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Seven key themes from 2022 budget, and why they matter



Nigerian govt to increase military funding

New year, new plan, huge optimism but little to cheer for Nigerians.

On December 31, President Muhammadu Buhari signed the 2022 Appropriation Bill into law, promising that this year would be better.

But a critical look at the numbers, showed that it is 2015-2021 again, same themes, hopefully better results this time.

Ripples Nigeria digested the 10 themes around Minister of Finance, Budget, and National Planning, Mrs. Zainab Ahmed’s public presentation and breakdown of the 2022 budget held in Abuja, on Wednesday, and present ten major themes from the document.

1) Lofty oil revenue

Revenue from Oil in the first nine months of 2021 was far below expectations despite trading above budget average price.

Oil benchmark price in the 2021 budget was $40 price of oil, but as at November 2021 it stood at $79.31 per barrel.

Despite the massive leap, the Minister of finance, revealed that Nigeria in the first nine months of 2021 earned N970.33 billion from oil which was 47.4% lower than the budget expectation of N1.84 trillion within the period.

The poor performance was majorly due to oil production challenges as the country failed to meet the 1.86 million per barrels target.

Once again, there is a huge optimism that 2022 oil will bring in more revenue.

The production target is pegged at 1.88mbpd despite only hitting 1.56mbpd in 2021.

It is also expected that oil will average at $62 per barrel in 2022.

2) Unrealistic exchange rate

The signed 2022 budget has an exchange rate of N410/$1 as advised by the Central Bank of Nigeria (CBN).

An interesting scenario given the CBN itself devalued the Naira to N434 per dollar before the close of 2021.

As at Friday, January 7, 2021 Naira closed at the I&E window at N416.25/$1 while the interbank rate was N414.14/$.

3) Huge economy growth expectation

At a press conference, Minister of Information Lia Mohammed reeled out the economic achievement of President Buhari using GDP numbers.

Q1(0.5%) Q2(5.01%), Q3(4.03) impressive right? Yes, but the true picture is that the base year played a major role.

Nigeria in 2020 was in recession and it‘s easy to understand why the numbers look great.

Well, it seems the Nigerian government believed it had done remarkably well and had projected a huge growth in 2022.

The Budget forecast is that Real GDP will hit 4.2% by 2022 end. Interesting!

4) More borrowings

The 2022 budget has a deficit of N6.39 trillion slightly exceeding the 3% ceiling set by the Fiscal Responsibility Act 2007 (FRA) by 0.39%, indicating a 3.39% of GDP.

The minister of finance, budget and national planning, however, alluded to the fact that the country’s recovery from the past two recessions would have been as unsuccessful without the sustained government expenditure funded largely by debt.

The President also notified the public that the expenditure level was necessary to assist with overcoming current security challenges and accelerate post-recession growth.

Read also: Why Buhari signed 2022 budget despite changes by National Assembly – Presidency

The country’s fiscal balance as of November 2021 stood at N7 trillion against the initial budget of N6 trillion.

Reports from the budget reveal that the deficit was expected to be financed by new borrowings, privatization proceeds, and drawdown on loans secured for specific projects. However, analysts were of the opinion that the government should begin employing a certain percentage of equity financing.

5) More money for workers’ salaries, others

The current 2022 budget shows that recurrent expenditure stands at N6.9 trillion, representing the largest item within the expenditure portfolio, with 62% relating to personnel cost at N4.1 trillion.

6) Borrower must pay back

In 2022, debt service expenditure is estimated at N3.61tn, representing about 35.6% of the projected revenue for the year.

Debt servicing expenditure swallowed up the oil revenue of N3.15 trillion, leaving a deficit of 12.7%.

7) 2015-2021 reincarnated

Just as in previous years, the 2022 budget made provision for huge revenue.

Federal government was expecting to make N10.74 trillion, a 36% increase from the N7.886 trillion provision made in the 2021 budget.

However, if history has taught us anything, it is that revenue realization in the budget is usually far-fetched.

In the first 9-months of 2021, N7.44 billion was expected to be earned by the federal government but only N5.50 trillion was realized.

How the N10.7 trillion budget will be realized remains to be seen.

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