Due to declining earnings, the Federal Government intends to borrow around N4.89 trillion from internal and external sources to pay the deficit in its proposed N13.98 trillion budget for 2022.
Zainab Ahmed, Minister of Finance, Budget, and National Planning made the statement Monday at an interactive session organized by the House of Representatives Committee on Finance on the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper.
Despite the Central Bank of Nigeria’s recent adjustment, Ahmed noted that perception of the naira as overvalued has compounded Nigeria’s risk aversion in the global capital market, which she said would put further pressure on the foreign exchange market, emphasizing that foreign portfolio investors have yet to return to the Nigerian market.
While the government intends to borrow to cover the N5.62 trillion deficits in 2022, the minister claimed that capital expenditure will be reduced by N259.315 billion due to economic instability caused by an uncertain global oil market as well consequences of the COVID-19 epidemic.
According to Ahmed, ministries, departments, and agencies will get N1.76tn in capital spending next year, compared to N2.02tn in 2021.
She also stated that the currency rate is set at N410.15 per dollar and that the oil benchmark is set at $57 per barrel.
Other significant macroeconomic assumptions in the MTEF/FSP include a crude oil benchmark crude oil production of 1.88 million barrels per day, a 13% inflation rate, and a nominal GDP of 149.369 trillion dollars.
The minister highlighted that, surprisingly, non-oil GDP continues to increase at 169.69 trillion, compared to 14.68 trillion in oil GDP, which is included in nominal GDP. The nominal consumption is 130,49.36 billion.
The budget deficit and the financing items for the expenditure projected for 2022 is N5.62tn, up from N5.60tn in 2021. The deficit is going to be financed by new foreign and domestic borrowings, both domestic and foreign, in the sum of N4.89tn, then privatisation proceeds of N90.73bn and drawdowns from project titles of N635bn.
This amount represents 3.05 per cent of the estimated GDP, which is slightly above the 3 per cent threshold that is spent recommended in the Fiscal Responsibility Act. The revenue that we expect is N6.54tn, N2.62tn to accrue to the Federation Account and VAT, respectively, She said
In addition, she stated that in 2022 N6.151tn in earnings from oil and gas will be available from the Federation Account.