Dr. Boniface Chizea
As has been the custom with us for many years now we would usually offer some comments on the details of the Appropriation Bill presented by the President to the National Assembly to join in catalyzing conversations on the expectations of the Budget particularly what it portends for the economy and the wellbeing of a generality of our population. The presentation of the 16.3 trillion Naira 2022 Appropriation bill was made to a joint session of the National Assembly on October 7, 2021. The details for Budget 2021 it will be recalled was presented at about this time on October 8, 2020.
With this development we expect that the National Assembly will conclude the approval process ready for the January to December calendar year cycle which is quite business friendly as most economic agents are wired for the calendar year for their planning purposes. We are pleased to note that this practice which has been bequeathed to us by this administration is being sustained as it will be on record as one of the administration’s legacy to impact the culture of budget preparation in the country going forward.
Some other unique features of the Budget 2022 include the recall of the fact that this will be the last full year budget to be presented by this Administration and therefore realistically there is not much time left for impactful developments to be effected. It is also impressive to note the fact that there was this constant referral to the Medium Term Expenditure Framework (MTEF) assumptions as changes were made as we made progress with discussions on the budget. There was this consciousness that the budget was prepared based first and foremost on the assumptions which have been earlier approved as included in the MTEF.
This is a welcome development as opposed to the situation in the past whereby one constantly wondered if the exercise of the approval of the MTEF was simply a hollow ritual. The President also gave assurance as part of his presentation that the Minister of Finance when she arrives to present the Budget breakdown would also present the Finance Bill; which is targeted at fiscal equity as tax laws are progressively reformed making them consistent with best global practice highlighting in the process the tax incentives that would be made available in the fiscal year under consideration. This we must recall is also an innovation introduced by this administration.
It is also on record that the recently enacted Petroleum Industry Act which has been under preparation for over 20 years made it possible to increase the budget size to the current amount of 16.39 tn. representing an increase of 19.7% compared to budget of 13.6tn. for 2021. Ministries, Departments and Agencies of government were also mandated through the details of this presentation to mainstream gender issues which for most female members of the National Assembly was a good deal as this feature was highlighted as one of the high points of the budget as they were interviewed after the presentation. On a lighter note members were caught on camera dozing off despite the fact that the presentation was abridged due to COVID concerns! They were called out as their pictures were splashed in the print media but the only saving grace was that the mask made it difficult to discern individual identity.
We identify with the objectives of the budget particularly the one that aims for the reduction on the level of insecurity in the land. The level of insecurity in the land is alarming to say the least and is stating the obvious to observe that Nigeria will remain an unattractive destination for as long as the level of kidnappings, rape, arson and general loss of human life remain unabated. It is therefore reassuring to note that the progress in this respect has improved recently following the delivery of Supper Tucano jets from America. The target of providing critical infrastructure is well thought out as it is a sure driver for fast forwarding economic growth and development. The other objectives such as diversification of the economy, reduction in the level of poverty and efforts to reduce regional economic and social disparity are veritable work in progress.
The budget includes a target to sell petrol at a price per barrel of 57 dollars up from 40 dollars used for the 2021 appropriation with a daily production rate of 1.88 million barrels per day. The current price of oil is above 80 dollars a barrel in the market. Therefore this assumption is very conservative which in itself is good as it is far better to manage surplus. But the deficit in the budget could be considerable reduced by for instance increasing the price of oil assumed for the preparation of the budget to say 60 dollars per barrel from the current 57 dollars per barrel assumed. The assumption on daily production is aligned with what the trend in daily production has been assuming that there will be no major disruptions due to unrest in the region.
An inflation rate of 13% as well as an exchange rate of 410.15 have been assumed. What one does not understand is why the detail on the rate of exchange is as exact as indicated! But the assumption on the rate of inflation might be difficult to realize against the backdrop of a free falling rate of exchange. It will be good if we can manage a growth rate of over 4% since at that level we might begin to witness some level of development if the population growth remains as projected at under 3%.
The budget has an aggregate revenue of 10.13 tn. With 3.16tn. or 34.9% from oil sources and therefore the balance of 6.97 tn. representing 65.1% from non-oil sources. It has a deficit of 6.25 tn. Which is the equivalent of 3.39% of GDP. Which will be funded by fresh borrowing to the tune of 5tn. Which will be sourced equally from both domestic and foreign sources. This deficit is in excess of 3% of the GDP which is the threshold indicated by the Fiscal Responsibility Act of 2007. But as the President explained we need to spend to resuscitate the economy following the slowdown imposed by the pandemic provided the expenditure is in areas such as essential infrastructure which has the potential to give a shot in the arm to the economy. Capital spend of 5.35tn the equivalent of 32.7% of the total expenditure has been earmarked.
For us to catalyze faster growth there is need for us to achieve an improvement on the proportion of the budget spent under this budget head. Therefore the efforts to rationalize recurrent expenditure particularly personnel related costs remain veritable work in progress. In this connection we commend the progress made so far at onboard many more personnel related information on the Integrated Personnel Payroll Information system which saw the onboarding as at last count of 711 number such accounts rising from the previous 459.
Petroleum subsidy amounted to 714 billion Naira as at the end of August, 2021. The nonfunctional refineries spent 8.33bn during the period up to August, 2021. It is estimated that the total expenditure on the refineries will be up to 66.6 bn. for the year. These expenditures are not sustainable against the backdrop of inactivity but it is interesting to note that there has been no budget provision in budget 2022 for such budget heads. Therefore the days ahead portend to be very interesting. The President has promised during his presentation to safeguard revenues from oil and gas; read plug leakages. That is a battle which Nigeria has to win if we are desirous of rapid development as it is often proclaimed that corruption fights back if you gear up to take it on.
The National Assembly has pledged its commitment to approve the budget ready for implementation by the first day of the calendar year 2022. We have no doubt that it is able to deliver on this promise. What would then be left is for the fiscal authorities to muster the necessary political will for the budget to be faithfully implemented as approved for therein lies the key to unlock the door to our quick exit from the ravages of the pandemic for the greater benefit of a generality of our population and to keep fidelity to the caption given to budget 2022 as; ‘Budget of Economic Growth and Sustainability’.
Dr. Boniface Chizea, economic expert and analyst is the chief executive officer of BIC Consulting Limited. He wrote from Lagos