Few days ago, President Muhammadu Buhari signed into law, a budget estimated at N16.39 Trillion for 2022. Was it too soon? This was the question by critics and finance experts, considering the lapses in the 2021 Budget; Despite the projected revenue of 8.12 Trillion Naira and a GDP of 4.52 from the 2021 budget according to the report by budgetoffice.gov.ng published on October 7, 2021; there are more worries over the financing of the fiscal budget with foreign loans from World Bank and Major Financial institution across the world.
The President while speaking at the National Assembly stated that the budget is for Economic Growth and sustainability. He stated that the budget is centered on economic diversification, enabling the growth of Micro, Small and Medium Enterprises, investing in critical infrastructure, strengthening security and good governance: enabling a vibrant, educated and healthy populace; reducing poverty: and minimizing regional, economic and social disparities as reported by channelstv.
The statement looks good on paper but its actualization has been a puzzle the Federal Government has not solved. The 2022 Budget is broken down in the following analysis. According to the report of the President’s Speech that the budgetoffice.gov.ng published on October 7, 2022, the conservative oil price benchmark is placed at $57 compared to the $40 per barrel that was included in the 2021 budget. Oil Production is estimated at 1.88 trillion per barrel compared to the 1.70 trillion per barrel from the 2021Fiscal budget. The exchange rate was proposed to 410. 15 Naira to a dollar and the GDP Growth were projected to 4.2% with an expected inflation rate of 13% as seen in the parameter and Fiscal Assumption Section of the 2022 Budget.
In the Revenue estimate of the budget as reported by the budgetoffice.gov.ng federally collectible revenue is estimated at 17.70 trillion. Oil revenue is projected at 3.16 trillion: non-oil taxes are projected at 2.13 trillion while Federal Government revenue is projected at 1.82 trillion as seen in the revenue estimate section of the 2022 Budget.
A total of 16.39 trillion was estimated for the total expenditure. This expenditure includes a Statutory Transfer of 768.28 billion, Non Debt Recurrent Cost of 6.83 trillion, Personnel Costs of 4.11trillion; Pension, Gratuities and Retirees benefit of 577.0 billion; Overheads of 792.39 billion; Capital Expenditure of 5.35 trillion, Debt service of 3.61 trillion and Sinking Fund of 292.71 billion Naira.
The Federal Government planned to finance the deficit by borrowing a total 5.01 trillion. 9.73 billion Will be borrowed for privatization proceeds and 1.16 million on loans secured for developmental projects. In this aspect, the President stated the concern over the borrowing to fund the fiscal project; he made it known in his speech that it was specific project, stating the need to spend their way out of recession that led to the growth of public debt across Nigeria while they seek funds for infrastructure financing in major sector such Health, Defence, Education and the Economy.
Debt servicing is a major issue in the economic sector. According to a report on punchng published on the 15th of July, 2021, Debt servicing rose from 54.66% in 2019 to 72% in 2020. Federal Government spent a total of N 2.34 Trillion within the year on Debt servicing, 72% of government revenue was gulped by Debt servicing in 2020.
In a report on nairametrics on July 4, 2021, The Federal Government of Nigeria has spent N 1.8 million on debt servicing in the first 5 month of 2021, representing about 98% of the total revenue generated at the same period. The Minister for Finance, Budget and National Planning, Mrs Zainab Shamsuna Ahmed stated that a data revealed that total revenue generated by the Federal Government from January to May 2021 was N 1.84 trillion, representing a deficit of N 1.48 trillion compared to the estimated revenue of N 3.33 trillion. According to report by nairametrics, an increase in debt service is represented by the high cost of debt profile and dwindling oil revenue. It shows that Nigeria is exposed to risk of trailing behind in the global market, placing much pressure on the Foreign exchange market.
The stats that follow in the rise of debt servicing point out that Nigeria spends its revenue servicing debt, opening the country to loans for funding Capital projects. It shows what the country stands to lose economically if a huge percentage of its revenue is spent on debt servicing. There is a need for Nigeria to tackle its debt challenges in order not to lose our economic infrastructure to foreign government and borrowing from China, France, UK and USA. Economists and Financial Experts have called on Cost trimming by the Federal Government, calling on the Federal Government on seek for ways to generate revenue from its treasury. Debt service will cause more harm to the economy if its properly tackled; with the rise in inflation and economic crises we stand the risk of being sabotaged economically if we do not seek for ways to stop debt servicing.