Budget of ‘growth’ raises doubt amid high debts, low incomes

• FG to raise $N90b from sales of power firms
• Debts rising because we borrowed our way out of two recessions, says Buhari
• Experts frown on non-compliance with full implementation, reliance on crude oil to fund budget
• Point ways to reduce borrowing
• APC urges speedy passage
• Lawan cautions Buhari to reduce borrowing, explore other sources of funding

President Muhammadu Buhari, yesterday, before a joint session of the National Assembly, unveiled a record N16.39 trillion ‘‘Budget of Economic Growth and Sustainability’’ for 2022, with a projected 25 per cent year-on-year rise in government spending as the economy struggles with the impact of the pandemic.

The President, decked in a white agbada, said he expects the total fiscal operations of the Federal Government to result in a deficit of N6.26 trillion, representing 3.39 per cent of estimated GDP, slightly above the three per cent threshold set by the Fiscal Responsibility Act 2007.

The President further put the total federally distributable revenue at N12.72 trillion, while total revenue available to fund the budget is estimated at N10.13 trillion, which includes grants and aid of N63.38 billion, as well as revenues of 63 Government-Owned Enterprises (GOE).

He also projected oil revenue at N3.16 trillion, non-oil taxes at N2.13 trillion and FGN independent revenues to be N1.82 trillion.

The President, who did not indicate the sectoral allocations of the budgetary estimates in a bid to abide by the COVID-19 protocols, acknowledged concerns from well-meaning Nigerians over the resort to borrowing to finance deficit gaps.

He expressed the plan to finance the N6.26 trillion deficit mainly by new borrowings totaling N5.01 trillion, N90.73 billion from Privatisation Proceeds and N1.16 trillion drawdowns on loans secured for specific development projects.

The budget for Africa’s top oil exporter was based on a conservative oil price benchmark of $57 per barrel; daily oil production estimate of 1.88 million barrels (inclusive of Condensates of 300,000 to 400,000 barrels per day).

It is also based on an exchange rate of N410.15 per dollar, and a projected GDP growth rate of 4.2 per cent and a 13 per cent inflation rate.

According to IMF data, Nigeria has among the lowest revenues globally, with government revenue between 2015 and 2019 at 7.9 per cent of GDP, compared with a Sub-Saharan African average of 12.7 per cent and a global average of 29.8 per cent.

Speaking before a joint sitting of the Senate and the House of Representatives, President Buhari said: “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.”

From the budget presentation came the revelation that the Federal Government has concluded plans to generate the sum of N90 billion from sales of mostly government-owned power assets under its National Integrated Power Projects (NIPPs) to help part-finance the 2022 budget.

This is in continuation of the unbundling and privatisation of the power sector to establish a competitive and efficient market to attract investment, increase revenue and provide a reliable and cost-efficient power supply.

The NIPP, which was established under the administration of President Olusegun Obasanjo, is the government vehicle that owns several power generation plants in the country. The government, however, did not reveal which of the power assets would be sold.

Recall that in a privatisation process that lasted over a decade, the Federal Government, in 2013, sold off controlling shares in the state-owned 11 power distribution companies and seven power generating companies to private companies.

Several years after the unbundling and the eventual sale of the power firms, citizens and businesses still do not have a reliable power supply. While the country has an installed capacity of 12,522MW, it is barely able to generate around 4,000MW, which is insufficient for the population of over 200 million.

Although there has been a lot of criticisms over Nigeria’s mounting debt, the President said the country is in so much debt due to borrowing to survive two recessions. He explained that part of what necessitated the borrowings was the economic recession that hit the country, adding that the nation does not have a debt sustainability problem, but a revenue challenge.

He said: “As you are aware, we have witnessed two economic recessions within the period of this administration. In both cases, we had to spend our 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 further explained that his government has endeavoured to use the loans to finance critical development projects and programmes aimed at improving Nigeria’s economic environment and ensuring effective delivery of public services to our people.

For President Buhari, the loans acquired have been and will continue to be focused on: Completion of major road and rail projects, effective implementation of power sector projects, 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.

