By John Ikani
The Federal Government has disclosed its plan to borrow about N5.62 trillion to finance an expected budget deficit in the 2022 fiscal year.
According to the government, a proposal has already been submitted to that effect, disclosing that it will cut down capital expenditure in 2022 by N259.315 billion.
Minister for Finance, Budget and National Planning, Zainab Ahmad, while presenting the 2022-2024 Medium Term Expenditure Framework (MTEF), and Fiscal Strategy Paper(FSP), before the House of Representatives Committee on Finance on Monday, explained that the reduction in the capital allocation became necessary because of economic volatility created by unstable global oil market, as well as effects of the covid-19 pandemic.
“On capital expenditure, the sum of N1,759,804,022,579 – as opposed to the N2,019,119,204,546 – will be available to Ministries Departments and Agencies (MDAs) of government in 2022. On the exchange rate, the naira is being pegged at N410 to one dollar, just as that minister told legislators that the projection is likely to come down in favour of the naira in 2023,” she said.
“The budget deficit that is projected for 2022 is N5.62 trillion, up from N5.60 trillion in 2021. The deficit is going to be financed by new foreign borrowing and domestic borrowing, both domestic and foreign in the sum of N4.89 trillion, then privatisation proceeds of N90.73 billion and drawdowns from existing project titles of N635 billion.
“This amount represents 3.05 percent of the estimated GDP, which is slightly above the 3 percent threshold that is recommended in the Fiscal Responsibility Act,” she told the James Faleke-led panel.
On revenue projections, the minister in the document stated that based on the decision of the Federal Executive Council (FEC) the sum of N6.54 trillion is expected to be realised for the 2022 fiscal year, adding that it was projected to increase in 2023 to N9.15 trillion, adding that “the revenue that we expect is N6.54 trillion N2.62 trillion to accrue to the Federation Account and VAT respectively”.
She further disclosed during the briefing that net oil and gas revenue which will be available for the Federation Account for distribution will be N6.151 trillion in 2022, as key macro-economic assumptions contained in the MTEF/FSP include a crude oil benchmark price of $57 per barrel for 2022, crude oil production of 1.88 million barrels per day, and a dollar exchange rate of N410.15 to one US dollar, an inflation rate of 13 percent in 2022, and a nominal GDP of 149.369 trillion.