The Federal Government on Thursday is set to present the 2022 budget estimates to the National Assembly. In line with this preparation, business leaders and economic experts have cautioned the Federal Government on the need for productive disbursement of billion-dollar loans being incurred by the administration.
The latest monthly Economic Report from the CBN in September indicated that the overall fiscal deficit shrunk to N150bn in April 2021. A cursory glance at the data however indicated an improvement over the deficit of N1.0trn recorded in the preceding month, the marked improvement was mostly explained by delays in the budgeted releases to government, ministries and agencies.
At a webinar organized by Abuja Chamber of Commerce and Industry in September, stakeholders decried the current application of loans to cover recurrent expenditures while also expressing apprehension over the servicing of debt with over 90 per cent of national earnings.
The President of ACCI, Dr. Al-Mujtaba Abubakar, at the webinar identified multiple challenges facing the economy and urged the government to support the private sector if the national economy is to truly turn the right corner.
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“The economic climate worldwide was challenging as nations struggled to cope with the fallouts of the COVID-19 pandemic, adding that across Africa, governments were struggling to innovate and achieve stabilisation after global disruption that is still reverberating in many parts of the world,” Abubakar said.
BudgIT‘s CEO, Gabriel Okeowo stated that “2021 has been a horrifying year for Nigerians concerning security as the country combats mutating forms of crime and terror across all its 36 states; this is despite allocating over N10.02tn to security between 2015 and 2021. In the 2021 budget, the entire security sector’s allocation was N1.97tn, representing a 14% increase from the N1.78tn allocated in 2020.”
“Increased resources allocated to the security sector means that less money is available to develop other sectors; thus, there is a need for more scrutiny of how these allocations are budgeted and spent,” Okeowo added.
He also noted that various non-security related government agencies now request and receive allocations for “Security Votes”, an opaque feature of the Nigerian security ecosystem devoid of accountability.
“In the 2021 budget, a total of 117 federal agencies received allocations for “Security Votes” worth N24.3bn, despite many of these agencies already having allocations for “Security Charges” to cover each agency’s security needs,” he stated.
BudgIT CEO further stated that the little budgetary allocation provided to other sectors are plagued with various loopholes for leakages and theft of public funds.
“Our investigations into the 2021 budget revealed at least 316 duplicated capital projects worth N39.5bn, with 115 of those duplicate projects occurring in the Ministry of Health. This is very disturbing especially considering the health infrastructure deficit and the raging COVID-19 pandemic affecting Nigeria.”
“Even worse, agencies now receive allocations for capital projects they cannot execute. For example, the National Agriculture Seed Council has an allocation for N400m to construct solar street lights across all six geopolitical zones, while the Federal College of Forestry in Ibadan in Oyo State got N50m for the construction of street lights in Edo State. These are aberrations that need to be corrected.”
This is amidst the N1.47tn spent on debt servicing payments in the first half of 2021.
Data from Debt Management Office (DMO) revealed that the country in the first quarter (Q1) of the year, spent N1.02tn on both domestic and external debt servicing, while a total of N445.45bn was spent in the second quarter of 2021.
From January to March 2021, Nigeria spent N612.71bn on domestic debt servicing, while it spent $1bn (N410.33bn) on external debt servicing.
From April to June 2021, Nigeria spent N322.7bn on domestic debt servicing and $299m (N122.7bn) on external debt servicing.
A breakdown of the statistics in Q2 shows that the Federal Government spent a total of N322.7bn on the payment of interest, with N50.3bn expended on the redemption of matured Nigeria Treasury Bills.
For external debt servicing in Q1, commercial loans had 76 per cent with a cost of $763.04m (N313.10bn), multilateral had 13 per cent with a cost of $134.04m (N55bn), and bilateral had 11 per cent with a cost of $106.33m (N43.63bn).
For external debt servicing in Q2, commercial loans had 53 per cent with a cost of $157m (N64.4bn), multilateral had 35 per cent with a cost of $103.7m (N42.5bn), and bilateral had 13 per cent with a cost of $38.2m (N15.7bn).
A political economist and former presidential candidate, Prof. Pat Utomi stated that the trend of continuous borrowing would further worsen the economic conditions of the country ahead of 2022’s appropriation bill presentation.
Okeowo enjoined the federal government to urgently block all loopholes in the budget creation and implementation process, some of which are highlighted in the recently released BudgIT publication.
Nigeria’s budget can be an excellent tool to accelerate economic recovery, but if the budget is left with the current loopholes, it can further create room for corruption and grand theft.
The Nigerian government already borrowed over N4tn to meet its expenditure needs in 2021. It cannot afford to allow these borrowed funds to be stolen by a corrupt few through loopholes in the budget and the subsequent upcoming budget.
