Public Presentation of 2022 FGN Budget Proposal - Breakdown and Highlights

Friday, January07, 2022 / 03:41 PM / by Office of the Honourable Minister of Finance,Budget & National Planning / Header Image Credit: Federal Ministry of Finance

Introduction &Background

Mr. President laid the FGN 2021 Budget Proposal onOctober 8, 2020. The National Assembly (NASS) passed the Bill by December 21,and Mr President signed it into law on December 31, 2020.

This underscores the Administration's firm commitmentto sustain the return to a predictable January - December fiscal year, as wellenact annual finance acts to facilitate implementation of the budget.

A supplementary budget of N982.73bn was also passed bythe NASS on the 7th of July, 2021, and Mr. President assented to it on the 26thof July, 2021 bringing the total appropriated expenditure for 2021 to N14.57trillion.

The Nigerian economy lapsed into recession in Q3 2020,after two successive quarters of negative GDP growth, but promptly emerged fromthe recession with a positive 0.11% GDP growth in Q4 2020.

The economy sustained the recovery, with a Q1Year-on-Year (YoY) GDP growth of 0.51% and a Q2 of 5.01%, fuelled byimplementation of government's Economic Sustainability Plan and helped by theeasing of COVID19 induced restrictions on economic activities.

The growth was mainly driven by the non-oil sector,which rose by 6.74% YoY, masking the deterioration in oil GDP by -12.65% YoY.

Other non-oil performance include trade (22.5% YoY)water supply and waste management (18.5%), ICT (5.5%) and human and healthservices (4.9% YoY) growth rate

The persistent rise of inflation halted in April 2021after nineteen consecutive months. From a four-year high of 18.17% in March2021, the consumer price index (CPI) which measures inflation moderated for thefourth consecutive month to 17.01% in August 2021, with the downward trendexpected to continue through the end of the year.

High unemployment/underemployment rates haveimplications for poverty incidence in the population. NBS' Q4 2020 estimatesput unemployment at 33% and underemployment rate at 22.84%.

Overview of 2021 Fiscal Outcomes & Update on 2021 BudgetImplementation

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Update On 2021 Budget Implementation (JAN - AUG)

Revenue Performance

Thefiscal numbers are preliminary and will be updated as the reconciliationprocess is concluded.

As atAugust 2021, FGN's retained revenue was N3.93 trillion, 73% of target:

FGNshare of oil revenues was N754.2 bllion (representing 56.3% performance of theprorated sum in the 2021 budget) while non-oil tax revenues totalled N1.15trillion (115.7% over and above the target).
Companies Income Tax (CIT) and Value Added Tax (VAT) collections were N547.54billion and N235.77 billion, representing 121% and 148% respectively of theprorata targets for the period.
Customs collections was N338.66 billion (99% of the target).

Otherrevenues amounted to N1.71 trillion, of which FGN Independent revenues wasN691.36 billion while GOEs' retained revenues was N873.52 billion.

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Expenditure Performance

On theexpenditure side, N8.14 trillion (or 84%) has been spent out of the N9.71trillion prorata budget. This performance is inclusive of expenditure estimatesof the GOEs but exclusive of Project-tied Loans.

Of theexpenditure,

N2.87trillion was for debt service, and

N2.57trillion for Personnel cost, including Pensions.

As atAugust 2021, N1.759 trillion had been expended for capital. Of this, N1.723trillion represents 81% of the provision for MDAs' capital, and N36.01 billionas GOEs capital expenditure.

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Updates on Global Outlook and Domestic Developments

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Underlying Macroeconomic Assumptions, Parameters & Targets for the2022 Budget

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Projections

Consumptionis projected to surge in the medium-term growing from a revised N136.57trillion in 2021 to N149.35 trillion by 2022, about 9.36% increase. This growthmomentum is projected to be sustained reaching N179.64 trillion in 2024.

NominalGDP is projected to rise from N168.60 trillion in 2021 to N184.38 trillion in2022 and then up to N221.78 trillion in 2024.

RealGDP growth forecast is 4.2% in 2022.

Inflationis expected to remain above single digit in the medium-term given structuralissues impacting cost of doing business, including high food distribution cost.The steady decline is however expected to be sustained, seeing inflation ratedrop to 13% in 2022 and 10 % by 2024.

AlthoughNigeria's total production capacity is 2.5 mbpd, current (year to date) crudeproduction is about 1.4mbpd (slightly short of the OPEC+ production quota), andan additional 300,000bpd of condensates, totaling about 1.6mbpd.

Oilproduction is projected to average 1.88 million barrels per day (includingcondensates) in 2022.

TheEnergy Information Administration (EIA) expects that global oil production willincrease to match rising levels of global oil consumption.

OPECcrude production is projected to average 28.34 million barrels per day in 2022higher than 26.94 million barrels per day forecast for 2021.

WorldBank forecasts that crude oil prices will rise gradually from an average ofUS$60 pb in 2022 to $61 pb in 2023, and US$61.9 pb in 2024. EIA sees 2022 oilprices averaging $66.04 per barrel.

Justification for Oil Price and Production Assumptions

Therealities of 2021 portend sustained OPEC Supply Cuts, ongoing vaccination, andrebounding Global GDP led by Emerging Economies.

Inconsultation with NNPC & other stakeholders, our base oil price scenario inthe Medium Term is (2022: $57/bbl, 2023: $57/bbl, 2024: $55/bbl) and this ispremised on the averages of leading forecasting institutions, factors affectingmarket fundamentals, global economic recovery, plans by governments and marketsentiments.

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