The leadership of Nigeria’s bicameral Legislature does not appear to be impressed with the 2022 budget proposal President Muhammadu Buhari laid before them for legislative action on Thursday.
Senate President, Ahmad Lawan, and Speaker of the House of Representatives, Femi Gbajabiamila, are exploring how to make an attractive electoral document for All Progressives Congress (APC) ahead of the titanic 2023 polls.
Analysts are already saying that the total fiscal operations of President Buhari’s 2022 budget will result in a deficit of N6.26 trillion. In spite of the huge debt the Buhari administration has piled up, it is still planning to further borrow N5 trillion to finance the deficit.
Interestingly, the president acknowledged the concern of the electorate over the heavy borrowings by his administration, claiming that there is no cause for alarm.
While delivering his budget proposal to the National Assembly, President Buhari pointed out that an additional N90.73 billion from Privatisation Proceeds and N1.16 trillion drawdowns on loans secured for specific development projects will fill the fiscal deficits.
“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”, Buhari said.
Continuing, he said his administration has 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 the people.
The areas of focus he listed are: 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.
While the senate president is saying that for the deficit in the country’s budget to be drastically reduced, a concerted effort must be made by the Executive and Legislature to explore alternative sources of funding to reduce borrowing, Gbajabiamila is considering a legislative action that will be popular with the electorate, and enhance the electoral value of APC in 2023.
To this end, Gbajabiamila is bracing to mobilise House members to insist on their important resolutions when working on the 2022 budget. For the speaker, the House has, in the last one year, passed several important resolutions relating to healthcare, primary education and national security that require actual funding.
On his part, Lawan wants funding sources of the budget to come by way of Public-Private Partnerships on infrastructural projects, as well as compulsory remittances of generated revenues by Ministries, Departments and Agencies of government.
He is therefore, insisting that the policy of zero allocation for MDAs that fail to remit revenues for the 2022 Appropriation must be sustained for positive results to be achieved, adding, ‘’generating and collecting revenues have remained major challenges in our quest for development.
“The recent efforts by the National Assembly as well as the Executive to challenge the revenue generating agencies is a step in the right direction. Equally important is the recent position taken by the Legislature and the Executive to insist on zero allocation for Ministries, Departments and Agencies (MDAs) that fail to remit/upload their revenues for the 2022 Appropriation.
“This saw an increase in the contribution of the MDAs by over N400 Billion. It is my view that MDAs can contribute to the Federation account much more than that. This policy should be expanded and deepen to cover more MDAs.”
‘’The need to enhance revenue generation and collection cannot be overemphasized. The level of budget deficit is high, and both the Legislature and the Executive should work to reduce this deficit through the availability of more revenues.
“I must commend the Senate and House Committees on Finance and the Ministry of Finance, Budget and National Planning for working together to improve the level of revenues for the government. We understand that due to paucity of revenue, the Federal Government has to resort to raising funds from foreign and domestic sources to provide infrastructure across the country. That is why, the National Assembly approved the requests for borrowing.
“The commitment of the Federal Government in providing infrastructure across the country means that the funds must be raised one way or the other. Government should also explore other sources of funding its projects in order to reduce borrowing.”
In a bid to ensure a hitch-free electioneering for 2023, federal legislators will be scaling-up funding of security agencies in the 2022 budget because as Lawan rightly said, ‘’the security of lives and property of Nigerians is still a challenge. The National Assembly is ever willing to work with the Executive arm of Government to continue to work for better security for our citizens.
“The recent change in the leadership of the armed forces is a clear testimony of the collaboration between the Legislature and the Executive to overhaul the security architecture for better outcomes in our fight against the myriads of security challenges.
“The recent passage of the supplementary budget 2021 that appropriated over eight hundred billion naira to our security agencies is a commendable step in the right direction. Federal Government should therefore continue to provide more resources to our security agencies to sustain the gains made so far.”
Gbajabiamila has said that where the resolutions of the House under his watch, are not included in the Appropriation Bill, the Green Chamber will work with the Red Chamber and with the Executive to see to it that the final version of this Appropriation Bill includes necessary allocations to implement these resolutions and give full effect to the best wishes of the House.
