The Federal Government has prioritized spending on defense and security, infrastructure, and education, allocating a total of N5.15 trillion in the proposed Budget for 2022.
Defence and security received N2.41 trillion (15%), infrastructure N1.45 trillion (8.9%), education N1.29 trillion (7.9%), health N820 billion (5%), and Social Development and Poverty Eradication N863 billion (5.3%) of the total allocation from the plan.
Mrs Zainab Ahmed, Minister of Finance, Budget, and National Planning, stated this in the ministry’s auditorium in Abuja on Friday during a public presentation and breakdown of the highlights of the 2022 appropriation bill.
Recall that President Muhammadu Buhari presented the National Assembly with the 2022 aggregate expenditure budget, which is expected to be N16.39 trillion, up 12.5 percent from the 2021 budget.
Recurrent expenditures for the projected year is N6.83 trillion, accounting for 41.7 percent of total expenditure and 18.5 percent greater than the 2021 budget, according to a breakdown of the N16.39 trillion predicted budget.
According to the forecast, N5.35 trillion will be spent on capital projects, accounting for 32.7 percent of overall spending.
Capital components of statutory transfers, capital expenditures by Government-Owned Enterprises, and project-tied loan expenditures are all included in this clause.
The Minister stated that a total of N10.132 trillion in revenue is expected to be collected in the current fiscal year to support the budget, with N3.60 trillion set aside to pay off debts.
In the year, the oil price was set at $57 per barrel, with daily oil output forecasted at 1.88 million barrels per day in 2022. The exchange rate was set at N410.15 per US dollar, with a projected GDP growth rate of 4.20 percent and inflation of 13%.
Although Nigeria’s total oil production capacity is estimated to be 2.5 million barrels per day, current crude output is around 1.4 million barrels per day, with an additional 300,000 barrels per day of condensates, totaling roughly 1.7 million barrels per day.
In Education, N108.1 billion was provided for the Universal Basic Education, N1.2 billion for rehabilitation of classrooms/hostels, N392 million as takeoff grants for six federal science and technical colleges; N4.5 billion as scholarship allowances; and N2 billion as payment to 5,000 Federal Teachers Scheme Allowance.
The government allocated N410 billion to the Federal Intervention Programme, which includes a homegrown school nutrition program, a government economic empowerment program, and conditioner cash transfers, among other things.
The government set aside N65 billion for the Presidential Amnesty Program for ex-militants in the Niger Delta, N46.2 billion for the North-East Development Commission, and N98.7 billion for the Niger Delta Development Commission for regional programs.
A total of N10 billion was allocated to the Niger Delta’s East-West route, with another N15 billion allocated to other essential infrastructure, agriculture, and health-care projects in the region.
The Rural Electrification Agency provided N300 billion to bridge tariff revenue shortfalls, N1 billion for distribution infrastructure expansion, and N114 billion for renewable energy project completion.
Mrs. Ahmed explained that government spending projections for 2022 have increased as a result of additional provisions of N100 billion for the Independent National Electoral Commission (INEC) to prepare for the 2023 general elections, N400 billion for national poverty reduction, N178.1 billion for the population and housing census scheduled for 2022, N54 billion for the National Agency for Science and Engineering Infrastructure (NASENI), and N305.99 billion for the TETFUND.
The Minister also sought to assuage concerns about Nigeria’s expanding debt profile, stating that the country’s primary difficulty was creating more revenue rather than reducing debt levels.
According to her, Nigeria’s budget deficit to GDP (-4.7%) and debt to GDP (21.6%) ratios were the lowest among African countries.
“However, Nigeria’s Debt Service/GDP ratio (73% as at August 2021) is the highest among same African top economies; This is proof that what we have is not a classic debt sustainability problem, but a revenue challenge”, she added.
She emphasized that more Nigerians needed to pay taxes in order for the government to increase revenue, claiming that the tax base was abysmally small, with only N41 million people paying taxes in Nigeria.
“It is now critical to fix our revenue challenge, because cutting expenditure is not currently a viable option, as our Public Expenditure /GDP ratio is also the lowest among same Africa’s leading economies;
“We must however continue to rationalise our expenditures as we cannot afford waste; In reality, our largest expenditure items are currently personnel cost, debt service and capital expenditure, which between them account for 85% of the 2022 budget; There is very little scope for cut in any of these over the medium term;
“The most viable solution to our fiscal challenge therefore remains to grow our revenues and plug all leakages.
