MTEF & FSP: FG Seeks N5.62trn Loan For 2022 Budget Deficits

…slashes capital expenditure by N259.3bn

The Federal Government on Monday submitted a proposal to the National Assembly (NASS) to acquire loans to the sum of N5.62 trillion to finance deficits in the N13.918 trillion 2022 budget.

This will further raise Nigeria’s Public debt which stands at  $87 239 billion or N33.107trillion as at March 31,2021 to N38.729 trillion.

The Debt Management Office (DMO) last week faulted media reports listing Nigeria as a “high-debt risk nation.”

The agency said such publications claiming that the classification came from the International Development Association, IDA,  Audited Financial Statement for the Fiscal Year 2021 (July 1, 2020 – June 30, 2021) were a misinterpretation of the report.

DMO stated,   “The World Bank’s report was an assessment of the performance of IDA and not the performance of the IDA loans nor the debt repayment capacity of the beneficiaries of IDA loans.

“With this  N5.62 trillion additional proposal, the FG has also altered provisions contained in the Medium Term Expenditure Framework (MTEF), and Fiscal Strategy Paper (FSP), by slashing the capital expenditure in the proposed 2022 budget by N259.3 billion.

“The 2022-2024 MTEF/FSP are documents containing provisions of prescriptions of the Federal Government’s socio-economic and developmental objectives and priorities for the time frame in question (2022 to 2024).

The minister for Finance, Budget and National Planning, Zainab Ahmad, while presenting the 2022-2024 Medium Term Expenditure Framework (MTEF), and Fiscal Strategy Paper (FSP), before the House of Representatives Committee on Finance, stated that the reduction in capital expenditure became necessary given economic volatility occasioned by unstable global oil market as well as effects of the covid-19 pandemic.

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The Finance minister disclosed that “on capital expenditure, the sum of N1,759,804,022,579, as opposed to the N2,019,119,204,546, will be available to Ministries, Department and Agencies (MDAs) of government in 2022.”

The minister who told legislators that the projection of the value of naira to dollar is likely to come down in favour of the naira in 2023, said “the budget deficit that is projected for 2022 is N5.62 trillion, up from N5.60 trillion in 2021.”

She mentioned that, “The deficit is going to be financed by new foreign borrowing. And domestic borrowing, both domestic and foreign in the sum of N4.89 trillion, then privatisation proceeds of N90.73 billion and drawdowns from existing project titles of N635 billion.

“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 minister in her presentation stated that based on the decision of the Federal Executive Council (FEC) the sum of N6.54 trillion is expected to be realised for the 2022 fiscal year, adding that it was projected to increase in 2023 to N9.15 trillion.

“The revenue that we expect is N6.54 trillion N2.62 trillion to accrue to the Federation Account and VAT respectively,” she said.

She disclosed further that net oil and gas revenue which will be available for the Federation Account for distribution will be N6.151 trillion in 2022.

The key macro-economic assumptions contained in the MTEF/FSP include a crude oil benchmark price of $57 per barrel for 2022, crude oil production of 1.88 million barrels per day, and a dollar exchange rate of N410.15 to one US dollar, an inflation rate of 13 percent in 2022, and a nominal GDP of 149.369 trillion.

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“What is interesting is that the non-oil GDP continues to grow at 169.69 trillion compared to oil GDP of 14.68 trillion included in the nominal GDP. Nominal consumption is 130,49.36 billion,” she said.

According to the document’s unemployment statistics, 82.9 million Nigerians are adjudged to be living in poverty.

The minister who said the global economic growth is projected to moderate to 4.9 per cent in 2022,  warned that Nigeria continues to be exposed to risk aversion in the foreign exchange market and devaluation of the naira.

The MTEF & FSP contains provisions of  financial strategies and policies to achieve government economic priorities, with highlights of the key drivers of government’s revenue and the purview of expenditure plans.

The World Bank’s damning report listed Nigeria among top 10 countries in the world with high-debt risk exposure. This is contained in the bank’s International Development Association (IDA), which was among its audited Financial Year, 2021. Undoubtedly, the financial report has far-reaching implications for Nigeria. It is a timely warning to the government to be extremely cautious about borrowing. The immediate implication of the World Bank’s report is that Nigeria’s credit is at great risk due to the fear that it might not meet its contractual obligations.

Nigeria was rated fifth on the list with $11.7billion, while India is top on the log with $22billion. Six African countries are on the list, with a combined debt exposure of $51.4 billion. As at June 30, 2021, the 10 countries’ total debt exposures accounted for 66 per cent of IDA exposure. Bangladesh occupies second position in the inglorious list with $18.1billion, followed by Pakistan with $16.4billion IDA debt stock and Vietnam with $14.1billion. Other countries on the list in order of appearance included: Ethiopia with $11.2billion, Kenya, $10.2billion IDA debt stock; Tanzania, $8.3billion; Ghana, $5.6 billion and Uganda with $4.4billion IDA debt stock.

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In all, Nigeria was elaborately mentioned in the World Bank IDA debt risk exposure report. According to the report, Nigeria’s undisbursed balance with the global financial institution was about $8.656billion as at June 30, 2021. The financial statement for the International Bank for Reconstruction and Development (IBRD), a subsidiary of the World Bank, showed Nigeria having a total of $589 million undisbursed balance, comprising $500million loans approved but not yet signed and $80million signed loan commitment. Besides, the financial statement for IDA revealed that Nigeria has a total undisbursed balance of $8.07 billion, consisting of $1.462 ban loans approved but not yet signed and $6.61billion signed loan commitment.

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