He has promised that the National Assembly will “ensure exhaustive consideration” of the 2022 budget that President Buhari presented to the Legislature, stressing that they are committed to the timely passage of the Appropriation Bill as it did in the last two years, noted that the next two to three months will be for the strictest scrutiny of the budget estimates and emphasized that lawmakers would hold government agencies accountable for the previously appropriated funds.
Gbajabiamila recalled that upon inauguration, the 9th Assembly committed itself to pursue long-awaited and critical reforms to the appropriations process for better delivery on the promise of national development, noting, “over the last two budget cycles, by the joint effort of the executive and legislature, we have made significant progress in this regard and achieved reforms that will stand the test of time and count in our favour.”
He has also assured, “we will demand a thorough accounting for the funds previously appropriated, disbursed and expended. And we will take steps to hold to account those who fail to provide the records we need to make informed decisions on the Appropriation Bill. This is the responsibility of the National Assembly, and we will live up to it.”
According to him, the reforms introduced by the 9th Assembly in the appropriations process, “including establishing a January to December budget cycle, improving oversight procedures, and ensuring greater fidelity to the letter and spirit of our appropriation laws, have led to measurable improvements in public infrastructure, access to education and housing, healthcare and transportation, amongst others. These improvements, which have had a positive impact on the lives of millions of Nigerians across the country, inspire us to do more.”
He said innovations in technology, the changing nature of global trade, the challenges of cross-border insecurity and the increasing interdependence of nations have continued to “present challenges we must overcome and opportunities we must embrace. We have a continued obligation to ensure that in considering this Appropriation Bill, we make all deliberate efforts to ensure that we continue to make critical investments in education and healthcare, public infrastructure and national security.
“Through these investments, we can hope to build an economy that provides enough well-paying jobs for our young population so that we can, in our lifetime, end endemic poverty in our country and eradicate the social ills that derive therefrom.”
Full text of President Buhari’s 2022 Budget speech
1. It is my great pleasure to be here once again to present the 2022 Federal Budget Proposals to this distinguished Joint Session of the National Assembly.
2. Distinguished and Honourable leaders, and members of the National Assembly, let me start by commending you for the expeditious consideration and passage of the Supplementary Appropriation Bill 2021. This further underscores your commitment to our collective efforts to contain the COVID-19 Pandemic and address the various security challenges facing our country.
3. I will also take this opportunity to thank you for the quick consideration and approval of the 2022-2024 Medium-term Expenditure Framework and Fiscal Strategy Paper. Our hope is that National Assembly will continue to partner with the Executive by ensuring that deliberations on the 2022 Budget are completed before the end of this year so that the Appropriation Act can come into effect by the first of January 2022.
4. The 2022 Budget will be the last full year budget to be implemented by this administration. We designed it to build on the achievements of previous budgets and to deliver on our goals and aspirations as will be reflected in our soon-to-be launched National Development Plan of 2021 to 2025.
5. Distinguished Senators and Honourable Members, in normal times, I make use of this opportunity to provide an overview of global and domestic developments in the current year, a summary of our achievements, and our plans for the next fiscal year.
6. However, these are exceptional times. The grim realities of COVID-19 and its lethal variants are still upon us. From President to Pauper, the virus does not discriminate.
7. This is why our country still maintains its COVID -19 guidelines and protocols in place to protect its citizens and stop the spread of this disease.
8. Over the past few days, we have consulted with the Presidential Steering Committee on COVID-19 and the leadership of the National Assembly on how best to present the 2022 budget proposal keeping in mind the deep-rooted traditions in place and the guidelines for safe mass gatherings.
9. We ultimately decided that the most responsible and respectful approach was to hold a shorter than usual gathering while allowing the Honourable Minister of Finance, Budget and National Planning to provide fuller details of our proposals in a smaller event.
10 I am sure many of you will be relieved as my last budget speech in October 2020 lasted over fifty minutes.
11.Still, over the next few minutes, I will provide key highlights of our 2021 performance as well as our proposals for 2022.
Performance of 2021 Budget
12. The 2021 ‘Budget of Economic Recovery and Resilience’ is based on a benchmark oil price of 40 US Dollars per barrel, oil production of 1.6m b/d, and exchange rate of 379 Naira to US Dollar. Furthermore, a Supplementary budget of 982.73 billion Naira was recently enacted to address exigent issues in the Security and Health sectors.
