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Buhari to borrow more as Nigeria’s 2022 budget runs on N6.26trn deficit

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PRESIDENT Buhari presented a budget of N16.39 trillion to the National Assembly for 2022, with a deficit of N6.26 trillion.

This means that the government will borrow up to N5.01 trillion to meet the expectations of 2022.

Buhari presented the budget to a joint session of the National Assembly on October 7, in Abuja.

While announcing the launching of his administration’s ‘National Development Plan of 2021 to 2025,’ the president said the 2022 budget would be the last full-year budget to be implemented by his administration.

He called it ‘a Budget of Economic Growth and Sustainability.’

The budget has a total deficit of N6.26 trillion, representing 3.39 per cent of the estimated Gross Domestic Product (GDP), which is slightly above the 3 per cent threshold set by the Fiscal Responsibility Act 2007.

2022 Proposed Budget Highlights

The 12th Section of Section 12 (1) and (2) of the Fiscal Responsibility Act 2007 says:

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“(1) the estimates of the aggregate expenditure and the aggregate amount appropriated by the National Assembly for each financial year shall not be more than the estimated aggregate revenue plus a deficit, not exceeding three per cent of the Estimated Gross Domestic Product or any sustainable percentage as may be determined by the National Assembly for each financial year.”

“(2) aggregate expenditure for a financial year may exceed the ceiling imposed by the provisions of subsection (1) of this section if in the opinion of the President there is a clear and present threat to national security or sovereignty of the Federal Republic of Nigeria.”

The president noted that some Nigerians had expressed concern over the government’s resort to borrowing in order to finance the deficit in the budget.

He blamed it on the spending that was carried out to pull the country out of two economic recessions that had taken place in his administration.

Buhari also went on to say that the budget’s “target over the medium term is to grow [Nigeria’s] Revenue-to-GDP ratio from about 8 per cent currently to 15 per cent by 2025” and by then, “the Debt-Service-to-Revenue ratio will cease to be worrying.”

The budget, according to the president, prioritised defence and internal security, stressing the need for Ministries, Departments and Agencies (MDAs) to ensure gender-responsive budgeting that would ensure fair distribution of resources to vulnerable groups.

Projections

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The parameters for the 2022 budget are: oil price benchmark of $57 per barrel, a daily oil production estimate of 1.88 million barrels, an exchange rate of N410.15 per US dollar and a projected GDP growth rate of 4.2 per cent and 13 per cent inflation rate.

The projection also includes N17.70 trillion, which is the estimation of the total federally collectable revenue in 2022.

Projection for oil revenue is N3.16 trillion and non-oil taxes, N2.13 trillion. Also, Nigeria’s independent revenues are projected to be N1.82 trillion.

Planned expenditure

In the president’s address, the proposed expenditure was made up of statutory transfers of N768.28 billion; non-debt recurrent costs of N6.83 trillion; personnel costs of N4.11 trillion, and pensions, gratuities and retirees’ benefits amounting to N577.0 billion.

In addition, there was an overhead cost of N792.39 billion, capital expenditure of N5.35 trillion, debt service of N3.61 trillion and a sinking fund of N292.71 billion to retire certain maturing bonds.

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