The Federal Government on Monday hinted of its plans to borrow about N4.89 trillion locally and externally in 2022 to fund the revenue shortfall in its proposed budget of N13.98trn in the fiscal year.
Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, disclosed this during an interactive session with members of the House of Representatives Committee on Finance while highlighting the fiscal thrusts of the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP).
The minister pointed out that perception of the naira as being over valued despite recent adjustment by the Central Bank of Nigeria has compounded Nigeria’s risk aversion in the global capital market, projecting that the ugly situation will further put pressure on the foreign exchange market, stressing that foreign portfolio investors have yet to return to the Nigerian market.
Ahmed explained that while the government planned to borrow to fund the N5.62 trillion deficit in 2022, it would reduce capital expenditure by N259.315 billion due to economic volatility occasioned by unstable international oil market and the lingering impacts of the COVID-19 pandemic.
According to her, in fiscal 2022 capital expenditures for ministries, departments and agencies (MDAs) is proposed for N1.76 trillion, representing about N500 billion lower than the N2.02 trillion spent in 2021.
On the exchange rate, the minister told the lawmakers that the Naira had been pegged at N410.15/$ while the oil benchmark price is put at $57 per barrel.
Ahmed listed other key macro-economic assumptions in the MTEF/FSP as including crude oil production of 1.88 million barrels per day, an inflation rate of 13 per cent and a nominal GDP of 149.369 trillion.
The minister further explained that non-oil GDP had sustained growth at 169.69 trillion compared to oil GDP of 14.68 trillion as contained in the nominal GDP just as the Nominal consumption is 130,49.36 billion.
She clarified: “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 added.
She also projected that the net oil and gas revenue for the Federation Account in the 2022 fiscal year would be N6.151 trillion.