NIGERIA’S 2022 budget is tainted with a huge deficit and loans whose repayment will, again, cost Africa’s most populous nation a fortune.
These, analysts say, puts the Nigerian economy under fiscal pressure.
President Muhammadu Buhari’s government has relied heavily on borrowing to sustain its budget cycle, with the Central Bank of Nigeria (CBN) serving as lenders of last resort to the the Federal Government.
The 2022 budget is projected at N17.13 trillion, which is 18 percent higher than the 2021 budget.
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Also, recurrent (non-debt) spending, which is estimated at N6. 91 trillion, is 40 per cent of total expenditure and 20 per cent higher than the 2021 budget.
At N3. 8 trillion, debt service is 22 per cent of total expenditure and 34 per cent of total revenue.
The 2022 budget has a deficit of about N6.25tn, approximately 3.39 percent of the country’s GDP.
The budget also set aside N59 billion for counterpart funding for railway projects including: Lagos-Calabar, Calabar-Lagos, Ajaokuta-Itakpe, Port Harcourt-Maiduguri, Kano-Katsina, Jibiya-Maradi in Nigeria Republic, and Abuja Itakpe and Aladja(Warri) – Port and Refinery/Warri New harbour.
Budget deficit is to be financed mainly by borrowings, with targets from domestic sources – N2. 57 trillion; foreign sources-N2. 57 trillion; multi-lateral/bi-lateral loan draw-down N1. 16tn; and privatisation proceeds, N90. 7 billion.
“We’re borrowing and have high level of budget deficits. When you jack up the budget from N16. 39 trillion to N17.127 trillion and you are borrowing with high level of deficit, it calls for concern,” Professor of Financial Economics and Director of Centre for Economic Analysis and Research at the University of Lagos Ndubuisi Nwokoma said in a monitored programme on Arise Television on Friday.
“Also, we are looking at N3. 8 trillion for debt servicing, which is close to N3. 16 trillion projected oil revenue. Remember, we still have the subsidy concerns to deal with. It shows the budget is ‘highly leveraged.’ This is not just for this year, this has been happening for sometime now.”
The economist noted that the projected revenue of N10.1 trillion from oil and non oil sector, which was often not met, left Nigeria with excessive borrowing.
“How do we finance the deficit? Fiscally, we have to borrow about N5.01 trillion, alongside other project-tied loans, in addition to proceeds from the sale of government assets.”
Following these concerns, those knowledgeable about the economy also expressed worry that the government was still paying lip service to cutting down cost of governance.
They noted that the government had a spending problem, not revenue issue.
“Even if the revenue agencies generate N30 trillion, it would be spent with less economic impact on the lives of the people. Is it not in the Federal Ministry of Agriculture that made budget for mosque from the ministry’s budget,” A Political Economist and Associate Consultant to the British Department for International Development, DFID Celestine Okeke told The ICIR.
“That would tell you that our problem is not revenue but ensuring a people-oriented spending that impacts the lives of the people.”
He stressed that public finance management was still a major issue in the federal ministries, departments and agencies of government.
“Hope you have seen the revelation from the auditor-general of the federation in some government agencies? What does that tell you about our public finance management? Currently, the national procurement committee is not there and it is a huge concern,” he noted.
Speaking further on the budget, an economist, banker and former gubernatorial aspirant in Abia State Alex Ottih expressed concern about low productivity level of the Nigerian economy and over-reliance on oil.
“There is no doubt that the country has a big problem, which is structural and must be resolved for the economy to start moving again in the right direction. The country has a problem with productivity.
“A situation where the country, for more than half a century, relies on a single product, which the populace adds little or no value to, for a large chunk of its foreign exchange earnings is not sustainable.
“No matter what it takes, the country needs to expand her productive base by getting more people to participate in economic activities.”
The 2022 budget deficit is slightly above the 3 per cent ceiling set by the Fiscal Responsibility Act of 2007.
The deficit is expected to be financed by new borrowings, financial proceeds and drawdown on loans secured for specific projects.
Non-debt recurrent expenditure of N6.83tn recurrent expenditure is the largest expense item, with 60 per cent relating to personnel costs at N4. 11 trillion.
President Muhaamdu Buhari had expressed strong reservations on the worrisome changes made by the National Assembly to the 2022 budget.
He announced that he would revert to the National Assembly with a request for amendment as soon as members resumed, to ensure that critical ongoing projects cardinal to his administration did not suffer a setback due to reduced funding.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.