2022 Budget: Defence, infrastructure, education lead with N5.15trn allocation

THE Federal Government has prioritized spending on defence & security, infrastructure and education with the sectors getting a combined N5.15 trillion allocation in the 2022 Budget proposal.

From the proposal, defence and security got N2.41 trillion (15%); infrastructure N1.45 trillion (8.9%); education N1.29 trillion (7.9%); health N820 billion (5%) and Social Development and Poverty Eradication N863 billion (5.3%) of the entire allocation

The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed disclosed this at the public presentation and breakdown of the highlights of the 2022 appropriation bill at the ministry’s auditorium in Abuja on Friday.

Recall that President  Muhammadu Buhari had on Thursday presented the 2022 aggregate  expenditure  projected to  be   N16.39  trillion which is  12.5% higher than the 2021 budget  to the National  Assembly.

A breakdown of N16.39 trillion estimated budget shows that recurrent spending for the projected year is N6.83 trillion, repressing 41.7% of total expenditure and 18.5% higher than the 2021 budget.

From the estimate, aggregate capital expenditure of N5.35 trillion is earmarked, representing 32.7%  of total expenditure.

This provision is inclusive of capital components of statutory transfers, Government Owned Enterprises capital and project-tied loans expenditures.

The Minister said a total sum of N10.132 trillion revenue is expected be raked in within the year under review to fund the budget, while N3.60 trillion was earmarked to fund debts.

Parameter & Key Assumptions

Oil price was benchmarked at $57 per barrel in the year in view daily oil production was pegged at 1.88 million barrels per day for 2022. Exchange rate was put at N410.15 per US dollar and GDP growth rate was projected at 4.20%, while inflation was put at 13%.

Although, Nigeria’s total oil production capacity is put at 2.5mbpd, current crude production is about 1.4mbpd and additional 300,000bpd of condensates, totaling about 1.7mbpd.

 Key project allocations

A further breakdown of allocations to critical projects and programmes of the Federal Government showed that allocation for construction and rehabilitation of roads in every geo-political zone was N168 billion; N58 billion for renovation and construction of bridges.

In Education, N108.1 billion was provided for the Universal Basic Education, N1.2 billion for rehabilitation of classrooms/hostels, N392 million as takeoff grants for six federal science and technical colleges; N4.5 billion as scholarship allowances; and N2 billion as payment to 5,000 Federal Teachers Scheme Allowance.

In the Social Investment subsector, the government provided N410 billion for Federal Intervention Programme including home grown school feeding programme, government economic empowerment programme, conditioner cash transfers among others.

For regional programmes, the government allocated N65 billion for Presidential Amnesty Programme for ex-militants in the Niger Delta, N46.2 billion to North-East Development Commission, and N98.7 billion to the Niger Delta Development Commission.

N10 billion was also provided for the East-West road in the Niger Delta with another N15 billion provided for other critical infrastructure, agriculture and health system projects in the region.

In the power sector, N300 billion was provided to bridge tariff revenue shortfall, N1 billion for the expansion of distribution infrastructure, and N114 billion for the completion of renewable energy projects by the Rural Electrification Agency.

Mrs. Ahmed explained that government expenditure projection for 2022 also increased following additional provisions of N100 billion for the Independent National Electoral Commission (INEC) towards preparation for the 2023 general elections; N400 billion for national poverty reduction, N178.1 billion for population and housing census scheduled for 2022, N54 billion for the National Agency for Science and Engineering Infrastructure (NASENI), and N305.99 billion for TETFUND.

Revenue not debt is the biggest challenge

The Minister also moved to allay fears over Nigeria’s rising debt profile, saying generating more revenue rather than debt level was the country’s biggest challenge.

According to her, Nigeria’s budget deficit to GDP (-4.7%) and debt to GDP (21.6%) ratios were the lowest among African countries.

“However, Nigeria’s Debt Service/GDP ratio (73% as at August 2021) is the highest among same African top economies; This is proof that what we have is not a classic debt sustainability problem, but a revenue challenge”, she added.

She stressed that to boost government’s revenue more Nigerians needed to pay tax, saying the tax base was abysmally low with just N41 million people paying tax in Nigeria.

“It is now critical to fix our revenue challenge, because cutting expenditure is not currently a viable option, as our Public Expenditure /GDP ratio is also the lowest among same Africa’s leading economies;

“We must however continue to rationalise our expenditures as we cannot afford waste; In reality, our largest expenditure items are currently personnel cost, debt service and capital expenditure, which between them account for 85% of the 2022 budget; There is very little scope for cut in any of these over the medium term;

“The most viable solution to our fiscal challenge therefore remains to grow our revenues and plug all leakages.

