Sustained opposition by organised Labour forced Federal Government to suspend increases in petrol pump price, President Muhammadu Buhari said yesterday.
He also explained why Nigeria’s debt portfolio continued to soar, saying his administration kept the economy on its feet by spending out of recessions.
The President’s explanations were contained in the next year’s Appropriation Bill he presented for consideration at a joint session of the National Assembly in Abuja.
He said next year’s Appropriation Act will be the last full year budget to be implemented by his administration.
The National Assembly, Buhari said, would recall that in March last year, the Petroleum Products Pricing Regulatory Agency (PPPRA) announced that the price of petrol would henceforth be determined by market forces.
He, however, noted that the rising crude oil prices and exchange rate combined to push the price of petrol above the regulated N145.00 per litre price.
According to the President, labour unions led the opposition against the price deregulation policy, saying that the government had to suspend upward price adjustments to engage labour leaders.
He added that the subsidy on petrol significantly eroded revenues that should have been available to fund this year’ Appropriation Act.
On the next year’s budget estimates, President Buhari proposed N16.39 trillion to the lawmakers for consideration.
He told his audience that his administration will be targeting N17.70 trillion as the total federally-collectible revenue in the next fiscal year, pointing out that a new Finance Bill would soon be unveiled to shore up revenue to fund the proposed budget.
He spoke of a plan to launch the 2021 – 2025 National Development Plan soon, explaining that the plan is meant to crystalise development of national infrastructure.
Buhari said the 2022 Appropriation Bill tagged: “Budget of Economic Growth and Sustainability,” is fashioned to be gender responsive.
On the planned expenditure, Buhari said: “A total expenditure of N16.39 trillion is proposed by the Federal Government in 2022. The proposed expenditure comprises the following;
Statutory transfers of N768.28 billion;
Non-debt recurrent costs of N6.83 trillion;
Personnel costs (N4.11 trillion);
Pensions, gratuities and retirees’ benefits (N577.0 billion
Overheads (N792.39 billion);
Capital Expenditure (N5.35 trillion), including the capital component of statutory transfers;
Debt service (N3.61 trillion);
Sinking Fund (N292.71 billion) to retire certain maturing bonds.
On fiscal balance, Buhari said “government expects “the total fiscal operations of the Federal Government to result in a deficit of N6.26 trillion.”
He said: “This represents 3.39 percent of estimated GDP, slightly above the three per cent threshold set by the Fiscal Responsibility Act 2007.”
The President noted that countries around the world have to, of necessity over-shoot their fiscal thresholds for the economies to survive and thrive.
Buhari said: “We need to exceed this threshold, considering our collective desire to continue tackling the existential security challenges facing our country.
“We plan to finance the deficit mainly by new borrowings totalling N5.01 trillion, N90.73 billion from privatisation proceeds and N1.16 trillion drawdowns on loans secured for specific development projects.”
Rising debt profile
On the concern raised on the rising debt profile, following borrowings to finance fiscal gaps, Buhari said: “They are right to be concerned. However, we believe that the debt level of the Federal Government is still within sustainable limits. Borrowings are for specific strategic projects and can be verified publicly.
“As you are aware, we have witnessed two economic recessions within the period of this administration. In both cases, we had to spend our way out of recession, which necessitated a resort to growing the public debt.
“It is unlikely that our recovery from each of the two recessions would have grown as fast without the sustained government expenditure funded by debt.”
The President said government’s target over the medium term is to grow the Revenue-to-GDP ratio from about eight per cent to 15 per cent in another four years, a feat, he noted, will end the concerns on the Debt-Service-to-Revenue ratio.
He said: “Put simply, we do not have a debt sustainability problem, but a revenue challenge which we are determined to tackle to ensure our debts remain sustainable.”
Buhari noted that very importantly, the Federal Government has endeavoured to use the loans to finance critical development projects and programmes aimed at improving the nation’s economic environment and ensuring effective delivery of public services to the people.
He listed the focus of the budget to include: completion of major road and rail projects; implementation of power sector projects; provision of potable water; construction of irrigation infrastructure and dams across the country; and critical health projects.
The President said government will strengthen the frameworks for concessions and public private partnerships (PPPs) with innovations in infrastructure financing.
He added that capital projects that are good candidates for PPP by their nature will be developed for private sector participation.
The government, he said, will also explore available opportunities in the existing ecosystem of green finance, including the implementation of our Sovereign Green Bond Programme and leveraging debt-for-climate swap mechanisms.
On his administration’s plan to shore up income, the President spoke of enhance tax and excise revenues through policy reforms and tax administration measures; review the policy on tax waivers and concessions; boost customs revenue through the e-Customs and Single Window initiatives; and safeguard revenues from the oil and gas sector.
He commended the National Assembly for the passage of the Petroleum Industry Act (PIA) 2021, expressing the hope that the implementation of the law will boost confidence in the economy and attract substantial investments.
