How Fiscal Deficit and Loan Servicing Are Weakening Nigeria’s 2022 Budget

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NIGERIA’s 2022 budget is marred by a huge deficit and loans the repayment of which will, once again, cost Africa’s most populous nation a fortune.

These, analysts say, put the Nigerian economy under fiscal pressure.

The government of President Muhammadu Buhari has relied heavily on borrowing to support its fiscal cycle, with the Central Bank of Nigeria (CBN) serving as the federal government’s lender of last resort.

The 2022 budget is projected at N17.13 trillion, 18% higher than the 2021 budget.

In addition, recurrent expenditure (excluding debt), which is estimated at N6. 91 trillion, or 40% of total expenditure and 20% more than the 2021 budget.

At N3. 8,000 billion, debt service represents 22% of total expenditure and 34% of total revenue.

Jhe 2022 budget shows a deficit of about 6.25 billion naira, or about 3.39% of the country’s GDP.

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The budget also earmarked N59 billion for matching funding for rail projects including: Lagos-Calabar, Calabar-Lagos, Ajaokuta-Itakpe, Port Harcourt-Maiduguri, Kano-Katsina, Jibiya-Maradi in Nigeria, and Abuja Itakpe and Aladja (Warri ) – Warri port and refinery/new port.

The budget deficit should be financed mainly by borrowing, with targets from domestic sources – N2. 57 trillion; foreign sources-N2. 57 trillion; drawdown on multilateral/bilateral loans N1. 16 tons; and privatization proceeds, N90. 7 billions.

“We are borrowing and have a high level of budget deficits. When you increase the budget from N16. 39 trillion to 17.127 trillion naira and you are borrowing with a high level of deficit, this is cause for concern,” said Professor of Financial Economics and Director of the Center for Economic Analysis and Research at the University of Lagos Ndubuisi Nwokoma in a watched program on Arise Television on Fridays.

“Additionally, we are looking at N3.8 trillion for debt service, which is close to N3.16 trillion in projected oil revenue. Remember we still have subsidy issues to deal with. the budget is “highly indebted.” It’s not just for this year, it’s been happening for some time now.

The economist noted that projected revenues of N10.1 trillion from the oil and non-oil sector, which were often not met, left Nigeria with excessive borrowing.

“How to finance the deficit? Fiscally, we need to borrow about N5.01 trillion, alongside other project-related loans, in addition to proceeds from the sale of government assets.

Following these concerns, those knowledgeable about the economy also expressed concern that the government continued to pretend to cut governance costs.

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They noted that the government had a spending problem, not a revenue problem.

“Even if revenue agencies generate N30 trillion, it would be spent with less economic impact on people’s lives. Wasn’t it the Federal Ministry of Agriculture that budgeted the mosque from the ministry’s budget,” said Celestine Okeke, political economist and associate consultant at the UK Department for International Development, DFID. the ICIR.

“That would tell you that our issue is not revenue but securing people-focused spending that impacts people’s lives.”

He pointed out that public financial management remains a major issue in federal government ministries, departments and agencies.

“I hope you have seen the revelation of the auditor general of the federation in certain government agencies? What does this tell you about our management of public finances? Currently, the national procurement committee is not there and that is a huge concern,” he noted.

Speaking further on the budget, an economist, banker and former aspirant to the post of Governor of Abia State, Alex Ottih, expressed concern about the low level of productivity of the Nigerian economy and its dependence too much oil.

“There is no doubt that the country has a big problem, which is structural and needs to be solved for the economy to get back in the right direction. The country has a productivity problem.

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“A situation where the country, for more than half a century, depends on a single product, to which the population adds little or no value, for a large part of its foreign exchange earnings is not sustainable. .

“No matter what it takes, the country must broaden its productive base by involving more people in economic activities.”

The 2022 budget deficit is slightly above the 3% cap set by the 2007 Fiscal Responsibility Act.

The deficit should be financed by new borrowings, financial products and drawdowns on guaranteed loans for specific projects.

Non-debt recurrent expenditure of N6.83tn recurrent expenditure is the largest expenditure item, with 60 percent related to personnel costs at N4. 11 trillion.

President Muhaamdu Buhari had strong reservations about the worrying changes made by the National Assembly to the 2022 budget.

He announced that he would return to the National Assembly with an amendment request as soon as MPs resume, to ensure that ongoing critical projects cardinal to his administration do not suffer setbacks due to reduced funding. .

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