For the first time since the inception of his government in 2015, President Muhammadu Buhari yesterday acknowledged how much petroleum subsidy had eroded national revenues, making it impossible for the country to adequately fund its annual budget, despite significant appreciation in crude oil prices.
Buhari made the revelations in Abuja while presenting a N16.39 trillion Appropriation Bill for the 2022 fiscal year to a joint session of the National Assembly.
But Chairman of the National Assembly and the President of the Senate, Dr Ahmad Lawan, flayed the rising level of budget deficit.
Nevertheless, there was hope of an early passage of the 2022 budget proposal, as Speaker of the House of Representatives, Hon. Femi Gbajabiamila, assured the president of quick consideration of the estimates by the National Assembly.
Similarly, the ruling party All Progressives Congress (APC) yesterday said the proposed 2022 budget was designed to accelerate the government’s ongoing efforts to diversify the economy.
But the main opposition Peoples Democratic Party (PDP) described the proposed budget as another budget of sorrow and pain to Nigerians.
The Coalition of United Political Parties (CUPP) slammed the budget presented by the president, saying though his last full-year budget, it does not have items that can at least see him leave the office with some element of pride.
The 2022 Appropriation Bill was tagged “Budget of Economic Growth and Sustainability.”
Buhari recalled that in March 2020, the Petroleum Products Pricing Regulatory Agency (PPPRA) had announced that market forces would henceforth determine the price of petrol.
He stated, “However, as the combination of rising crude oil prices and exchange rate combined to push the price above the hitherto regulated price of N145 per litre, opposition against the policy of price deregulation hardened on the part of labour unions in particular.
“Government had to suspend further upward price adjustments while engaging labour on the subject. This petrol subsidy significantly eroded revenues that should have been available to fund the budget.”
Buhari said allocations to Ministries, Departments and Agencies (MDAs) in the budget were guided by the strategic objectives of the National Development Plan of 2021-2025. He said the plan prioritised diversification of the economy with robust Micro, Small and Medium Enterprises (MSMEs) growth; investing in critical infrastructure; strengthening security and ensuring good governance; enabling a vibrant, educated and healthy populace; reducing poverty; and minimising regional, economic and social disparities.
The president stressed that the security sector would still take a chunk of the 2022 budget, saying, “Defence and internal security will continue to be our top priority.
“We remain firmly committed to the security of life, property and investment nationwide. We will continue to ensure that our gallant men and women in the armed forces, police and paramilitary units are properly equipped, remunerated and well-motivated.”
The president commended the National Assembly for the expeditious consideration and passage of the supplementary appropriation bill 2021. He said that underscored the federal legislature’s commitment to collective efforts to contain the COVID-19 pandemic and address the various security challenges facing the country.
He also commended the National Assembly for the quick consideration and approval of the 2022-2024 Medium-term Expenditure Framework and Fiscal Strategy Paper.
The president said, “Our hope is that the National Assembly will continue to partner with the executive by ensuring that deliberations on the 2022 Budget are completed before the end of this year so that the Appropriation Act can come into effect by the first of January 2022.”
Buhari said over the past few days, consultation was made with the Presidential Steering Committee on COVID-19 and the leadership of the National Assembly on how best to present the 2022 budget proposal, keeping in mind the deep-rooted tradition in place and the guidelines for safe mass gatherings.
He said it was decided that the most responsible and respectful approach was to hold a shorter than gathering while allowing the Minister of Finance, Budget and National Planning to provide fuller details of the proposals at a smaller event.
According to him, 2022 to 2024 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) set the parameters for the 2022 Budget.
He noted that the oil price benchmark was pegged at $57 per barrel; with a daily oil production estimate of 1.88 million barrels (inclusive of Condensates of 300,000 to 400,000 barrels” per day projected.
Buhari said the exchange rate was pegged at N410.15 per dollar and projected Gross Domestic Product (GDP) growth rate of 4.2 per cent and 13 per cent inflation rate. He added that based on these fiscal assumptions and parameters, total federally collectable revenue was estimated at N17.70 trillion in 2022.
The president pointed out that total federally distributable revenue was estimated at N12.72 trillion in 2022, while total revenue available to fund the 2022 budget was estimated at N10.13 trillion. This includes grants and aid of N63.38 billion, as well as the revenues of 63 government-owned enterprises.
Buhari noted that oil revenue was projected at N3.16 trillion; non-oil taxes were estimated at N2.13 trillion and FGN independent revenues were projected to be N1.82 trillion.
