2022 Budget: Implementation doubts amid high debts

The recurring high public debts and their probable implications for the country have understandably raised a lot of doubts and pessimism among various stakeholders, including economic experts, about the 2022 Federal Government Budget proposal recently presented to the joint session of the National Assembly by President Muhammadu Buhari.

The doubts cannot be otherwise considering the unrepentant penchant of the Buhari administration for a borrowing spree, which has been further plunging the country into this frenzied journey to Golgotha, despite wide advice against that attitude by well-meaning stakeholders across the country.

The excuse that the previous borrowing helped to salvage the economy over the tide of the two recessions in the past years does not appear tenable. In both cases, documentary evidence indicates that the economy exited recession simply due to positive developments in the global oil market and the consequent increase in the price of crude oil. Simple!

The budget which is tagged the “Budget of Economic Growth and Sustainability” has a spending plan of N16.39 trillion, higher than the N13.6 trillion projected for 2021 by 25%. The GDP growth rate projection of 4.2% is considered overly optimistic compared to the revised projection of 2.5% for 2021 which was hardly achieved, though slightly lower than the unrealistic 4.42% growth rate projected for 2020. These projections, however, appear to be in line with earlier postulations by Zainab Ahmed, the Minister of Finance that GDP growth projections would be 4.2% in 2022, 2.3% in 2023 and 3.3% in 2024.

The GDP growth figures over the years have largely appeared cosmetic given that they are mostly not attained. A major deviation from the 2021 budget projection is the benchmark price for crude oil put at $57 per barrel compared to the $28 projection of 2021 due to the setbacks of the COVID-19 pandemic. This is understandable since the price for crude oil currently hovers above $80 per barrel which may hopefully still remain so in 2022. Other macroeconomic assumptions underlying the budget, namely inflation rate at 13 %, the exchange rate at N410 per dollar and daily oil production at 1.88 million barrels per day also appear understandable. All these assumptions have not really shown sufficient consistency in ensuring an efficient implementation of the budget as most of the budgets since 2015 have hardly performed as projected on all counts.

The most worrisome aspect of the 2022 budget proposal is the projection of a deficit of N6.26 trillion, slightly higher than the provision of 3% of GDP in the Fiscal Responsibility Act of 2007. The proposal’s indication that this is to be financed by new borrowings of about N5.01 trillion, among others is indeed worrisome. This additional borrowing would take the public debt burden to about N40 trillion going by the figures from the Debt Management Office, (DMO) which put the total debt portfolio at about N35 trillion to date. Adding another N5.01 trillion would hasten the collapse of the economy in a situation where the Buhari administration has remained adamant in not having the political will to drastically reduce the cost of governance. This is against the backdrop of a debt service payment to revenue ratio of over 80% which has put the country’s current and future economic circumstances in jeopardy.

The revenue projection of N10.13 trillion appears sizeable if the cost of governance can be reduced particularly when the government itself is crying that its problem is that of insufficient revenue. The fragility of the major sources of this revenue particularly the oil revenue of N3.16 trillion and the non-oil taxes of N2.13 trillion is quite obvious. Even, going by experiences of previous years, the Federal Government Independent revenue of N1.82 trillion is not reliable.

This concern for unwarranted and frivolous borrowing is widespread across the country. It seems that government does not have any new ideas out of the economic conundrum it has put itself into. Its management of fiscal sustainability has been less than efficient. Indeed borrowing has been the buzzword of the Buhari administration with the Central Bank being the usual resort for overdrafts by ways and means advances which happens so frequently and currently to the tune of about N15 trillion. Often, these requests from the government are met by more printing of currency, as alleged by the Edo State Governor, Godwin Obaseki.

It is instructive that the President of the African Development Bank, Akinwumi Adesina, at the recent Mid-term Ministerial Performance Review Retreat held in Abuja, has reiterated his earlier caution on unnecessary borrowing. It is also pleasantly surprised that even Ahmed Lawan, the president of the Senate, who has been presiding over the approvals of most of the unwarranted borrowings in recent times, has cautioned that borrowing should be reduced and that government should explore other sources of funding the budget. Overall, there appears to be no alternative to drastically reducing the cost of governance across the three arms of government. What value does the country derive for the President to be buying new official vehicles for himself when government bureaucracy is grinding to a halt in many sectors?