13. Based on the 2021 Fiscal Framework, total revenue of 8.12 trillion Naira was projected to fund aggregate federal expenditure of 14.57 trillion Naira (inclusive of the supplementary budget). The projected fiscal deficit of 6.45 trillion Naira, or 4.52 percent of GDP, is expected to be financed mainly by domestic and external borrowings.
14. By July 2021, Nigeria’s daily oil production averaged one 1.70million barrels (inclusive of condensates) and the market price of Bonny Light crude averaged 68.53 US Dollars per barrel.
15. Accordingly, actual revenues were 34 percent below target as of July 2021, mainly due to the underperformance of oil and gas revenue sources. Federal Government’s retained revenues (excluding Government Owned Enterprises) amounted to 2.61 trillion Naira against the proportionate target of 3.95 trillion Naira for the period.
16. The Federal Government’s share of Oil revenue totalled 570.23 billion Naira as of July 2021, which was 51 percent below target, while non-oil tax revenues totalled 964.13 billion Naira. The poor performance of oil revenue relative to the budget was largely due to the shortfall in production as well as significant cost recovery by NNPC to cover the shortfall between its cost of importing petrol and the pump price.
17. The National Assembly will recall that in March 2020 the Petroleum Products Pricing Regulatory Agency announced that the price of petrol would henceforth be determined by market forces.
18. However, as the combination of rising crude oil prices and exchange rate combined to push the price above the hitherto regulated price of 145 Naira per litre, opposition against the policy of price deregulation hardened on the part of Labour Unions in particular.
19. Government had to suspend further upward price adjustments while engaging Labour on the subject. This petrol subsidy significantly eroded revenues that should have been available to fund the budget.
20. On a positive note, we surpassed the non-oil taxes target by eleven (11) percent in aggregate. The sustained improvement in non-oil taxes indicates that some of our revenue reforms are yielding positive results. We expect further improvement in revenue collections later in the year as more corporate entities file their tax returns and we accelerate the implementation of our revenue reforms.
Improving Revenue Generation and Administration
21. We have stepped up implementation of the strengthened framework for performance management of government owned enterprises (GOEs), with a view to improve their operational efficiencies, revenue generation and accountability. The 50% cost-to-income ratio imposed on the GOEs in the Finance Act 2020 has contributed significantly to rationalizing wasteful expenditures by several GOEs and enhanced the level of operating surpluses to be transferred to the Consolidated Revenue Fund (CRF). I solicit the cooperation of the National Assembly in enforcing the cost-to-income ratio and other prudential guidelines during your consideration of the budget proposals of the GOEs, which I am also laying before you today.
22. On the expenditure side, as at end of July 2021, a total of six point seven-nine (6.79) trillion Naira had been spent as against the pro-rated expenditure of seven point nine-one (7.91) trillion Naira. Accordingly, a deficit of four point one-seven (4.17) trillion Naira was recorded as at end of July 2021. The deficit was financed through domestic borrowing.
23. Despite our revenue challenges, we have consistently met our debt service commitments. We are also up to date on the payment of staff salaries, statutory transfers, and overhead costs. As at (4th of October 2021, a total of 1.732 trillion Naira had been released for capital expenditure.
24. I am pleased to inform you that we expect to fund MDAs’ capital budget fully by the end of the fiscal year 2021.
25. Capital releases thus far have been prioritised in favour of critical ongoing infrastructural projects in the power, roads, rail, agriculture, health and education sectors.
26. We have made progress on the railway projects connecting different parts of the country. I am glad to report that the Lagos-Ibadan Line is now completed and operational. The Abuja-Kaduna Line is running efficiently. The Itakpe-Ajaokuta rail Line was finally completed and commissioned over thirty (30) years after its initiation.
27. Arrangements are underway to complete the Ibadan-Kano Line. Also, work will soon commence on the Port Harcourt-Maiduguri Line and Calabar-Lagos Coastal Line, which will connect the Southern and Eastern States to themselves and to the North.
