Nigeria’s budget deficit is projected to rise to N5.62 trillion in 2022, up from N5.60 trillion in 2021, the Minister of Finance, Budget and National Planning, Zainab Ahmed, has said.
Mrs Ahmed made this known while briefing State House Correspondents after the federal executive council meeting in Abuja on Wednesday.
The minister explained that the budget deficit represents 3.05 per cent of the estimated GDP, which is slightly above the 3 per cent threshold that is spelt out in the Fiscal Responsibility Act.
“The FRA empowers Mr. President to exceed the threshold if in his opinion, the nation faces national security threats. And it is our opinion, and FEC agreed that we can exceed it,” she said.
In recent years, Nigeria’s deficit financing has been a source of worry for Nigerian policy experts and international ratings agencies.
Mr Ahmed said the deficit is going to be financed by new foreign and domestic borrowing in the sum of N4.89 trillion, privatization proceeds of N90.73 billion, and drawdowns from existing project titles of N635 billion.
Medium Term Framework
The minister explained further that the ministry presented a memo for the approval of the 2022 to 2024 medium term expenditure framework and the fiscal strategy paper as required by the Fiscal Responsibility Act.
The MTEF/FSP describes the federal government’s socio economic and developmental objectives and priorities for the reporting period of 2022 to 2024, the fiscal strategies that would be put in place, and policies to achieve the priorities.
The report highlighted the key drivers of government’s revenue and the spending plans, adding that the goal is to improve the nation’s macro economic situation and reposition the economy on the path of inclusive, diversified, and sustainable growth.
“The MTEF/FSP consists of medium term macro economic projections, fiscal targets and estimates of revenue and expenditure including government’s financial obligations,” she said.
“We provided to Council, the macro economic background base, which we set the estimates that were presented to council.”
Speaking about the economy, the minister noted that the Nigerian economy recovered from a negative growth of -1.8% in 2020, to 2.5% in 2021, and then to 4.2% in 2022. She added that inflation has moderated from two-months high, and now moderated and coming down to 17.93%.
She added, however, that the foreign reserves declined from the previous month.
“The key macro assumptions that were presented on Council approved is that there’ll be a crude oil benchmark price of $57 per barrel for 2022, a 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% in 2022, and a nominal GDP of 149.369 trillion,’ she said.
“What is interesting is that the non oil GDP continues to grow at 169.69 trillion compared to oil GDP of 14.68 trillion included in the nominal GDP. Nominal consumption is 130,49.36 billion.
“We have also presented to the federal government the projected revenues for the 2022 to 2024. Specifically for 2022, the revenue that we expect is N6.54 trillion and N2.62 trillion to accrue to the Federation account and VAT respectively. And then there will be a net oil and gas revenue available for the Federation Account FAAC for distribution will be N6.151 trillion in 2022. This revenue is projected to increase in 2023 to N9.15 trillion.”
The minister said the total expenditure that has been projected and approved by council is an aggregate expenditure of N13.98 trillion.
“This includes N1.1 trillion Naira of government owned enterprises expenditure as well as grants and donor funded projects in the sum of N62.24 billion,” she said.
“This means that this budget is just 3% higher than the 2021 budget in terms of the size of expenditure.”
Speaking on the projected debt to revenue ratio in the report, the minister put it at 43%, adding that Nigerians all have concerns about the figures.
“The actual debt to revenue ratio in 2019 was 58%. So this is an improvement over 2019,” she said.
“In 2020, the ratio was up to 85%. So 2022 is a significant improvement on 2020.”
She explained further that the nation is optimistic about growth following the impact of the COVID-19 pandemic on the global economy.
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