“Our target over the medium term is to grow our Revenue-to-GDP ratio from about 8 – 9 percent currently to 15 percent by 2025. At that level of revenues, the Debt-Service-to-Revenue ratio will cease to be a critical concern”, she stated.
In response to a question on why the government has continued to borrow, the Minister stated that the administration is borrowing for the right reasons and that the funds will be used correctly to accomplish the desired outcomes.
She stated that Nigeria had not surpassed the borrowing limit to GDP ratio, but conceded that the administration did so once due to the outbreak of the COVID-19 epidemic, which added to the government’s financial burden.
She stated that the government would enhance its revenue tracking and monitoring system in order to ensure that income-generating agencies fulfill their annual revenue targets.
While warning that agencies that frequently fail to fulfill their revenue targets will face sanctions, she also revealed that the directors of such organizations would suffer repercussions.
The Director-General of Budget, Ben Akabueze, echoed the Minister’s position, saying that the budget had a moral grounding, hence the need for government to borrow in the absence of expected revenue to cover the country’s basic necessities.
He argued that borrowing was the only way for the government to fund important initiatives like as security and infrastructure.
Mohammad Nami, the Chairman of the Federal Inland Revenue Service (FIRS), claimed the agency had collected N4.2 trillion in revenue as of September 30, 2021. He said that 950 billion dollars came from oil-related taxes, while N3.63 trillion came from non-oil sources.
In terms of the sum, he said that a total of N1 trillion has been received from 41 million taxpayers so far, compared to 40 million who paid the same amount in 2020.
On the predicted impact, Ahmed stated that the budget estimate for 2022 is intended to accelerate our economy’s recovery and achieve more inclusive GDP growth, lifting millions of our compatriots out of poverty.
The Chairman of the Federal Inland Revenue Service (FIRS), Mohammad Nami, said that as of September 30, 2021, the agency had collected N4.2 trillion in revenue. He said that oil-related taxes brought in 950 billion dollars, while non-oil sources brought in N3.63 trillion.
In terms of the quantity, he added that 41 million tax payers had paid a total of N1 trillion so far, compared to 40 million who paid the same amount in 2020.
In terms of the expected impact, Ahmed remarked that the budget estimate for 2022 aims to speed up our economy’s recovery and deliver more inclusive GDP growth, lifting millions of our countrymen out of poverty.
Companies paid N547.54 billion (121 percent) in income tax and N235.77 billion (148 percent) in value added tax. N338.66 billion was generated through customs (99 percent of target).
Other revenues totaled N1.71 trillion, including N691.36 billion in federal government income and N873.52 billion in revenue held by government-owned enterprises (GOEs).
On the expenditure side, she revealed that N8.14 trillion (or 84 percent) of the N9.71 trillion prorata budget had been spent. “This performance includes GOE expenditure estimates but excludes Project-tied loans,” she clarified.
Mrs. Ahmed explained that of the expenditure, N2.87 trillion was for debt service, and N2.57 trillion for personnel cost, including pensions.
“As at August 2021, N1.759 trillion had been expended for capital. Of this, N1.723 trillion represents 81% of the provision for MDAs’ capital, and N36.01 billion as GOEs capital expenditure”, the Minister explained further.
Regional and domestic development
Despite the negative effects of the COVID-19 epidemic, the Minister predicted that economic activity in Sub-Saharan Africa will perk up from 2021 to 2022, albeit unevenly, with GDP estimated to grow by 3.4 percent in 2021 and 4.1 percent in 2022.
On the domestic front, she stated that Nigeria’s economy increased by 5.01 percent in the second quarter of 2021, indicating a recovery, with the non-oil sector contributing considerably to the economy’s performance in the second quarter, with real growth of 6.74 percent.
She did say, however, that as part of the administration’s strategic revenue growth plans, many steps are being implemented to boost government income and enshrine fiscal restraint, with a focus on achieving value for money.
Improvements to the tax administration structure, including improvements to tax filing and payment compliance; examination of the process and policy efficacy of fiscal incentives are just a few of the approaches.
Ensure that MDAs properly account for and return their internally generated revenue; plug fiscal drainers like subsidies; leverage technology and automation; and put annual caps on tax expenditures to better control their impact on already constrained government revenues.
She stated that the government seeks to maximize the operational efficiencies and revenue generating emphasis of Government owned Enterprises to further enhance independent revenue collection (GOEs).
