Senate Approves N13.98trn 2022 Budget Projection, Retains N8.36trn Revenue Target

*Benchmarks oil at $57 per barrel, N410/$1 exchange rate
*Okays crude production of 1.88mbpd, 2.23mbpd, 2.22mbpd for 2022, 2023, 2024
*Lawan backs collection of VAT by FIRS until legal outcome is determined

Deji Elumoye, Juliet Akoje in Abuja and Dike Onwuamaeze in Lagos

The senate has approved the federal government’s revenue projection of N8.36 trillion and proposed expenditure of N13.98 trillion for the 2022 fiscal year. The lawmakers also passed the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) ahead of the expected presentation of the 2022 Appropriations bill to the National Assembly by President Muhammadu Buhari.

The endorsements came as President of the Senate, Dr. Ahmad Lawan, backed the continuous collection of Value Added Tax (VAT) by the federal government until the final judgement of the Supreme Court on the matter.

The passage of the 2022-2024 Medium Term Expenditure Framework was sequel to the consideration and deliberation of a report by the Joint Committee on Finance; Local and Foreign Debts; Banking, Insurance and other Financial Institutions; Petroleum Resources (Upstream); Downstream Petroleum Sector and Gas.

Chairman of the Senate Finance Committee, Senator Solomon Adeola, presented the Joint Committee report.

Senators took turns to debate the MTEF/FSP document, which was submitted to the legislative arm for approval last month by Buhari.

Contributing to the debate, former Governor of Benue State and Chairman of the Senate Committee on Power, Senator Gabriel Suswam, lamented that government borrowing had been increasing yearly, and wondered when it would stop.

According to him, the country’s budget deficit has gone beyond “the threshold of the Fiscal Responsibility Act.” Suswam frowned on irrelevant waivers granted businesses even as the country operated a deficit budget.

The former governor also expressed displeasure that the country was dishing out N2.4 trillion as waivers when it was having over N5.6 trillion deficit.

He stated, “The issue of borrowing and deficit. We now have a deficit that has been growing year in, year out. When is it going to stop? These are issues that agitate the minds of Nigerians, especially when it concerns borrowing.

“We have a deficit that has gone beyond the threshold of the Fiscal Responsibility Act (FRA) 2007, which then means that we (must) amend the FRA so as to accommodate this deficit.
“The FRA stipulates a threshold of three per cent. Last year, it was above the threshold, this year, it is above by six per cent.

“In managing an economy, we need to combine fiscal policies with monetary policies.”

On his part, Chairman of the Senate Committee on Aviation, Senator Smart Adeyemi, stated, “There was nothing wrong with borrowing, provided it is channelled towards improving infrastructure, such as roads, health facilities, as well as empowering Nigerians.”

The Red Chamber thereafter approved the daily crude oil production of 1.88 million barrels per day (mbpd), 2.23mbpd, and 2.22mbpd for 2022, 2023 and 2024, respectively, “in view of average 1.93mbpd over the last three years and the fact that a very conservative oil output benchmark has been adopted for the medium term in order to ensure greater budget realism.”

The senate, in its recommendations, also approved the benchmark oil price of $$57 per barrel; adopted the exchange rate of N410.15/$ proposed by the executive for 2022-2024; and gave its nod to the projected Gross Domestic Product (GDP) growth rate of 4.20 per cent; as well as 13 per cent inflation rate.

In addition, the upper chamber approved fiscal deficit of N5.62 trillion, and new borrowings of N4.89 trillion – an amount that includes foreign and domestic borrowing – subject to the provision of details of the borrowing plan to the National Assembly.

The senate approved other parameters, such as statutory transfers totalling N613.4 billion; debt service estimate of N3.12 trillion; sinking fund to the tune of N292 billion; pension, gratuities and retirees benefits of N567 billion.

Out of the aggregate federal government’s expenditure of N13.98 trillion, the upper chamber approved the sum of N6.12 trillion for total recurrent (non-debt); N3.47 trillion as personnel cost for Ministries, Departments and Agencies (MDAs); N3.26 trillion for capital expenditure (exclusive transfers); N350 billion for special intervention (recurrent); and N10 billion for special intervention (Capital).

The upper chamber in its report recommended that the fiscal deficit estimate of N5.62 trillion should be sustained due to the federal government’s conservative approach to target setting and its determination to improve collection efficiency of major revenue generating agencies.

It further called on the Salaries and Wages Commission to review the salary structure of all Ministries, Departments and Agencies (MDAs) in order to come up with a new salary structure that will reflect the true financial position of the agencies.

The chamber demanded a continuous review of the Fiscal Responsibility Act to ensure that all revenues are remitted to the Consolidated Revenue Fund (CRF) as and when due, in order to curtail frivolous deductions and diversion of funds by the MDAs.

It maintained that all laws relating to the mining business should be reviewed urgently to ensure an upward review of rates applied to royalties, ground rent, and license renewal for all mining companies operating in Nigeria. The senate said this would guarantee transparency in the collection of revenue by relevant agencies. It recommended stringent sanctions in proposed new laws to address illegal mining.

The senate also called on the Nigeria Customs Service to accelerate the process of installing scanners at all ports across the country to curb smuggling and underpayment of custom duties on imported goods, which has resulted in huge loss of revenue to the government.

The upper chamber urged the federal government to urgently implement the Petroleum Industry Act (PIA) recently assented to by the president in order to curtail the problems of smuggling and round-tripping of petroleum products imported into the country.

In addition, the chamber recommended that the proposed budget of Government Owned Enterprises (GOEs) be reviewed upward to reflect their capabilities to generate revenue. It further recommended that the offices of the Accountant General (AGF), Auditor General of the Federation (AuGF) and Fiscal Responsibility Commission be strengthened in the areas of staffing and funding of their activities to ensure optimal performance.

The chamber stated that the Acts establishing some MDAs, such as Nigeria Investment Promotion Council (NIPC), National Lottery Trust Fund Act, Bank of Industry Act, Bank of Agriculture Act, Energy Commission Act, and Nigeria Nuclear Regulatory Commission, if reviewed and amended, would assist to generate more revenue to the coffers of government.

It also recommended that the federal government’s budget be reviewed and purged of some agencies with demonstrated capacity to stand on their own without recourse to government budget. It identified such agencies to include the National Agency for Food and Drug Administration and Control (NAFDAC) and Nigerian College of Aviation Technology, Zaria.

Speaking after the passage of MTEF/FSP, Lawan stressed that the lawmakers needed to up their game in the area of oversight.

According to him, much needs to be done by the various committees, especially in the area of oversight, to ensure full implementation of the annual budget of the federal government.
On Value Added Tax (VAT), Lawan said there was nothing wrong in continuing with VAT since there was no finality in the judgement yet.

The senate president said, “Therefore, we shouldn’t confuse our system until there is a very clear cut, definite judgement by the Supreme Court. We should go ahead with VAT as part of the resources available to us”.

Lawan urged the Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS) and other major revenue generating agencies to strive to bring in more revenue into the coffers of government.

According to him, “We have given them all the support that is necessary. They have no reason not to improve on their collection.”