Richard Asoge

In compliance with the section 81 of the 1999 Nigeria Constitution as amended, the President of Federal Republic of Nigeria, Muhammadu Buhari, on October 7, 2021 laid before the National Assembly 2022 budget estimate for the country. Bringing it about three months before the implementation begins creates room for thorough dissecting and as well inviting all critical stakeholders which include ministries, departments and agencies on their take.

The year 2022 drafted budget is N16.39 trillion. Recurrent expenditure without debt service and capital expenditure is respectively to gulp N6.83 trillion and N4.89 trillion. Furthermore, debt service is to take a chunk of N3.9 trillion while statutory transfer is to take the sum of N768.28 billion. Breaking it down to a common man language, of every one hundred naira the country intends to spend in the coming year, about N24 goes on debt services to various organizations, institutions or countries which in the time past, Nigeria had obtained loans. As at August 2021, the records of Debt Management Office showed that Nigeria owed about N35 trillion to internal and external bodies. The country is enmeshed in debt. As if the damage was not enough, we are still asking for more loans like ‘Oliver Twist’. Of course, there is nothing wrong in obtaining a loan to finance a project if it is viable enough in the medium or long term to generate fund to pay the principal with the interest, or such project is capable of improving the living standard of the people. If the latter is the case, tax can be introduced to recoup the investment made on the project. Both debt service and direct statutory transfer are priority for settlement. The more the allocation for these headings in the given sum, the lower the fund available for developmental projects and other government financial responsibilities. It is time for us to think out of the box rather than go for loan or aid at every slight opportunity.

Considering the expected income in the year mainly from oil receipt, VAT and other sources, the total proposed expenditure is far more than that of income which gives room for about N6.26 trillion deficits. In other words, the country is expected to generate N10.21 trillion from various sources of income and borrow the balance. Of this shortfall, N5 trillion is expected to be sourced domestically, N1.2 trillion is to come via drawings from bilateral and multilateral loans while over N90 billion expected from the proceeds of privatization.

Oil receipt which is the largest source of income is benchmarked at $57 per barrel with 1.88 million barrel per day at official exchange rate of $410.15. The parameter used here is good and is more of the conservative side. Past records showed that Nigeria produced over 2 million barrel per day. If all things being equal, the figure will be attained easily and beyond. After a worldwide decline in the spate of COVID-19 spread, global oil market has rebounded and still rebounding. This manifested in the current oil price hovering between $80 and $84 per barrel in the international market. This implies that excess is expected from this sub-heading of the budget.

In the 2022 proposed budget, inflation is anchored within the threshold of 13%. This is a dream taken too far. The present situation of things in Nigeria does not indicate serious crashing in the prices of goods and services from the currently 18% to average of 13% in the coming year. If the statement credited to the Minister of Finance, Budget and National Planning, Dr Zainab Ahmed, while given comprehensive analysis of the said budget that subsidy will be removed from fuel and electricity by the mid next year is enforced, then inflation will go far beyond the estimate of 13%. However, if all necessary supports were given to the local refineries (the existing government refineries and the upcoming private refineries) to operate to a reasonable capacity, removal of subsidy will not have substantial effects on the prices of goods and services but save already declined foreign exchange from going down deeper.

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The beauty of any budget lies in its implementation or performance. Evidence from past years showed that revenue performance was always low to the expectation. This made implementation difficult. For instance, in year 2020, the proposed revenue was N5.37 trillion while the actual revenue attained for the year was N3.42 trillion. This was a variance of 36.3%. You may say COVID-19 caused. To me, that is not a strong defence. There had been similar trends over the years. In 2018 when there was nothing like COVID-19, projected revenue was N7.12 trillion while the actual revenue attained was N3.48 trillion given a variance of 51.1%. Justification of various spending and cutting down on the allowances and benefits of the political office holders will close the gap between the proposed expenditure and revenue.

It is very clear that development of any nation is proportional to the financial and other commitments made to research and development. Commitment and funding of research institutions in various areas of human endeavor give a nation an insight of what the future holds and makes preparation for it. This is the magic wand of the developed economies in the world.

Richard Asoge
Clappahouse Analytics
chards001@gmail.com
O8081492614.