28. Progress is also being made on several power generation, transmission, and distribution projects, as well as off-grid solutions, all aimed towards achieving the national goal of optimizing power supply by 2025.
29. I am again happy to report that we continue to make visible progress in our strategic road construction projects like the Lagos – Ibadan expressway, Apapa – Oworonsoki expressway, Abuja – Kano expressway, East-West Road and the second Niger bridge. We hope to commission most of these projects before the end of our tenure in 2023.
30. The Pandemic revealed the urgent need to strengthen our health system. Towards this end, we constructed 52 Molecular labs, 520-bed intensive care units, 52 Isolation centres and provision of Personal Protective equipment across 52 Federal Medical Centres and Teaching Hospitals.
31. We continue to push our expenditure rationalization initiatives which we commenced in 2016. For example, on personnel costs, the number of MDAs captured on the Integrated Payroll and Personnel Information System increased from 459 in 2017 to 711 to date.
32. The recent passage of the Petroleum Industry Act 2021, and consequent incorporation of the Nigeria National Petroleum Corporation should also result in the rationalisation of expenditure, as well as increased investments and improved output in the oil and gas industry.
33. Distinguished Senators and Honourable Members, you will agree with me that a lot has been accomplished over the last year but there is still much to be done. I will now proceed with a review of the 2022 Budget proposal.
Theme and Priorities of 2022 Budget
34. The allocations to MDAs were guided by the strategic objectives of the National Development Plan of 2021 to 2025, which are: Diversifying the economy, with robust MSME growth; Investing in critical infrastructure; Strengthening security and ensuring good governance; Enabling a vibrant, educated and healthy populace; Reducing poverty; and Minimizing regional, economic and social disparities.
35.The 2022 Appropriation therefore is a Budget of Economic Growth and Sustainability.
36. Defence and internal security will continue to be our top priority. We remain 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.
37. 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.
Parameters and Fiscal Assumptions
38. Distinguished Members of the National Assembly, 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.
2022 Revenue Estimates
39. Based on these fiscal assumptions and parameters, total federally collectible revenue is estimated at 17.70 trillion Naira in 2022.
40. 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.
41. 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.
Planned 2022 Expenditure
42. A total expenditure of sixteen point three-nine (16.39) trillion Naira is proposed for the Federal Government in 2022. The 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.
43. We expect the total fiscal operations of the Federal Government to result in a deficit of 6.26 trillion Naira. This represents 3.39 percent of estimated GDP, 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
44. We need to exceed this threshold considering our collective desire to continue tackling the existential security challenges facing our country.
45. 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.
46. 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.
47. 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.
48. 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.
49. Very importantly, we have endeavoured to use the loans to finance critical development projects and programmes aimed at improving our economic environment and ensuring the 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.
Innovations in Infrastructure Financing
50. 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.
51. 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.
Enhancing Revenue Mobilisation
52. Our strategies to improve revenue mobilisation will be sustained in 2022 with the goal of achieving the following objectives: Enhance 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.
53. Distinguished Senators and Honourable Members, I commend you for the passage of the Petroleum Industry Act 2021. It is my hope that the implementation of the law will boost confidence in our economy and attract substantial investments in the sector.
Finance Bill 2022
54. 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.
55. 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.
56. Mr. Senate President, Mr. Speaker, Distinguished and Honourable Members of the National Assembly, this speech would be incomplete without commending the immense, patriotic, and collaborative support of the National Assembly in the effort to deliver socio-economic development and democracy dividends for our people.
57. I wish to assure you of the strong commitment of the Executive to strengthen the relationship with the National Assembly.
58. Nigeria is currently emerging from a very difficult economic challenge. We must continue to cooperate and ensure that our actions are aimed at accelerating the pace of economic recovery so that we can achieve economic prosperity and deliver on our promises to the Nigerian people.
59. The fiscal year 2022 is very crucial in our efforts to ensure that critical projects are completed, put to use and improve the general living conditions of our people.
60. It is with great pleasure, therefore, that I lay before this distinguished Joint Session of the National Assembly, the 2022 Budget Proposals of the Federal Government of Nigeria.
61. I thank you most sincerely for your attention.
62. May God bless the Federal Republic of Nigeria.