The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed has explained that Federal Government’s inability to raise enough revenue internally for expenditure means it would continue to borrow to bridge the gap.
Mrs. Ahmed who disclosed during a public presentation and breakdown of the highlights of the 2022 appropriation bill in Abuja, however allayed fears over Nigeria’s rising debt profile.
She said the country’s debt to GDP which stood at 21.6% was the lowest amongst African countries.
“However, Nigeria’s Debt Service/GDP ratio (73% as at August 2021) is the highest among same African top economies; This is proof that what we have is not a classic debt sustainability problem, but a revenue challenge”, she added.
She stressed that to boost government’s revenue more Nigerians needed to pay tax, saying the tax base was abysmally low with just N41 million people paying tax in Nigeria.
“It is now critical to fix our revenue challenge, because cutting expenditure is not currently a viable option, as our Public Expenditure /GDP ratio is also the lowest among same Africa’s leading economies;
“We must however continue to rationalise our expenditures as we cannot afford waste; In reality, our largest expenditure items are currently personnel cost, debt service and capital expenditure, which between them account for 85% of the 2022 budget; There is very little scope for cut in any of these over the medium term;
“The most viable solution to our fiscal challenge therefore remains to grow our revenues and plug all leakages.
“Our target over the medium term is to grow our Revenue-to-GDP ratio from about 8 – 9 percent currently to 15 percent by 2025. At that level of revenues, the Debt-Service-to-Revenue ratio will cease to be a critical concern”, she stated.
The 2022 budget proposal showed that the government has has prioritized spending on defence & security, infrastructure, education and health with the sectors getting a combined N6 trillion allocation.
The breakdownshowed that defence and security got N2.41 trillion (15%); infrastructure N1.45 trillion (8.9%); education N1.29 trillion (7.9%); health N820 billion (5%) and Social Development and Poverty Eradication N863 billion (5.3%) of the entire allocation.
President Mohammadu Buhari had on Thursday presented the 2022 aggregate expenditure projected to be N16.39 trillion which is 12.5% higher than the 2021 budget to the National Assembly.
A breakdown of N16.39 trillion estimated budget shows that recurrent spending for the projected year is N6.83 trillion, repressing 41.7% of total expenditure and 18.5% higher than the 2021 budget.
From the estimate, aggregate capital expenditure of N5.35 trillion is earmarked, representing 32.7% of total expenditure.
This provision is inclusive of capital components of statutory transfers, Government Owned Enterprises capital and project-tied loans expenditures.
The Minister said a total sum of N10.132 trillion revenue is expected be raked in within the year under review to fund the budget, while N3.60 trillion was earmarked to fund debts.
A further breakdown of allocations to critical projects and programmes of the Federal Government showed that allocation for construction and rehabilitation of roads in every geo-political zone was N168 billion; N58 billion for renovation and construction of bridges.
In Education, N108.1 billion was provided for the Universal Basic Education, N1.2 billion for rehabilitation of classrooms/hostels, N392 million as takeoff grants for six federal science and technical colleges; N4.5 billion as scholarship allowances; and N2 billion as payment to 5,000 Federal Teachers Scheme Allowance.
In the Social Investment subsector, the government provided N410 billion for Federal Intervention Programme including home grown school feeding programme, government economic empowerment programme, conditioner cash transfers among others.
For regional programmes, the government allocated N65 billion for Presidential Amnesty Programme for ex-militants in the Niger Delta, N46.2 billion to North-East Development Commission, and N98.7 billion to the Niger Delta Development Commission.
N10 billion was also provided for the East-West road in the Niger Delta with another N15 billion provided for other critical infrastructure, agriculture and health system projects in the region.
In the power sector, N300 billion was provided to bridge tariff revenue shortfall, N1 billion for the expansion of distribution infrastructure, and N114 billion for the completion of renewable energy projects by the Rural Electrification Agency.
Mrs. Ahmed explained that government expenditure projection for 2022 also increased following additional provisions of N100 billion for the Independent National Electoral Commission (INEC) towards preparation for the 2023 general elections; N400 billion for national poverty reduction, N178.1 billion for population and housing census scheduled for 2022, N54 billion for the National Agency for Science and Engineering Infrastructure (NASENI), and N305.99 billion for TETFUND.