The federal government recorded a budget deficit of N7. 052 trillion as at November last year, in the implementation of the 2021 budget.
The aggregate 2021 budget deficit had been put at N6.449 trillion, however, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, disclosed at the Public Presentation of 2022 budget, in Abuja, yesterday, that as at the end of November, deficit spending rose N7.052 trillion, instead of the prorata figure of N 5.911trillion.
She noted that the 2021 budget implementation report was provisional, capturing only the first 11 months, an indication that the deficit figure could be higher when the entire year’s budget implementation report is concluded.
Mrs. Ahmed who disclosed that as at November 2021, the federal government aggregate revenue was N5.51 trillion (74% of target), justified the deficit spending, as according to her, it would not have been possible for the economy to exit the recent recessions without such a strategy.
Her words, “Having witnessed two economic recessions we have had to spend our way out of recession, which contributed significantly to the growth in the public debt. It is unlikely that our recovery from each of the two recessions would have been as fast without the sustained government expenditure funded partly by debt.”
Giving details of the 2021 budget performance, she said, “FGN share of oil revenues was N970.3 billion (representing 53% performance of the prorated sum in the 2021 budget).
“FGN share of non-oil tax revenues totaled N1.62 trillion (118.8% over and above the target). Companies Income Tax (CIT) and Value Added Tax (VAT) collections were N718.58 billion and N360.56 billion, representing 115% and 165% respectively of the prorata targets for the period.”
According to the minister, non-oil revenue exceeded its target of N1.488 trillion, as it recorded N1.621 trillion, showing a positive variance of 256.4 billion or 18. 8 percent.
Out of the N2.011 trillion Non-Oil revenue forecast in the 2021 budget, the sum of N1.843 trillion should have been realized as at the end of November. However, only N970.33 billion was recorded, indicating a shortfall of about 47 per cent.
“On the expenditure side, N12.56 trillion (or 94.1%) has been spent out of the N13.57 trillion prorata budget. This performance is inclusive of expenditure estimates of the GOEs but exclusive of Project-tied Loans.
“Of the expenditure, N4.20 trillion was for debt service, and N3.02 trillion for Personnel costs, including Pensions.
“As at November 2021, N3.40 trillion had been expended for capital. Of this, N2.98 trillion represents 83% of the provision for MDAs’ capital, N369.9 billion for Multi-lateral / Bilateral Project-tied loans, and N49.52 billion as GOEs capital expenditure.”
The minister was elated by growth in the non-oil sector, saying that the sector showed greater resilience, recording 5.44% in real terms during the reference quarter (Q3 2021).
Her words, “In real terms, the non-oil sector contributed 92.51% to GDP in Q3 2021, higher from the share recorded in the Q3 2020 which was 91.27.
“As at November, 2021, we had surpassed all collections for FGN independent revenues from 2017 to date. This reflects performance of our revenue growth initiatives for this revenue stream.
“We have now for the first time surpassed the 1 trillion mark collection for independent revenues (N1.104tn collected as at November against a budget target of 973.41bn). Analysts have always considered our projections unrealistic, but we have always insisted on the potentials that exist to grow FGN independent revenue.”
Budget 2022 Overview
The key assumptions of the 2022 budget include: oil production of 1.88 mbpd; oil benchmark of $62 pbl (the legislature increased it from the executive’s earlier $57pbl); Exchange Rate of N410.15/$1; 13 per cent inflation rate; N119. 28 trillion Nominal Consumption; N184. 38 trillion Nominal Domestic Product); and 4. 20 GDP growth rate.
Mrs. Ahmed said that the 2022 federal government budget would continue “the reflationary policies of the 2020 and 2021 Budgets, which helped put the economy back on the path of recovery and growth.”
According to her, “The projected aggregate revenue available to fund the 2022 budget of N10.74 trillion (inclusive of GOEs) is 32% higher than the 2021 projection of N8.12 trillion,” to fund the 2022 aggregate federal government expenditure of N17.13 trillion, which is 18% higher than the 2021 Budget.
The minister stressed that the nation’s public debt level (put at N38 trillion as at third quarter of 2021) remained sustainable.
She said, “This is to restate that the debt level of the Federal Government is still within sustainable limits. ▪ Borrowings are essentially for Capital Expenditure and Human Development, as specified in Section 41(1)a of the Fiscal Responsibility Act 2007.”
Mrs. Ahmed further justified borrowing to fund the budget, saying, “The country has technically been at war, with the pervasive security challenges across the nation; This has necessitated massive expenditures on security equipment and operations, contributing to the fiscal deficit. Defence and Security sector accounts for 22% of the 2021 budget.
“Nigeria’s Budget Deficit/GDP (-4.3%, as at November 2021) and Debt/GDP ratios (30% as at September 2021) are the lowest among Africa’s leading economies However, Nigeria’s Debt Service/Revenue ratio (76% as at November 2021) is the highest among same African top economies. This is proof that what we have is not a classic debt sustainability problem, but a revenue challenge.
Defence & Security Sector was allocated the highest amount of money in the budget, totaling N2.29 trillion (13.4% of Budget).
The second sectoral allocation of N1.42 trillion ( 8.3%) was made to infrastructure, including works, Housing, Power, Transport, Water Resources and Aviation.
The educational sector received the highest allocation of N1.234 trillion. N815.69bn was provisioned for the Federal Ministry of Education and its agencies, while the Tertiary Education Trust Fund (TETFund) and the Universal Basic Education Commission (UBEC) received N306.00bn and N112.29bn, respectively.
The Health Sector got N876.38 billion.