The President said the tax and fiscal laws were undergoing review to produce a draft Finance Bill 2022.
“It is our intention that once ongoing consultations are completed, the Finance Bill would be submitted to the National Assembly to be considered alongside the 2022 Appropriation Bill,” he said.
On the proposed revenue estimates, Buhari said: “Based on these fiscal assumptions and parameters, total federally-collectible revenue is estimated at N17.70 trillion in 2022.
“Total federally distributable revenue is estimated at N12.72 trillion in 2022 while total revenue available to fund the 2022 Budget is estimated at N10.13 trillion.
“This includes Grants and Aid (N63.38 billion), as well as the revenues of 63 Government-Owned Enterprises (GOE). Oil revenue is projected at N3.16 trillion, Non-oil taxes are estimated at N2.13 trillion and FGN Independent revenues are projected to be N1.82 trillion.”
On parameters and fiscal assumptions, Buhari said that the 2022 -2024 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP sets out the parameters for the 2022 Budget.
He listed the parameters as:
- Conservative oil price benchmark of $57 per barrel;
- Daily oil production estimate of 1.88 million barrels (inclusive of Condensates of 300,000 to 400,000 barrels per day);
- Exchange rate of N410.15/$ and
*Projected GDP growth rate of 4.2 per cent and 13 per cent inflation rate.
On the budget theme and priorities, Buhari noted that the allocations to MDAs were guided by the strategic objectives of the National Development Plan of 2021 to 2025.
The objectives, according to him, are: diversification of the economy with robust MSME growth; investment in critical infrastructure; strengthening security and ensuring good governance; enabling a vibrant, educated and healthy populace; poverty reduction and minimising regional, economic and social disparities.
He restated defence and internal security as government’s top priorities.
The President said: “We remain firmly committed to the security of life, property and investment nationwide. We will continue to ensure that our gallant men and women in the armed forces, police and paramilitary units are properly equipped, remunerated and well-motivated.”
On the progress recorded on the railway projects connecting different parts of the country, Buhari said: “I am glad to report that the Lagos-Ibadan Line is now completed and operational. The Abuja-Kaduna Line is running efficiently. The Itakpe-Ajaokuta rail Line was finally completed and commissioned over thirty (30) years after its initiation.
“Arrangements are underway to complete the Ibadan-Kano Line. Also, work will soon commence on the Port Harcourt-Maiduguri Line and Calabar-Lagos Coastal Line, which will connect the Southern and Eastern States to themselves and to the North.
“Progress is also being made on several power generation, transmission, and distribution projects, as well as off-grid solutions, all aimed towards achieving the national goal of optimising power supply by 2025.
“I am again happy to report that we continue to make visible progress in our strategic road construction projects like the Lagos – Ibadan Expressway, Apapa – Oworonsoki Expressway, Abuja – Kano expressway, East-West Road and the Second Niger Bridge. We hope to commission most of these projects before the end of our tenure in 2023.
“The pandemic revealed the urgent need to strengthen our health system. Towards this end, we constructed 52 Molecular labs, 520-bed intensive care units, 52 isolation centres and provision of Personal Protective equipment across 52 Federal Medical Centres and Teaching Hospitals.
“We continue to push our expenditure rationalization initiatives which we commenced in 2016. For example, on personnel costs, the number of MDAs captured on the Integrated Payroll and Personnel Information System (IPPIS) increased from 459 in 2017 to 711 to date.”
On performance of 2021 Budget, Buhari said the 2021 ‘Budget of Economic Recovery and Resilience’ is based on a benchmark oil price of $40 per barrel, oil production of 1.6m b/d, and exchange rate of N379/$.
He added that furthermore, a supplementary budget of N982.73 billion was recently enacted to address exigent issues in the security and health sectors.
He noted that based on the 2021 Fiscal Framework, total revenue of N8.12 trillion was projected to fund aggregate federal expenditure of N14.57 trillion (inclusive of the supplementary budget).
The projected fiscal deficit of N6.45 trillion, or 4.52 per cent of GDP, he said, is expected to be financed mainly by domestic and external borrowings.
The President said as at July, Nigeria’s daily oil production averaged 1.70 million barrels (inclusive of condensates) and the market price of Bonny Light crude averaged $68.53 per barrel.
“Accordingly, actual revenues were 34 per cent below target as of July 2021, mainly due to the underperformance of oil and gas revenue sources. federal government’s retained revenues (excluding GOEs) amounted to N2.61 trillion against the proportionate target of N3.95 trillion for the period.
“The Federal Government’s share of oil revenue totalled N570.23 billion as of July 2021, which was 51 per cent below target, while non-oil tax revenues totalled N964.13 billion.
“The poor performance of oil revenue relative to the budget was largely due to the shortfall in production as well as significant cost recovery by NNPC to cover the shortfall between its cost of importing petrol and the pump price.”