Finance minister says looking at internal, external sources
Nigeria’s proposed budget for fiscal 2022 has an inbuilt deficit of N5.62 trillion, for which Zainab Ahmed, the finance minister, says N4.89 trillion of that would be financed through borrowing from internal and external sources, it has emerged.
The total spending plan for fiscal 2022 has been estimated at N13.98 trillion and the long years of deficit budgeting has been the outcome of declining revenues.
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Ahmed at a recent interactive session organised by the House of Representatives Committee on Finance on the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP), in Abuja, noted that the idea of the overvaluation of the Nigerian Naira, despite the recent adjustments by the CBN have compounded Nigeria’s risk aversion in the global capital market, which she said would further exact pressure on the foreign exchange market.
She stressed that as a result of the overvaluation perception, as well as the pressure in the foreign exchange market, foreign portfolio investors are yet to return to the Nigerian market.
The minister said while the federal government plans to borrow to fund the deficits, its capital expenditure will be reduced by N259.32 billion as the decline would be seen as necessary due to economic volatility occasioned by unstable global oil markets, as well as the effects of the COVID-19 pandemic.
She further revealed that for capital expenditure, it is planned that ministries, departments and agencies (MDAs) would get N1.76 trillion next year as opposed to the N2.02 trillion spent in 2021.
Meanwhile, other key macro-economic assumptions in the MTEF/FSP are that the exchange rate will be pegged at N410.15 to a dollar, with the oil benchmark at $57 per barrel; crude oil production benchmark is pegged at 1.88 million barrels daily; inflation rate at 13 percent; and a nominal GDP at N149.369 trillion.
Ahmed said that other assumptions include that non-oil GDP will rise to N169.69 trillion as against the N14.68 trillion for the oil GDP, as included in the nominal GDP, with nominal consumption staying at N130.49 billion.
“The budget deficit and the financing items for the expenditure projected for 2022 is N5.62 trillion, up from N5.60 trillion in 2021. The deficit is going to be financed by new foreign and domestic borrowings, both domestic and foreign, in the sum of N4.89 trillion, then privatisation proceeds of N90.73 billion and drawdowns from project titles of N635 billion. This amount represents 3.05 percent of the estimated GDP, which is slightly above the 3 per cent threshold that is spent and as recommended in the Fiscal Responsibility Act. The revenue that we expect is N6.54 trillion, N2.62 trillion to accrue to the Federation Account and VAT, respectively,” the minister said, stressing that the proposed net oil and gas revenue would be N6.15 trillion and would be available for distribution from the federation account in the year 2022.