The president explained that total expenditure of N16.39 trillion was proposed for the federal government for 2022.
He said the proposed expenditure comprised: Statutory Transfers of N768.28 billion, Non-debt Recurrent Costs of N6.83 trillion; Personnel Costs of N4.11 trillion; Pensions, Gratuities and Retirees’ Benefits N577.0 billion; Overheads of N792.39 billion; Capital Expenditure of N5.35 trillion, including the capital component of Statutory Transfers; Debt Service of N3.61 trillion and Sinking Fund of N292.71 billion to retire certain maturing bonds.
Buhari stated, “We expect the total fiscal operations of the federal government to result in a deficit of N6.26 trillion. This represents 3.39 per cent of estimated GDP, slightly above the three per cent threshold set by the Fiscal Responsibility Act 2007. Countries around the world have to of necessity over-shoot their fiscal thresholds for the economies to survive and thrive.
“We need to exceed this threshold considering our collective desire to continue tackling the existential security challenges facing our country.”
Buhari said the federal government planned to finance the deficit mainly by new borrowings totalling N5.01 trillion, N90.73 billion from privatisation proceeds and N1.16 trillion drawdowns on loans secured for specific development projects.
The president stated, “Some have expressed concern over our resort to borrowing to finance our fiscal gaps. They are right to be concerned. However, we believe that the debt level of the federal government is still within sustainable limits. Borrowings are too specific strategic projects and can be verified publicly.”
Buhari explained that the country had witnessed two economic recessions within the period of his administration, stressing that in both cases, the country had to spend its way out of recession, which necessitated a resort to growing the public debt.
“It is unlikely that our recovery from each of the two recessions would have grown as fast without the sustained government expenditure funded by debt,” he said.
On parameters and fiscal assumptions, the president said the target over the medium term was to grow the country’s revenue-to-GDP ratio from about eight per cent currently to 15 per cent by 2025. He said at that level of revenue, the debt service-to-revenue ratio would cease to be worrying.
“Put simply, we do not have a debt sustainability problem, but a revenue challenge which we are determined to tackle to ensure our debts remain sustainable,” Buhari said.
The president noted that his government had used loans to finance critical development projects and programmes aimed at improving the economic environment and ensuring effective delivery of public services to the people.
He said his government focused on: the completion of major road and rail projects; the effective implementation of power sector projects; the provision of potable water; construction of irrigation infrastructure and dams across the country; and critical health projects such as the strengthening of national emergency medical services and ambulance system, procurement of vaccines, polio eradication and upgrading Primary Health Care Centres across the six geopolitical zones.
Buhari said his government in 2022 would further strengthen the frameworks for concessions and public-private partnerships (PPPs), adding that capital projects that are good for PPP by their nature would be developed for private sector participation.
On the performance of the 2021 budget, Buhari said in the 2021 Fiscal Framework, total revenue of N8.12 trillion was projected to fund aggregate federal expenditure of N14.57 trillion (inclusive of the supplementary budget), while actual revenues were 34 per cent below target as of July 2021, mainly due to the underperformance of oil and gas revenue sources.
Buhari pointed out that the federal government’s retained revenues (excluding Government Owned Enterprises) amounted to N2.61 trillion against the proportional target of N3.95 trillion for the period.
Earlier in his welcome address, Lawan said the 2020 and 2021 budgets provided for significant infrastructure development across the country. He added that it was imperative that the government prioritises the completion of ongoing projects on the development of infrastructure, adding that the 2022 budget should be targeted at the completion and consolidation of the projects embarked upon.
Lawan lamented that generating and collecting revenues had remained major challenges in the country’s quest for development. He said for the deficit in the country’s budget to be drastically reduced, a concerted effort must be made by the executive and legislature to explore alternative sources of funding to reduce borrowing.
The senate president explained that such sources of funding could come by way of Public-Private Partnerships on infrastructure projects, as well as compulsory remittances of generated revenues by MDAs.
Lawan stressed that equally important was the recent position taken by the legislature and the executive to insist on zero allocation for MDAs that failed to remit/upload their revenues for the 2022 Appropriation.
He said he saw an increase in the contribution of the MDAs by over N400 billion, saying he believed that MDAs could contribute to the federation account much more than that. Lawan added, “Mr President, the need to enhance revenue generation and collection cannot be overemphasised. The level of the budget deficit is high, and both the legislature and the executive should work to reduce this deficit through the availability of more revenues.”
According to him, the security of life and property of Nigerians was still a challenge. She assured that the National Assembly was ever willing to work with the executive arm for better security for the citizens.