“Our target over the medium term is to grow our Revenue-to-GDP ratio from about 8 – 9 percent currently to 15 percent by 2025. At that level of revenues, the Debt-Service-to-Revenue ratio will cease to be a critical concern”, she stated.

On why government has continued to borrow, the Minister said administration is borrowing for the right reasons and would ensure the funds are properly utilized to achieve the targeted goals.

She said Nigeria has not exceeded the borrowing limit to GDP ratio but admitted that the administration exceeded the limited once due to the advent of COVID-19 pandemic which posed additional financial burden on the government.

She disclosed that government was going to improve its revenue tracking and monitoring system to ensure that revenue generating agencies meet their revenue target for the year.

While warning that sanctions would be imposed on agencies that consistently fail to meet their revenue targets, she disclosed that the leadership of such agencies would face consequences.

Corroborating the Minister’s position, the Director General of Budget, Ben Akabueze said, there was a moral underpinning the budget, hence the need for government to borrow in absence of expected revenue to meet the basic needs of the country.

He insisted that government had no option than to borrow to fund critical projects like security and infrastructure.

On his part, the Chairman of the Federal Inland Revenue Service (FIRS), Mohammad Nami, said the service had collected a total of N4.2 trillion revenue as at 30th September 2021. Out of this sum, he said 950 billion was collected from oil related taxes, while N3.63 trillion was collected from non-oil sources.

On the sum, he disclosed that a total of N1 trillion was collected from 41 million tax payers so far captured in its tax net as against 40 million that paid same amount in 2020.

Expected impact

On the expected impact, Ahmed said the 2022 budget estimate is expected to further accelerate the recovery of our economy; attain more inclusive GDP growth that would lift millions of our citizens out of poverty.

Despite revenue challenge, she assured that government remains committed to the effective implementation of the Strategic Revenue Growth Initiatives, plugging of drainages and  ensuring  more effective independent revenue monitoring.

2021 budget performance

In her review of the 2021 budget performance, she disclosed that at the end of August 2021, Federal Government retain revenue was N3.93 trillion which was 73% of target.

A breakdown showed that Federal Government share of oil revenue was N754.2 billion (56.3% of target), non-oil tax revenue was N1.15 trillion (115.7% of target)

Companies income tax and value added tax brought in N547.54 billion (121%) and N235.77 billion (148%) respectively. Customs generated N338.66 billion (99% of target).

Other revenues amounted to N1.71 trillion, of which Federal Government Independent revenues was N691.36 billion while government owned enterprises’ (GOEs) retained revenues was N873.52 billion.

On the expenditure side, she disclosed that N8.14 trillion (or 84%) has been spent out of the N9.71 trillion prorata budget. “This performance is inclusive of expenditure estimates of the GOEs but exclusive of Project-tied loans”, she added.

Mrs. Ahmed explained that of the expenditure, N2.87 trillion was for debt service, and N2.57 trillion for personnel cost, including pensions.

“As at August 2021, N1.759 trillion had been expended for capital. Of this, N1.723 trillion represents 81% of the provision for MDAs’ capital, and N36.01 billion as GOEs capital expenditure”, the Minister explained further.

Regional and domestic development

Despite the adverse impact COVID-19 pandemic, the Minister said economic activities in Sub Sahara Africa region are expected to pick up from 2021  to 2022 albeit unevenly  and GDP is  projected to expand by 3.4% in 2021 and  4.1% in 2022.

On the local front, she said Nigeria’s economy grew by 5.01% in Q2 2021 signaling rebound, with the non-oil sector contributing significantly to the economic performance in the Q2 with growth of 6.74% in real terms.

She however, informed that several measures are being instituted under the administration’s strategic revenue growth initiatives to improve government revenue and entrench fiscal prudence with emphasis on achieving value for money.

Some of the measures include: improving tax administration framework including tax filing and payment compliance improvements; evaluation of the process and policy effectiveness of fiscal incentives; ensuring that MDAs appropriately account for and remit their internally-generated revenue; plugging fiscal drainers like subsidy; leveraging technology and automation and  setting annual ceilings on tax  expenditures to better manage their impact on already constrained government revenues.

To further enhance independent revenue collection, she said government aims to optimize  the operational efficiencies and revenue generation focus of Government owned Enterprises (GOEs).


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