers of the National Assembly seeking permission to present the 2022 Appropriation Bill on Thursday.
The joint session is to be co-chaired by the Senate President, Dr. Ahmad Lawan and the Speaker of the House of Representatives, Hon. Femi Gbajabiamila in their position as Chairman and Vice Chairman of the National Assembly respectively.
President Buhari in a letter dated October 4, 2021, read by the Senate President Ahmad Lawan and the House Speaker, Hon. Femi Gbajabiamila solicited the permission of the leadership of the National Assembly to lay the 2022 budget estimates before the parliament.
The President’s letter read: “May I crave the kind indulgence of the Distinguished Senate/House to grant me the slot of 12:00 Hours on Thursday, 7th October, 2021, to formally present the 2022 Appropriation Bill to the Joint Session of the National Assembly.
“Please, Accept, Distinguished Senate President/ Speaker of House of Representatives, the assurances of my highest regards, as I look forward to addressing the Joint Session”
In response to the President’s request, both chambers in pursuant to Order 21 Rule 8(1) and (2) of the Standing Orders, resolved to admit the President and his entourage to address a joint sitting of the National Assembly on Thursday, 7 October 2021 at 12noon, for the purpose of presenting the 2022 budget estimates.
In line with the parliamentary tradition, the Senators and members of the House of Representatives will converge at the House of Representatives chamber by 11.45am ahead of President Buhari’s budget presentation by Noon today.