How Budget Deficit, Loan Servicing Weaken Nigeria’s 2022 Budget

NIGERIA’S 2022 budget is tainted with a huge deficit and loans whose repayment will, again, cost Africa’s most populous nation a fortune. These, analysts say, puts the Nigerian economy under fiscal pressure.

President Muhammadu Buhari’s government has relied heavily on borrowing to sustain its budget cycle, with the Central Bank of Nigeria (CBN) serving as lenders of last resort to the Federal Government.

The 2022 budget is projected at N17.13 trillion, which is 18 percent higher than the 2021 budget.

Also, recurrent (non-debt) spending, which is estimated at N6. 91 trillion, is 40 per cent of total expenditure and 20 per cent higher than the 2021 budget.

At N3. 8 trillion, debt service is 22 per cent of total expenditure and 34 per cent of total revenue.

The 2022 budget has a deficit of about N6.25tn, approximately 3.39 percent of the country’s GDP.

The budget also set aside N59 billion for counterpart funding for railway projects including: Lagos-Calabar, Calabar-Lagos, Ajaokuta-Itakpe, Port Harcourt-Maiduguri, Kano-Katsina, Jibiya-Maradi in Nigeria Republic, and Abuja Itakpe and Aladja(Warri) – Port and Refinery/Warri New harbour.

Budget deficit is to be financed mainly by borrowings, with targets from domestic sources – N2. 57 trillion; foreign sources-N2. 57 trillion; multi-lateral/bi-lateral loan draw-down N1. 16tn; and privatisation proceeds, N90. 7 billion.

“We’re borrowing and have high level of budget deficits. When you jack up the budget from N16. 39 trillion to N17.127 trillion and you are borrowing with high level of deficit, it calls for concern,” Professor of Financial Economics and Director of Centre for Economic Analysis and Research at the University of Lagos Ndubuisi Nwokoma said in a monitored programme on Arise Television on Friday.

“Also, we are looking at N3. 8 trillion for debt servicing, which is close to N3. 16 trillion projected oil revenue. Remember, we still have the subsidy concerns to deal with. It shows the budget is ‘highly leveraged.’ This is not just for this year, this has been happening for sometime now.”

The economist noted that the projected revenue of N10.1 trillion from oil and non oil sector, which was often not met, left Nigeria with excessive borrowing.

“How do we finance the deficit? Fiscally, we have to borrow about N5.01 trillion, alongside other project-tied loans, in addition to proceeds from the sale of government assets.”

Following these concerns, those knowledgeable about the economy also expressed worry that the government was still paying lip service to cutting down cost of governance.