FGN budget – an expansionist position in 2022

The FGN’s 2022 budget titled Economic Growth and Sustainability was signed by President Buhari on December 31, ’21. Overall spending is estimated at N17.1 billion, which is 18% more than the aggregate FGN expenditure in 2021 of N14.6 billion.

The total amount allocated for capital spending in the 2022 budget is 5.96 billion naira. This represents 35% of total expenditure (above the 30% target set by the current administration) and is 14% higher than the 2021 provision of N5.23trn. The budget has an estimated deficit of 6.39 billion naira, or about 4.1% of total GDP (in 2020) and is slightly above the 3% ceiling set by the 2007 Fiscal Responsibility Act (FRA).

Tax expenditures also include a statutory transfer of 869.7 billion naira, debt service of 3.6 billion naira, a sinking fund of 270.7 billion naira, recurrent expenditure (excluding debt) of 6.9 billion naira and special (recurring) interventions of 350.0 billion naira.

Assumptions for the 2022 national budget include a benchmark oil price of 62 USD / b, 1.9 mbpd of oil production, an exchange rate of 410.15 N / USD, a GDP growth rate of 4.2 % year-over-year and an inflation rate of 13%.

In addition, the budget deficit is expected to be financed by foreign borrowing of 2.6 billion naira and domestic borrowing of 2.6 billion naira, privatization proceeds of 90.7 billion naira and drawdowns on multilateral loans. / bilateral by 1.2 billion naira.

Regarding debt sustainability, Nigeria’s debt-to-GDP ratio stood at 30% at end-September’21. It is relatively low compared to other African economies such as Kenya (65%), South Africa (80%) and Egypt (90%). However, the country’s debt service-to-revenue ratio stood at 76% as of November 21, one of the highest among African economies.

The overall revenue available to finance the 2022 national budget is projected at 10.7 billion naira. Projected revenue is 32.3% higher than the previous year and includes oil revenue estimated at 3.4 billion naira (31.3% of total revenue) and non-oil revenue of 7.3 billion Naira. naira (68.7% of total revenue).

Regarding revenue mobilization, the FGN plans to increase the revenue / GDP ratio from around 8% to 15% by 2025. In accordance with the priorities of the 2022 budget, certain essential policies of the 2021 budget law which Could help achieve this include the imposition of excise duties on non-alcoholic, carbonated, and sugar-sweetened beverages as well as technology reforms by the Federal Inland Revenue Service (FIRS) to improve tax administration and increase revenue.

Based on our estimates, between January and November ’21, FGN expenditure is 5.9% below the pro-rated budget of N13.4trn while revenues are 25.9% below the pro-rated budget of N7 .4trn. In addition, we note that the debt service is 38% higher than the pro-rated budget of N3.0trn.

The FGN aims to further strengthen the frameworks of concessions and public-private partnerships (PPP) as well as explore green finance opportunities, such as the implementation of the sovereign green bond program and swap mechanisms. of debt against the climate. The national budget should target the financing of essential development projects and programs that should improve the economic and business environment.

Good fiscal management is necessary to keep the economy afloat in the short term and drive it towards double-digit growth in the medium and long term. Capital spending should be maximized to increase the potential for income generation and growth in the non-oil economy. Although there are FGN PPP initiatives, increased private sector participation is still needed.

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