BUT experts have expressed dismay over non-compliance with full implementation of national budgets in line with existing appropriation laws. They say the implementation of the proposed N16.39 trillion 2022 budget may not be different given the fact that several past budgets never realised up to 80 per cent implementation threshold.

Speaking on the issue, the Director, Institute of Fiscal Studies, Godwin Ighedosa, said: ‘’It is sad that subsequent governments have always refused to follow appropriation laws while implementing the budgets. Monies are not supposed to be diverted from one ministry to another but to be used for what purpose they are meant for in the various MDAs.”

He called on the government to diversify the economy into ICT areas, transportation and embark on a Public-Private Partnership (PPP) model to fund developmental projects.

A former lecturer, Dr. Liman Umar, said the government should, as a matter of fact, rely more on PPP in funding its yearly budgets. He said: “Using the PPP model will help attract local and foreign investors into the economy and jobs would be created with taxes paid to boost government revenues that could be used to pay outstanding debts.”

An economist, Tope Fasua, faulted the lack of innovation in government and taking the easy way out of economic underdevelopment by relying heavily on crude oil sales and borrowing to fund annual budgets.

Fasua said Nigeria is still trapped under the yoke of heavy borrowings. “The budget has not gone out of the vicious circle of crude oil being the main source of revenue for this country. We are still talking about crude oil, how many barrels we can sell and how many barrels we can produce.

“Nigerians are waiting for the day there would be out-of-the-box thinking as far as our budget is concerned where we will be able to see new thinking about revenue expectations of our budgets. We have not got to that point.

“The way we are going now, the fear is that will we may never get out of the budget deficit circle. Nigeria is the second-lowest country in terms of per capita budget, meaning the federal budget is divided by the population, will amount to little. We are not better than Congo.”

He, however, commended the Federal Government for presenting the budget early to the National Assembly.

Urging the government to drastically reduce the rate at which it is borrowing to fund its yearly budget, Dr. Bongo Adi, Senior Lecturer, Faculty of Economics, Pan-Atlantic University, said the government is stretching itself too thin getting involved in services and projects that the market should have been allowed to provide.

He said that the government is spending too much-giving people what to eat rather than helping them to fend for themselves by providing enabling environment and the needed infrastructure for the people to use their personal initiatives.

Adi said the near socialist posture of the government, which is the reason for what he called, the handouts it is giving to the people in the form of social intervention, is a huge burden on public finance.

“Supposing government cuts off that handout and uses that money to build infrastructure that will stimulate economic activities, the people will pay tax, we can even export some of our products and services and earn foreign exchange. That’s more money for the country,” he said.

“Let government revive that drive they had in 2018 when they set up the Infrastructure Concession Regulatory Commission (ICRC), which is about identifying and packaging bankable projects.

“If they can do that, I can assure you that more than 70 per cent of what we have as capital expenditure of the government, will go to the market to provide and the government will not need to borrow this heavy.”

For Dr. Muda Yusuf, the CEO of, Centre for the Promotion of Private Enterprise (CPPE), the government should discontinue the accumulation of commercial debt because of sustainability concerns.

He said for the economy to move forward, the government must fix the security problems to create the environment for increased real sector activities, review the foreign exchange policy regime to reduce distortions, eliminate arbitrage opportunities, minimise uncertainties, reduce exchange rate volatility and mitigate investment risks and align CBN financing of deficit strictly to the provisions of the CBN Act.

Newly appointed Chairman, Financial Reporting Council (FRC), Dr. Sam Nzekwe, said while he is not against borrowing, the money must be channeled to infrastructure that will make the country more productive. He said with the dwindling revenue from crude oil, this is the time for the country to do away with petrol subsidy, which he said has been a big drain on the national purse.

“I don’t have issues with borrowing provided it is not for consumption,” Nzekwe said. “But from what we are seeing, the monies are almost for consumption, you can see that the contracts are overvalued and there is no value for money. This is contrary to what you get when the private sector handles the same kind of job.”

On his part, Prof. Muhammad Mainoma, immediate past president of, Association of National Accountants of Nigeria (ANAN), said the only way for the government to reduce borrowing to fund the budget is for it to make the productive sector working.

