BY VICTORIA ONU, ABUJA
The fiscal impact from the implementation of the Petroleum Industry Act has made the federal government to slash the projected federation revenue by N341bn in the 2022 budget.
The figure is contained in the 2022 budget proposed which was made public penultimate week by the Minister of Finance, Budget and National Planning, Zainab Ahmed.
The Senate had last month passed the 2022-2024 Medium Term Expenditure and Fiscal Strategy Paper, retaining all the assumptions and projections submitted to it by President Muhammadu Buhari, in July.
The preparation of the budget estimates for Ministries, Departments and Agencies usually takes into consideration the Medium-Term Policies/Strategies contained in the Expenditure Framework and Fiscal Strategy Paper which is the federal government’s pre-budget statement.
The MTEF/FSP outlines the development priorities of the federal government for the period covered.
The underlying drivers of the 2022 fiscal projections, such as oil price benchmark, oil production volume, exchange rate, GDP growth, and inflation rate remain unchanged as in the previously approved 2022-24 MTEF/FSP.
But an analysis of the Medium-Term Expenditure Framework covering 2022-2024 showed that there have been key changes in the framework, necessitated by the need to reflect the new fiscal terms in the PIA.
Findings revealed that the PIA implementation is assumed to take effect by mid-year 2022, a development that has made the federal government to premise the revised 2022-24 Fiscal Framework on hybrid of January to June (based on current fiscal regime) and July-December (based on PIA fiscal regime).
But for 2023 and 2024, the MTEF would be based on the full implementation of the PIA.
Further analysis of the MTEF showed that the key impacts of the revision are the decrease in gross federation revenue projection for the 2022 fiscal year, from N8.87tn to N8.53tn, reflecting a decline of N341.5bn.
It stated, “The revision has also led to a decrease in the deductions for federally-funded upstream project costs and 13 per cent derivation by N335.3bn and N810.25m respectively.
“As a result, net federation oil and gas revenue projection thus declined by N5.42bn from N6.540trn to N6.535trn.”
The NNPC under the new Petroleum Industry Act is being unbundled. What this means is that the NNPC would be run as a registered company expected to pay dividend to its shareholders.
President Buhari had presented the N16.39 trillion 2022 Appropriation Bill to a joint session of the National Assembly on October 7, 2021, in Abuja.
According to Buhari, total revenue available to fund the 2022 Federal Budget is estimated at N10.13 trillion; including grants and aid of N63.38 billion, as well as the revenues of 63 Government-Owned Enterprises (GOEs).
Described as a budget of Economic Growth and Sustainability, it was predicated on a conservative oil price benchmark of $ 57 per barrel with daily oil production estimate of 1.88 million barrels per day.
Ahmed had said the exchange rate of N410.15 per US dollar and projected Gross Domestic Product (GDP) growth rate of 4.2 per cent and 13 per cent inflation rate were also taken into consideration.
She said that of the generated revenue for 2021, the federal government’s share of oil revenues was N754.2 billion, representing 56.3 per cent of performance of the prorated sum.
The minister added that non-oil taxes revenues stood at N1.15 trillion, representing 115.7 per cent, which was above what was targeted in the 2021 budget.
On the expenditure side, the minister said that N8.14 trillion had been spent out of the N9.71 trillion prorata budget, adding that it was inclusive of expenditure estimates of GOEs, but excluded project-tied loans.
Giving a breakdown of the expenditure, Ahmed said that N2.87 trillion had been expended on debt service and N2.57 trillion for personnel cost, including pensions, while N1.79 trillion had been expended for capital projects.
“Further analysis of the MTEF showed that the key impacts of the revision are the decrease in gross federation revenue projection for the 2022 fiscal year, from N8.87tn to N8.53tn, reflecting a decline of N341.5bn”
Speaking on the 2022 Appropriation Bill, Ahmed said that the N16.39 trillion proposed to be spent was 12.2 per cent higher than the initial 2022 MTEF.
She said that of the amount, N10.132 trillion was projected to be generated as revenue and N6.26 trillion which was 3.39 per cent of GDP as deficit would be financed majorly by borrowing.
According to her, to fund the deficit, N2.51 trillion would come from domestic sources, another N2.51 trillion from foreign borrowing, N1.16 trillion from multi- and bi-lateral loan drawdowns and N90.7 billion from privatization proceeds.
For the revenue, she said that N3.53 trillion would come from oil, N2.13 trillion from taxes, N1.816 trillion from independent revenue, N1.728 trillion from retained GOEs and N924.31 billion from other revenue sources.
On expenditure, she said that recurrent expenditure, which is non-debt spending, was estimated to cost N6.83 trillion, while aggregate capital expenditure was pegged at N5.35 trillion and N3.61 trillion would go for debt servicing, while N292.7 billion would provide for retirement of maturing bonds to local contractors and suppliers.
Speaking on critical sectoral allocations, Ahmed said that defence and security sector, at 15 per cent, would get N2.41 trillion, infrastructure at 8.9 per cent N1.45 trillion and education sector 7.9 per cent of the budget at N1.290 trillion.
For the health sector, 5 per cent of the total budget at N820.2 billion and social development and poverty reduction programmes at 5.3 per cent of the budget would get N863 billion.
Ahmed, however, said that the 2022 budget was expected to further accelerate the recovery of the nation’s economy.
“We are optimistic of attaining more inclusive GDP growth as we focus on achieving our objective of massive job creation and lifting millions of our citizens out of poverty.
“Early passage of the 2022 budget for implementation from January 1 will significantly contribute towards achieving government macro-fiscal and sectoral objectives,” she added.
She said that though revenue currently remains the nation’s fiscal challenge, government remained committed to the effective implementation of the Strategic Revenue Growth Initiatives (SRGI).
