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Nigeria’s proposed N16.39trn budget raises more questions, less hope

President Muhammadu Buhari dubbed it a budget of growth and sustainability, but Nigeria’s 2022 appropriation bill of 16.39 trillion has raised a plethora..

President Muhammadu Buhari dubbed it a budget of growth and sustainability, but Nigeria’s 2022 appropriation bill of 16.39 trillion has raised a plethora of questions while offering a little basis for hope.

The questions arise largely because of the assumptions on which the estimates in the bill are based.

Buhari was accompanied by Vice President Yemi Osinbajo and other dignitaries to the joint session of the National Assembly presided over by Senate President Ahmad Lawan and Speaker Femi Gbajabiamila.

He presented the bill to a joint session of the National Assembly on Thursday but without a breakdown of sectoral allocations, unlike previous budgets.

However, Buhari told the lawmakers that he left out some of the details from his budget speech to avoid keeping the lawmakers and other personalities in an enclosed place for a longer period saying, the “grim realities of COVID-19 and its lethal variants are still upon us.”

The estimate of the 2022 budget presented by the president is N2.8tr higher than the 2021 revised budget of N13.59tr.

It has a total aggregate revenue projection of 17.70tr with a deficit of N6.26tr.

“We plan to finance the deficit mainly by new borrowings totalling N5.01tr; N90.73 billion from privatization proceeds and N1.16tr drawdowns on loans secured for specific development projects”, Buhari said.

Buhari justified the frequent borrowings by his administration saying, the country’s debts profile is still within a sustainable level.

He said the 6.26tr deficit in the budget represents 3.39 percent of estimated GDP which is slightly above the 3 percent threshold set by the Fiscal Responsibility Act 2007.

The budget proposal is predicated on oil benchmark of 57 US Dollars per barrel; daily oil production of 1.88 million barrels (inclusive of condensates of 300,000 to 400,000 barrels per day); exchange rate of 410.15 per US Dollar; and projected GDP growth rate of 4.2 percent and 13 percent inflation rate.

From a target exchange rate of N410.15 to a dollar, crude oil production of 1.88 million barrels per day, to a GDP growth of 4.2 percent, these assumptions do not sync with many analysts who question their reasonableness.

Equally troubling to some observers is the government’s recurring proclivity to borrowing, despite assurances from both the President and the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, that the nation’s debt-to-GDP ratio is still sustainable and so poses no challenge to the economy.

The 1.88m barrels daily oil production estimate will include 300,000 to 400,000 barrels per day of condensates pegged at a conservative oil price benchmark of $57 per barrel;

Analysis of the envisaged oil production figure shows that next year’s target is 18,000 barrels higher than the 1.70m barrels (including condensates), the average figure as of July 2021 at the market price of Bonny Light crude averaged $68.53 per barrel.

At $57 per barrel, the target oil price is less than the $68.53 which oil sold for in July. The oil price had soared to its highest point of $80/barrel in July this year before dropping.

Although the oil revenue projection for next year is N3.16tr, it is less than the N3.95tr project for this of which N2.61tr was realised due to a 34 percent underperformance of oil and gas revenue sources, the record indicated.

“The poor performance of oil revenue relative to the budget was largely due to the shortfall in production as well as significant cost recovery by NNPC to cover the shortfall between its cost of importing petrol and the pump price,” the president said.

Just on Monday, the Organisation of Petroleum Exporting Countries (OPEC) and allies, otherwise called OPEC+, agreed to gradually increase oil production output rather than flood the global market as opposed to the stance of the United States and some other consumer countries.

Brent crude rose to $81.43 on Thursday but was up to $83.47 on Wednesday, which was the highest since October 2018.

More questions, fewer answers

An Economist and Chief Executive Officer of Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf observed that the 2022 budget of N16.39trillion is 25 percent higher than the 2021 budget proposal, which was N13.08trillion.

 He believes that the assumptions are generally realistic except the one on the exchange rate, which, according to him, does not reflect the current exchange rate realities, and the oil production as output has continued to suffer setbacks due to security challenges faced by oil-producing companies.

Yusuf also said the capital budget will be financed entirely from borrowing as the finance minister already hinted that the government’s revenue could barely cover recurrent expenditure and debt service. 

To get out of this, the immediate-past Director-General of the Lagos Chamber of Commerce and Industry (LCCI), said is to fix the security problems, review the foreign exchange policy regime to reduce distortions, CBN financing of deficit should be aligned strictly to the CBN Act, and resoling the Lagos ports access crisis; the government should also stop new Excise Duties. 

For Ndubisi Ifeanyi Nwokoma, a Professor of Economics and Director, Centre for Economic Policy Analysis and Research, at the University of Lagos, borrowing to fund the budget is not realistic.

“We need an austere budget. Austerity should have been the focus of the budget not too much borrowing. Every year, you keep on borrowing, this is not realistic.”

Nwokoma dismissed the argument of the Minister of Finance that the borrowing is still within the limit, saying GDP does not pay debt.

“What pays debt is revenue,” Nwokoma said.

A retired Director with the Department of State Service, Mike Ejiofor, who said insecurity is the greatest challenge in the country, called for the consideration of a non-kinetic approach in addressing the problem.

“However, the criticism against the government is the inability to see a correlation in the huge spending on the state of security in the country,” he said.


By Itodo D. Sule, Balarabe Alkassim, Abdulateef Salau, Simon E. Sunday (Abuja); Abiodun Alade, Christiana T. Alabi & Abdullateef Aliyu (Lagos)

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