According to him, “if the borrowing is meant to increase the production capacity, it makes a lot of sense because in the long run, the yield will be more than what we are paying as interest.”

Economic analysts said the budget signalled the government was not about to make any major policy shift as spending would remain elevated to deal with a deteriorating security situation in many parts of the country.

The security forces have been struggling to contain Islamist insurgencies in the Northeast, a spate of mass abductions and deadly bandit attacks in the Northwest, conflicts between farmers and herders in many areas and a general surge in crime.

MEANWHILE, the ruling All Progressives Congress (APC) has enjoined the National Assembly to speedily pass the 2022 budget presented by President Buhari. APC in a statement by its caretaker secretary, John Akpanudoedehe, explained that the call was aimed at meeting the January-December budget cycle.

The APC called on Nigerians to keep track of the progress being made by this administration in delivering projects, services and countless dividends of democracy all over the country.

The party maintained that the proposed budget is designed to accelerate the government’s ongoing efforts to diversify the economy through more support for Micro, Small and Medium Enterprises (MSMEs), continued investment in vital infrastructure, strengthening security, enabling a vibrant, educated and healthy populace, reducing poverty through targeted social investments and ultimately ensuring good governance.

THE President of the Senate, Ahmad Lawan, has, however, cautioned the Federal Government to reduce its penchant for borrowing by exploring other funding sources. Lawan gave the advice in his speech at the budget presentation yesterday.

He said: “Mr President, we understand that due to paucity of revenue, the Federal Government has to resort to raising funds from foreign and domestic sources to provide infrastructure across the country. That is why the National Assembly approved the requests for borrowing. Government should also explore other sources of funding its projects in order to reduce borrowing.”

He congratulated the National Assembly and the Executive for the passage of the Petroleum Industry Bill (PIB) and assent to enact the Petroleum Industry Act (PIA) 2021.

“The ninth National Assembly broke the jinx of the non-passage of the PIB over the years and Your Excellency, you have achieved the feat of assenting to the Bill. Let me also commend you for starting to implement the PIA immediately, with nominations of qualified Nigerians to serve on the Petroleum Down and Midstream Regulatory Authority and Petroleum Upstream Regulatory Commission.

He gave the assurance that Assembly members will immediately start work on the 2022 Appropriation Bill. He recalled that the President laid the appropriation bill for 2021 on October 8, 2020.

Continuing he said the members of the ninth National Assembly have kept to their promise of passing the yearly Appropriation Bill before the end of the year to ensure that it is signed into law before the beginning of the new year.

According to Lawan, the Nigerian economy and indeed citizens are benefitting from the early passage and assent to the 2020 and 2021 Appropriation Bills.

THE Speaker, House of Representatives, Femi Gbajabiamila, assured that the National Assembly would “ensure exhaustive consideration” of the 2022 budget. The Speaker, who said the National Assembly was committed to the timely passage of the Appropriation Bill as it did in the last two years, noted that the next two to three months will be for the strictest scrutiny of the budget estimates and emphasised that lawmakers would hold government agencies accountable for the previously appropriated funds.

SOME of the critical ongoing infrastructural projects, according to the President are in the power, roads, rail, agriculture, health and education sectors.

“We have made progress on the railway projects connecting different parts of the country. I am glad to report that the Lagos-Ibadan Line is now completed and operational. The Abuja-Kaduna Line is running efficiently. The Itakpe-Ajaokuta rail Line was finally completed and commissioned over 30 years after its initiation.”

According to the president, arrangements are underway to complete the Ibadan-Kano Line, pointing out that work will soon commence on the Port Harcourt-Maiduguri Line and Calabar-Lagos Coastal Line, which will connect the Southern and Eastern States to themselves and to the North.

The president said progress is also being made on several power generation, transmission, and distribution projects, as well as off-grid solutions, all aimed towards achieving the national goal of optimising power supply by 2025.

“I am again happy to report that we continue to make visible progress in our strategic road construction projects like the Lagos-Ibadan expressway, Apapa-Oworonsoki expressway, Abuja-Kano expressway, East-West Road and the second Niger bridge. We hope to commission most of these projects before the end of our tenure in 2023.”