*justifies borrowing to fund Capital projects
By Ignatius Okorocha, Gift Chapi Odekina
President Muhammadu Buhari on Thursday presented a N16.39 trillion budget proposal for the 2022 fiscal year to the National Assembly.
This is as he justified why the federal government must continue to borrow to fund the 2022 budget.
The presentation of the Appropriations Bill 2022, was made at a joint session attended by members of both chambers of the National Assembly.
President Buhari arrived the House of Representatives Chamber where the joint session held at about 12:04pm and ended at 1:05pm.
The president made the claim on Thursday when he presented a budget of 16.39trillion naira for the year 2022 to a joint session of the National Assembly in Abuja.
The budget which was tagged as budget of Economic Growth and sustainability had defence and security taking the largest share.
According to president Buhari, the federal government expects the total fiscal operations to result in a deficit of 6.26 trillion Naira which represents 3.39 percent of estimated GDP, which according to him is slightly above the 3 percent threshold set by the Fiscal Responsibility Act 2007.
“Countries around the world have to of necessity over-shoot their fiscal thresholds for the economies to survive and thrive
“We need to exceed this threshold considering our collective desire to continue tackling the existential security challenges facing our country.
“We plan to finance the deficit mainly by new borrowings totalling 5.01 trillion Naira, 90.73 billion Naira from Privatization Proceeds and 1.16 trillion Naira drawdowns on loans secured for specific development projects.
“Some have expressed concern over our resort to borrowing to finance our fiscal gaps. They are right to be concerned. However, we believe that the debt level of the Federal Government is still within sustainable limits. Borrowings are to specific strategic projects and can be verified publicly.
“As you are aware, we have witnessed two economic recessions within the period of this Administration. In both cases, we had to spend our way out of recession, which necessitated a resort to growing the public debt. It is unlikely that our recovery from each of the two recessions would have grown as fast without the sustained government expenditure funded by debt.
“Our target over the medium term is to grow our Revenue-to-GDP ratio from about 8 percent currently to 15 percent by 2025. At that level of revenues, the Debt-Service-to-Revenue ratio will cease to be worrying. Put simply, we do not have a debt sustainability problem, but a revenue challenge which we are determined to tackle to ensure our debts remain sustainable.
” Very importantly, we have endeavoured to use the loans to finance critical development projects and programmes aimed at improving our economic environment and ensuring effective delivery of public services to our people.
“We focused on; the completion of major road and rail projects; the effective implementation of Power sector projects; the provision of potable water; construction of irrigation infrastructure and dams across the country; and critical health projects such as the strengthening of national emergency medical services and ambulance system, procurement of vaccines, polio eradication and upgrading Primary Health Care Centres across the six geopolitical zones.
Speaking further he said that defence and internal security will continue to be top priority, adding that the government remains firmly committed to the security of life, property and investment nationwide.
“We will continue to ensure that our gallant men and women in the armed forces, police and paramilitary units are properly equipped, remunerated and well-motivated.
“The 2022 budget is also the first in our history, where MDAs were clearly advised on gender responsive budgeting. These are part of critical steps in our efforts to distribute resources fairly and reach vulnerable groups of our society.
“Distinguished Members of the National Assembly, the 2022 to 2024 Medium Term Expenditure Framework and Fiscal Strategy Paper sets out the parameters for the 2022 Budget as follows:
“Conservative oil price benchmark of 57 US Dollars per barrel;
“Daily oil production estimate of 1.88 million barrels (inclusive of Condensates of 300,000 to 400,000 barrels per day);
” Exchange rate of four 410.15 per US Dollar; and
“Projected GDP growth rate of 4.2 percent and 13 percent inflation rate.
Speaking in the parameters, he said based on these fiscal assumptions and parameters, total federally-collectible revenue is estimated at 17.70 trillion Naira in 2022.
“Total federally distributable revenue is estimated at 12.72 trillion Naira in 2022 while total revenue available to fund the 2022 Federal Budget is estimated at 10.13 trillion Naira. This includes Grants and Aid of 63.38 billion Naira, as well as the revenues of 63 Government-Owned Enterprises.
“Oil revenue is projected at 3.16 trillion, Non-oil taxes are estimated at 2.13 trillion Naira and FGN Independent revenues are projected to be 1.82 trillion Naira.
On the planned 2022 expenditure, proposed expenditure comprises: Statutory Transfers of 768.28 billion Naira; Non-debt Recurrent Costs of 6.83 trillion; Personnel Costs of 4.11 trillion Naira; Pensions, Gratuities and Retirees’ Benefits 577.0 billion Naira; Overheads of 792.39 billion Naira; Capital Expenditure of 5.35 trillion Naira, including the capital component of Statutory Transfers; Debt Service of 3.61 trillion Naira; and sinking Fund of 292.71 billion Naira to retire certain maturing bonds.
Innovations in Infrastructure Financing, he said In 2022, Government will further strengthen the frameworks for concessions and public private partnerships (PPPs). Capital projects that are good candidates for PPP by their nature will be developed for private sector participation.
“We will also explore available opportunities in the existing ecosystem of green finance including the implementation of our Sovereign Green Bond Programme and leveraging debt-for-climate swap mechanisms.
On enhancing revenue mobilisation President Buhari said that its strategies to improve revenue mobilisation will be sustained in 2022 with the goal of achieving the following objectives:
Enhancing tax and excise revenues through policy reforms and tax administration measures; review the policy effectiveness of tax waivers and concessions; boost customs revenue through the e-Customs and Single Window initiatives; and safeguard revenues from the oil and gas sector.
” In line with our plan to accompany annual budgets with Finance Bills, partly to support the realization of fiscal projections, current tax and fiscal laws are being reviewed to produce a draft Finance Bill 2022.
” It is our intention that once ongoing consultations are completed, the Finance Bill would be submitted to the National Assembly to be considered alongside the 2022 Appropriation Bill,” He said.