On Friday, 8 October 2021, the Federal Ministry of Finance, Budget and National Planning hosted a Public Presentation and Breakdown of the 2022 Appropriation Bill in Abuja.
According to President Muhammadu Buhari, the proposed budget aims at accelerating the pace of economic recovery to achieve economic prosperity and deliver on the government’s promises.
The total budgetary estimate programmed by the federal government of Nigeria for the fiscal year 2022 is N16.39tn. According to the Federal Ministry of Finance, Budget and National Planning, the 2022 budget, funded by debt, is expected to help the economy further its course towards full economic recovery after an escape from recession in the fourth quarter of 2020.
Following two successive quarters of contraction, Nigeria’s economy wiggled itself out of recession in Q4 2020 at a meagre 0.11 per cent GDP growth rate. By Q1 2021, the economy’s real growth rate had moved up 0.51 per cent year-on-year, while the next quarter experienced a growth boost to reach 5.01 per cent year-on-year.
This growth experience accrues to non-oil sector activities in the country, whose sectoral performance grew by 6.74 per cent, year-on-year.
Nigeria’s fiscal authorities are optimistic that FY 2022 will augur well for the nation since the proposed spending programme as contained in the presented appropriation bill is designed to propel the country’s aggregate performance totally with the IMF’s projection of a 2.5 per cent growth rate on an annual basis.
Total government spending for FY 2022 is premised upon some underpinning assumptions that serve as the basis for budgetary allocation of monetary outlay.
(i) Oil price benchmark is estimated to be at $57 per barrel
(ii) Daily oil production is expected to total 1.88 million barrels a day
(iii) Exchange rate is set at N410.15/$1
(iv) Estimated real GDP growth is targeted at 4.20 per cent per annum
(v) Expected inflation rate stays at 13 per cent.
Of the entire N16.39tn fiscal bulk, projected aggregate revenue available to fund the 2022 budget of N10.13tn is 24.8 per cent higher than FY 2021 projection which stands at N8.12tn. Also integrated into the federal government’s 2022 budget proposal for its funding are allocations to TETFUND and the budgets of 60 GDEs.
Fiscal planners have estimated that 34.9 per cent of the projected revenue from the budget will come from oil-related sources while 65.1 per cent will be realised from non-oil sources.
Dedicated funding to expenditures show that recurrent (non-debt) spending is estimated to be N6.83tn, representing 41.7 per cent of total expenditure and is 18.5 per cent higher than 2021 budget spending under the same category.
Accordingly, aggregate capital spending is estimated to be N5.35tn representing 32.7 per cent of the total budget for 2022.
Total debt service is ticked at N3.61tn, which is 22 per cent of total expenditure and 35.6 per cent of total government revenue.
Of the entire spending plan for FY 2022, the total expected revenue is N10.132tn, while other revenue sources include dividends, minerals and mining, electronic money transfer levy, special accounts drawn down, domestic recoveries, grants and donor funding, as well as education tax.
Read also: Nigeria’s 2022 Budget: Where is the Money Going?
The overall budget deficit for 2022 is N6.26tn, representing 3.39 per cent of GDP. According to the federal government, this deficit will be financed mainly by borrowing from domestic and other external sources. Accordingly, the estimated domestic contribution towards funding the deficit stands at N2.51tr while foreign sources contribution is N2.51tr. Multilateral and bilateral loans drawn is set at N1.16tn, and proceeds from privatisation is N90.7bn.
Allocation to critical sectors of the economy include the following:
(i) Education sector: N875.93bn will be disbursed to the Federal Ministry of Education for its recurrent and capital expenses throughout the fiscal year 2022.
To the Universal Basic Education Commission (UBEC), N108.10bn will be disbursed. Also, transfers to the Tertiary Education Trust Fund (TETFUNFD) for infrastructure projects in tertiary institutions across the country is set at N310bn.
(ii) Health sector: the Federal Ministry of Health and its agencies are expected to spend N711.28bn on recurrent and capital expenditures in 2022. This amount also includes the Hazard allowance.
N54.87bn is programmed for the GAVI/immunisation funds, including counterpart funding for donor-supported programmes. Also, N54.05bn will go to transfers for Basic Healthcare Provision Fund (BHCPF).
(iii) Defence: N2.41tn will be shared by the military, police, intelligence and para-military outfits for capital and recurrent spending.
(iv) Infrastructure: N1.45tn will be used to service needs in the works, housing, power, transport, water resources and aviation industry, respectively.
(v) Youth, Women and Social Development: N921bn is provisioned for social investments and poverty reduction programmes.
The federal government of Nigeria plans to borrow its way into financing the currently widening fiscal gaps in the country. They, however, believe that debt levels are still within sustainable limits. The government assures Nigerian citizens that borrowings for investments in infrastructure and human capital development and specific strategic projects can be publicly verified.
While the government makes no alarming statement about the state of borrowings in the nation, they maintain that the major challenge facing the country’s fiscal administration is revenue constraint.
The federal government hopes to improve the country’s tax administration framework, including tax filing processes and payment compliance improvement in general.
