Why Buhari is borrowing another ₦4.89tn – Zainab Ahmed

The Federal Government has revealed plans to borrow about ₦4.89tn from internal and external sources to finance the deficit in its proposed 2022 budget of N13.98trn due to dwindling revenue.

Zainab Ahmed, Nigeria’s Minister of Finance, Budget, and National Planning made this known in Abuja on Monday at an interactive session organised by the House of Representatives’ Committee on Finance on the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper.

She noted that perception of the naira as being overvalued over despite recent adjustment by the Central Bank of Nigeria has compounded Nigeria’s risk aversion in the global capital market, which she said would further put pressure on the foreign exchange market, stressing that foreign portfolio investors have yet to return to the Nigerian market.

Zainab Ahmed stated that while the government plans to borrow to fund the N5.62tn deficits in 2022, it will reduce capital expenditure by N259.315bn, as the reduction would become necessary due to economic volatility occasioned by unstable global oil market as well as the effects of the COVID-19 pandemic.

Ahmed said for capital expenditure next year, ministries, departments and agencies would get N1.76tn as opposed to the N2.02tn spent in 2021.

She also the exchange rate has been pegged at N410.15 to a dollar per dollar and oil benchmark at $57 per barrel.

Other key macro-economic assumptions in the MTEF/FSP include a crude oil benchmark crude oil production of 1.88 million barrels per day, an inflation rate of 13 per cent, and a nominal GDP of 149.369tn.

The minister noted that interestingly, non-oil GDP continues to grow at 169.69tn, compared to oil GDP of 14.68tn included in the nominal GDP. Nominal consumption is 130,49.36bn.

According to her “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.”

The minister further said the net oil and gas revenue, which would be available for the Federation Account for distribution, would be N6.151tn in 2022.