NIGERIA’s Minister of Finance Zainab Shamsuna Ahmed has listed insecurity and past recessions as causes of the nation’s spending problems.
She said this on Wednesday in Abuja while giving a breakdown of the highlights of the 2022 Appropriation Act.
The minister, while giving her address, stated that the overall deficit in the 2022 budget was valued at N6.39trn, noting that the economy was still in crisis mode.
She said, “The overall deficit is based at 6.39trn for 2022. It represents 3.46 per cent of the Gross Domestic Product (GDP). This is .46 per cent higher than what has been permitted in the Fiscal Responsibility Act which is 3 per cent. The economy is still in some form of an emergency and crisis mode.
“A combination of the impact of the recession we are exiting from and also the security situation we have at hand that requires very extensive spending. The budget deficit would be financed by domestic borrowing as well as borrowing from foreign sources,” she added.
She explained that the capital expenditure in the 2022 budget was 45 per cent when compared to non-expenditure, however, when compared to the aggregate expenditure, it would amount to 35 per cent.
She also explained that the debt service to revenue ratio in the budget was 34 per cent, but the actual figure might be higher as the budget implementation commenced. “You can see the deficit to revenue ratio is already high at 5.9 per cent,” she stressed.
The minister reiterated that Nigeria’s debt level was within the sustainable limit and borrowings were essentially done for capital expenditure as well as human capital development as specified on the Fiscal Responsibility Act of 2007.
Ahmed explained that the recovery from economic recessions was sorted by spending.
“Having witnessed two consecutive economic recessions, we have had to spend our way out of the recession which contributed significantly to the growth of the public debt. It is unlikely that our recovery from each of the past two recessions would be as fast without the sustained government expenditure, funded largely by debt.”
“To compound matters, the country has technically been facing significant security challenges across the nation. This has necessitated massive expenditure on security equipment and operations contributing to the fiscal deficit. Defence and security sectors account for 22 per cent of the total 2021 budget,” she stated.
According to the minister, the 2022 aggregate Federal Government’s expenditure, including Government Owned Enterprises (GOE) and projected loans, was expected to be N17.13 trillion -18 per cent higher than the 2021 budget.
She said that the recurrent non-debt spending was estimated at N16.19trn, which was 40 per cent of the total expenditure and 30 per cent higher than the provisions in the 2021 budget. She also noted that the aggregate capital expenditure was N5.96trn, costing 35 per cent of the total expenditure of the project.
Similarly, a sum of N3.61trn was set aside for debt service, amounting to 21 per cent of the total expenditure of the 2022 budget and 34 per cent of the projected revenue of the 2022 budget.
Ahmed maintained that provisions to return maturing loans to local contractors and suppliers had been made in the budget to the tune of N290.71bn and this represented 1.6 per cent of the total expenditure.
“The provision is in line with the Federal Government commitment to offset accumulated arrears to contractors dating back to over a decade,” she said.
The 2022 budget seeks to continue the reflationary policies of the 2020 and 2021 budgets. It was taken in line with the National Development Plan of 2021-2025.
The projected aggregate revenue available to fund the 2022 budget of N10.74trn (inclusive of GOES) is 32 per cent higher than the 2021 projection of N8.12trn. Without the GOEs retained revenue, the FGN revenue is projected at N9.01trn, according to the minister.
To promote fiscal transparency, accountability and comprehensiveness, allocations to the Tertiary Education Trust Fund (TETFUND) and the budgets of 63 GOES were integrated in the FGN’s 2022 Budget proposal, she noted.
In aggregate, 35 per cent of projected revenues Is to come from oil-related sources while 65 per cent is to be earned from non-oil sources.
All these are based on the projections of 1.88 million barrels of crude oil per day at $62 per barrel. This is based on assumptions that dollar will be revised at N411 and inflation at 13 per cent with a GDP growth rate of 4.20 per cent.
The minister said the nation must grow revenue to GDP ratio to 15 per cent by 2025