Nigeria Raises Oil Price, Production Expectations for 2022 Fiscal Spending
In the recently approved medium term expenditure, the Nigerian government has raised oil price and production volume expectations for the preparation of the fiscal year 2022 budget.
As against the $40 per barrel assumption for the preparation of the budget for the current year, Federal Government appears to be very much optimistic in its plan by raising the oil benchmark to $57 a barrel and expect to produce 1.88 million barrels per day in 2022.
On Wednesday, the Federal Executive Council (FEC) has approved the 2022 – 2024 Medium Term Expenditure Framework and the Fiscal Strategy Paper (MTEF/ FSP).
Minister of Finance, Budget and National Planning, Dr Zainab Ahmed, disclosed this after the meeting of the Council which was presided over by President Muhammadu Buhari.
According to her, the MTF/ FSP describes the Federal Government’s socio-economic and developmental objectives and priorities for the reporting period of 2022 to 2024 as well as the fiscal strategies to be put in place, and policies to achieve in the priorities.
She said her ministry presented a memo to FEC with a 2022 projected revenue of N6.54 trillion and N2.62 trillion to accrue to the Federation Account and Value Added Tax (VAT) respectively.
According to her, this revenue is projected to increase in 2023 to N9.15 trillion.
She said: “The goal for us is to improve the nation’s macro-economic situation or reposition the economy. The MTF/ FSP consists of medium term macro-economic projections, fiscal targets and estimates of revenue and expenditure including the government’s financial obligations.
“We have also presented to the Federal Government the projected revenues for 2022 to 2024, specifically for 2022.
“The revenue that we expect is N6.54 trillion and N2.62 trillion to accrue to the Federation account on VAT respectively. And then there will be a net oil and gas revenue available for the Federation account for distribution will be N6.15 trillion in 2022.
“This revenue is projected to increase in 2023 to 9.15 trillion. The total expenditure that we are expecting we have projected and approved by Council is an aggregate expenditure of N13.98 trillion.
“This includes N1.1 trillion of government-owned enterprises expenditure as well as grants and donor-funded projects in the sum of N62.24 billion.
“This means that this budget is just three per cent higher than the 2021 budget in terms of the size of expenditure. We also reported to the council the budget deficit and the financing items for the expenditure.’’
According to the minister, the budget deficit that is projected for 2022 is N5.62 trillion, up from 5.60 trillion in 2021.
She added that this amount represents 3.05 per cent of the estimated GDP, which is slightly above the 3 per cent threshold that is specified in the Fiscal Responsibility Act (FRA).
“The FRA empowers Mr President to exceed the threshold. In his opinion, the nation faces national security threats and it is our opinion on fact agreed that we can exceed.
“The deficit is going to be financed by new foreign borrowing and domestic borrowing, both domestic and foreign in the sum of N4.89 trillion on privatisation proceeds of N90.73 billion and drawdowns from existing project tied loans of N635 billion.
“I just want to state that the project had a debt to revenue ratio in the report is 43 per cent. Which, of course, we know Nigerians all have concerns about the actual debt to revenue ratio but in 2019 was 58 per cent.
“So, this is an improvement over the preceding over 2019. In 2020, the ratio was up to 85%,” she added.
The minister said she provided to the council, a macroeconomic background, which affirmed that the Nigerian economy had recovered from a negative growth of minus 1.8 per cent in 2020 to 2.5 per cent in 2021.
She added: “Also, the inflation has moderated from 19 months. It’s now moderated two months now that is coming down to 17.93 per cent. And our foreign reserves stand at N34.2 billion at the end of May, which is N640 million declined from the previous month.
“The key macro assumptions that were presented and council approved is that there’ll be a crude oil benchmark price of 57 dollars per barrel of crude oil for 2022, crude oil production of 1.88 million barrels per day, and our exchange rate of 410 to one US dollar, an inflation rate of 10 per cent in 2022, and a nominal GDP of N149.369 trillion.
“What is interesting is that the non-oil GDP continues to grow at N169.69 trillion compared to all GDP of N14.8 trillion included in the nominal GDP.”
Nigeria Raises Oil Price, Production Expectations for 2022 Fiscal Spending
