Economists and allied professionals have faulted the 2022 appropriation, saying it lacks the necessary creativity, freshness and sincerity to pull the economy out of the woods.
This comes as data analysis has shown that the country’s peers are far more ambitious in terms of both composite and per capita spending.
President Muhammadu Buhari, on Thursday, presented a total estimated expenditure of N16.4 trillion ($40 billion) for next year in what he tagged a budget of economic growth and sustainability.
The figure, according to research, is a far cry from what other African governments are spending to pull their economies out of the ruins of COVID-19. For instance, South Africa is looking at spending R6.2 trillion (or $423 billion) under its three-year medium-term expenditure framework (MTEF).
The former apartheid country is constrained by fast-rising national debt to scale down its spending this year. Notwithstanding its contractionary fiscal stance, its R2.2 trillion ($147 billion) expenditure plan is still more than three times larger than Nigeria’s proposed budget of economic growth.
Also, Egypt, which is the third-largest African economy behind South Africa and Nigeria, is looking at a total expenditure of 2.46 trillion Egyptian pounds, which is an equivalent of $158 billion in the same financial year. With the figure, Egypt is only $2 trillion more than quadrupling Nigeria’s total budget.
In terms of real budget, which is measured on a per capita basis, the gap between Nigeria and either of the dominant regional economies is even wider. If the figure proposed is passed into law and spending plans adhered to religiously, the Federal Government will spend $200 on each Nigerian, supposing the citizens benefit from both capital and recurrent expenditures.
South African and Egyptian government per capita budgets have dwarfed Nigeria’s $200 (N82, 000) per capita annual budget. While that of Egypt is $1, 504, that of South Africa is $2, 444.
Despite rising security concerns, the country’s total appropriation for defence, which takes the lion’s share, is N2.41 trillion. This means the Federal Government’s cost of defending an average Nigerian next year is capped at N12, 000. With its miserable underbelly exposed by COVID-19, health gets an allocation of N820 billion, which translates to per capita spending of N4, 100.
As poor as the spending outlay is when decomposed, more disappointing is the revenue assumptions. The Federal Government hopes to fund the budget with an N10.13 trillion revenue projection, which is over 20 per cent above the current year’s N8.12 trillion estimate.
The upward review was on the account of the President’s belief that the revenue mobilisation reform efforts are beginning to “yield positive results”. Interestingly, the story of revenue projection as against actual revenues in recent years has not been a rosy one.
For instance, the 2021 half-year actual revenue was 20 per cent short of the estimated N4.2 trillion the Federal Government aspires to realise. Within the six months, the government’s total revenue generated was N3.38 trillion. But for the accruable from the value-added tax (VAT), which was eight per cent above the targeted N1.7 trillion, the shortfall would have been worse.
The revenue and expenditure outturn of the Federal Government resulted in a fiscal deficit of N3.5 trillion (4.4 per cent of prorating GDP) in the first half of 2021. This was N1.038 trillion (42.5 per cent) above the projected half-year deficit of N2.4 trillion.
It was also above the N2.8 trillion deficit recorded in the first half of 2020. The Budget Office said the deficit was financed through domestic borrowing of N1.2 trillion, thereby reflecting negative net financing of N2.2 trillion. This has been the trend in recent years.
In 2020, less than 51 per cent of N10.8 trillion projected revenue was achieved. The 49.4 per cent shortfall shot up the projected fiscal deficit of N6.6 trillion. The amount was N2 trillion or 43 higher than the projected fiscal deficit of N4.6 trillion for the year. The 2020 fiscal deficit was also higher than the N4.2 trillion recorded in 2019.
But President Buhari hopes next year could buck the trend. “Actual revenues were 34 per cent below target as of July 2021, mainly due to the underperformance of oil and gas revenue sources,” he said during the budget presentation.
Sheriffdeen Tella, a professor of economics, has faulted the budget, saying there is nothing in the parameters that suggests that it would be different from past experiences. The scholar said it was shocking that the government would fund one-third of a budget whose major component would go into debt servicing.
“The National Assembly needs to look at the budget critically now that it has left the control of the executive. We must begin to pay attention to reducing the deficit. The economic aspiration of the country must reflect in the budget. Otherwise, we will not make any progress,” Tella said.
David Adonri, an economist and financial expert, said the budget was good for mere academic exercise rather than a tool of economic growth and national development.
“The target for 2022 itself is extravagant, unrealistic and worthless because the prevailing situation cannot generate non-debt income to support it. If it is to be realised, it means the current borrowing will be increased, which will be an albatross of economic destruction. If it were finance, it means the Federal Government will be overtrading,” he told The Guardian.
In a detailed analysis of the document, a development economist and Chairman of Board, Amaka Chiwuike-Uba Foundation, Dr. Chiwuike Uba, queried: “The cost of governance has remained on an upward trend every year. The capital budget accounts for only 33 percent of the proposed 2022 budget. Over 50 per cent of the N3.31 trillion increase in the 2022 budget proposal over the 2021 budget is earmarked for debt servicing and recurrent expenditures. As shown by the previous year’s actual capital expenditures, the performance of the capital budget is typically less than 50 per cent and most projects are rushed through late in the fiscal year. This creates integrity issues, as an adequate cost-benefit analysis that ensures value for money is seldom strictly observed in awarding such hasty contracts.
“Achieving the 2022 budget targets of economic growth and consolidation requires real investment in key infrastructure, health, education and other key economic and social sectors. Infrastructure funding through the public-private partnership (PPP) mechanism as well as the Central Bank of Nigeria (CBN)’s funding for targeted sectors needs to be deepened. Nigeria needs to replicate large businesses such as Dangote across the country. Seventy-two large and strong corporations in each state are better than the millions of enterprises financed by the CBN with no impact on the economy. Economic growth and consolidation are beyond good speeches, they demand bold decisions.”
The economist argued that the 2021 budget has so far failed to meet up to 30 per cent of the government’s fiscal policy objectives, going by half-year report, with the economic growth and stabilisation still very weak.
“Unlike the 2020 half-year, when the government made a transfer of $250 million to the Nigerian Sovereign Wealth Investment Authority (NSWIA), the authority has received no transfer in 2021,” he noted.
In terms of structure and character, he insisted, the 2022 budget proposal mirrors the budget of recent years. He noted that revenue forecasts and some of the other budget parameters are extremely unrealistic, suggesting that the usual credibility problems of previous budgets are “likely to shadow the 2022 budget.
“There is still a consumption mentality based on borrowing, with little or no real strategy to break out of the fiscal abyss and the debt trap. We must reflect and discuss whether we should grow and strengthen the economy. The 2022 budget proposal in its current form cannot meet the budget’s objectives,” Uba, who has consulted for several multinational and development agencies, said.
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