The 2023 budget needs drastic review
Buhari presenting 2022 budget before National Assembly

Adebayo Obajemu

Discoveries of several mis-allocations or padding in the 2022 budget by members of the National Assembly have sparked anxiety over the fate of the appropriation presented by President Muhammadu Buhari in October presented to the joint session of the legislature.

Since the coming of this government in 2015, the issue of budget padding has become recurring, with the result effect of over bloating the budget. One of such is the $200 million or N96 billion estimate for the import of mosquito nets, which left most Nigerians outraged.

The proposed total expenditure for the coming year is put at N16.39 trillion with a crude oil benchmark price of $57 per barrel and daily oil production estimate of 1.88 million barrels (inclusive of condensates of 300,000 to 400,000 barrels per day).

The exchange rate is projected at N410.15 per dollar and GDP growth rate of 4.2 per cent with 13 per cent inflation rate.
The president said the total federally distributable revenue is estimated at N12.72 trillion in 2022 while total revenue available to fund the 2022 budget is estimated at N10.13 trillion. This includes Grants and Aid of N63.38 billion, as well as the revenues of sale of 63 Government-Owned Enterprises (GOEs).

The president earlier sought to increase the total expenditure from N13 trillion to 16.45 trillion. About N6trillion will be borrowed to fund the deficit between revenue and expenditure.
Some reasons he gave for the increase are the allocation of N100 billion to the electoral umpire, INEC, for preparations for the 2023 general election, N50 billion to health workers for hazard allowance and other allocations to security agencies.
He said the total federally-collectible revenue is estimated at N7.70 trillion in 2022.

While oil revenue is projected at N3.16 trillion, non-oil taxes estimated at N2.13 trillion, and Independent revenues are projected to be N1.82 trillion.

The budget contains a non-debt recurrent expenditure of N6.83 trillion, personnel cost of N4.11 trillion and debt service of N3.61 trillion.

Statutory transfers, the category to which the National Assembly falls, have been put at N768.28 billion while Pension, Gratuities & Retirees Benefits was put at N577 billion and Overhead cost at N792.39 billion.

The deficit, Mr. Buhari said, will be financed mainly by new borrowings totaling N5.01 trillion.

“This represents 3.39 per cent of estimated GDP, slightly above the three per cent threshold set by the Fiscal Responsibility Act 2007. Countries around the world have to of necessity over-shoot their fiscal thresholds for the economies to survive and thrive.
“We need to exceed this threshold considering our collective desire to continue tackling the existential security challenges facing our country.”

Buhari said Nigerians are right to worry about the government’s attitude of borrowing but the nation’s borrowing is still within limit. It is most likely the budget will be reviewed upwardly, given the reaction of the National Assembly.

“It is to be expected that the budget will face many hurdles, including the National Assembly that may increase its own allocation”, Professor Adeagbo Moritiwon, a political scientist told BusinessHallmark.

As expected, despite public outcry, the spokesperson of the House of Representatives, Ben Kalu, said the N134 billion allocated to the National Assembly in the 2022 budget is inadequate.

He called for an increase in the allocation to the National Assembly “for it to fulfill its mandate”. According to him, “If you do a proper analysis of statutory transfers for 2022, you will be seeing N768.28 billion and this is an increase of about 58.7 per cent from the last one which was about N484.49 billion, which means that what was added to it was N283.79 billion.

“Now, this increase, one would have expected that it would impact positively on the budget of the National Assembly. It is common reasoning. Over the years, you have increased the budget from one level to the other and the percentage of ‘oversighting’ arm of government keeps dropping”, he said.

This follows the current economic and fiscal crisis in Nigeria, where retained revenue simply pays for debt service and the bulk of the resources required for personnel, overhead and capital expenditure are sourced through borrowings.
The president increased the National Assembly’s budget from N125 billion in previous years to N128 billion for 2021
During the approval the lawmakers upped the budget by N6 billion, bringing their total budget for 2021 to N134 billion. There are speculations that the legislature will again increase its allocation.

Despite public disapproval, the Federal Government has submitted a proposal to borrow the sum of N5.62 trillion to finance deficits in the 2022 budget. Last the senate approved a borrowing of $16 billion for the government, raising the nation’s debt stock to N49 trillion.

The minister for Finance, Budget and National Planning, Zainab Ahmad, while presenting the 2022—2024 Medium Term Expenditure Framework (MTEF), and Fiscal Strategy Paper (FSP), before the House Committee on Finance, stated that the reduction became necessary given economic volatility occasioned by unstable global oil market as well as effects of the covid-19 pandemic.

According to her, “on capital expenditure, the sum of N1,759,804,022,579, as opposed to the N2,019,119,204,546, will be available to Ministries, Department and Agencies of government in 2022.”

Explaining the deficit, the minister said: “the budget deficit and the financing items for the expenditure. The budget deficit that is projected for 2022 is N5.62 trillion, up from N5.60 trillion in 2021.”
“The deficit is going to be financed by new foreign borrowing. And domestic borrowing, both domestic and foreign in the sum of N4.89 trillion, then privatisation proceeds of N90.73 billion and drawdowns from existing project titles of N635 billion.
On revenue projections, the minister in the document stated that based on the decision of the Federal Executive Council (FEC) the sum of N6.54 trillion is expected to be realised for the 2022 fiscal year, adding that it was projected to increase in 2023 to N9.15 trillion.

“The revenue that we expect is N6.54 trillion N2.62 trillion to accrue to the Federation Account and VAT respectively,” she said.

She disclosed further that net oil and gas revenue which will be available for the Federation Account for distribution will be N6.151 trillion in 2022.

The key macro-economic assumptions contained in the MTEF/FSP include a crude oil benchmark price of $57 per barrel for 2022, crude oil production of 1.88 million barrels per day, and a dollar exchange rate of N410.15 to one US dollar, an inflation rate of 13 percent in 2022, and a nominal GDP of 149.369 trillion.
Another area of potential disagreement is the budget oil price benchmark. Members of the House of Representatives have asked that the oil price benchmark for the 2022 budget be pegged at $60 per barrel. The federal government had proposed a benchmark of $57 per barrel.

Oil price has remained bullish since June reaching a high of $85 per barrel in October before dropping to $83 on Friday. Onofiok Luke, a lawmaker representing Etinan/Nsit Ibom/Nsit Ubium federal constituency (Akwa Ibom), said the $57 per barrel is not sustainable.

“The pegging of oil price at $57 per barrel is totally quite very low. It is not sustainable,” he said. “Permit me to add that in the last three years since 2018, we have had a yearly high at an average of about $60 per barrel. So we should be advocating that there should be the upping of the pegging of $57 per barrel to $60 per barrel.

“In 2018, the year high was $77.41 cents per barrel; in 2019, it was $66.24 cents. In 2020 it was $63.23 cents. As of today, Brent is $83.27 cents. So we can have an average of $60 per barrel and that would be sustainable for us.”

Expressing a similar view, Leke Abejide, chairman committee on customs, said the oil benchmark of $57 per barrel is “very low”.
“The benchmark of $57 per barrel, if you look at the world market today, it is above $80,” he said. “I think this is a bit low. If we can look at it, not to be too ambitious, maybe we take it above $60 per barrel.”


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