The Federal Government’s fiscal operations in 2022 is set for contraction, despite higher oil earnings and earnings from increased exchange rate.
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 yesterday, said the federal government would slash capital expenditure by N259.315 billion, despite a 3.0 percent increase in total budget size to N13.9 trillion from N13.6 trillion in 2021.
According to her, the reduction became necessary given economic volatility occasioned by unstable global oil market as well as effects of the COVID-19 pandemic.
She stated, “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, Departments and Agencies of government in 2022.”
Oil price benchmark for 2022 budget has been put at $57 per barrel as against $40 in 2021 as actual prices have averaged $65 since this year, indicating more oil revenue accruals to the Federation Account.
Also exchange rate has been put at N410.1 per USDollar as against N379 in $379 in 2021, indicating more Naira cash flow from oil and other foreign exchange inflows.
On the exchange rate, the Minister told legislators that the rate would likely to come down in favour of the naira in 2023.
On the funding of the N5.62 trillion proposed deficit, Ahmed said: “The deficit is going to be financed by new foreign borrowing and domestic borrowing in the sum of N4.89 trillion, then privatisation proceeds of N90.73 billion and draw downs from existing project titles of N635 billion.
“This amount represents 3.05 per cent of the estimated GDP, which is slightly above the three percent threshold that is spent recommended in the Fiscal Responsibility Act.”
On revenue projections, the Minister 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 respec-tively,” 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 dollar, an inflation rate of 13 per cent in 2022, and a nominal GDP of 149.369 trillion.
“What is interesting is that the non-oil GDP continues to grow at 169.69 trillion compared to oil GDP of 14.68 trillion included in the nominal GDP. Nominal consumption is 130,49.36 billion.”
The MTEF/FSP are documents that describe the Federal Government’s socio-economic and developmental objectives and priorities for the reporting period of 2022 to 2024. It also has the fiscal strategies to put in place and policies to achieve govern-ment economic priorities, including highlights of the key drivers of government’s revenue and the spending plans.
Customs Fuel stations
Meanwhile, the Comptroller General of Nigerian Customs Service, NCS, Col. Ahmadu Ali (rtd), has advised the Department of Petroleum Resources, DPR to issue licenses to petrol stations in neighboring countries, to check the smuggling of petroleum products to those countries.
Speaking at the same House of Representative Committee hearing, the Customs boss advised, “To check cross border smuggling of petroleum products and improve on government revenue, the government, must establish filling stations in neighbouring countries like Togo, Benin, Chad, Niger, Cameroon and other neighbouring countries”.
