N’Assembly Increases Extra Budget By N86.9bn to N982.729bn
Senate approves $6.183bn external loan request
The National Assembly yesterday raised the N895.842 billion supplementary budget proposal for the 2021 fiscal year submitted to its two chambers, the Senate and the House of Representatives, by President Muhammadu Buhari by N87.9 billion and approved N982.729 billion.
The Senate also approved the federal government's request for $6.183 billion (N2.343 trillion) as external borrowing in 2021 Appropriation Act.
Nonetheless, the federal government has intensified preparations for next year's budget as it approved the 2022 - 2024 Medium Term Expenditure Framework and the Fiscal Strategy Paper (MTEF & FSP), authorising the funding of a N5.26 trillion budget deficit in 2022 through external borrowings.
The passage of the supplementary Appropriation Bill 2021 by the Senate was a sequel to the consideration of a report by the Committee on Appropriation during plenary.
Presenting the report, Chairman of the Appropriation Committee, Senator Barau Jibrin, explained that N45.63 billion required for COVID-19
vaccine programme would be sourced through World Bank loans and grants.
He added that the balance of N37.93 billion is to be sourced from Special Reserve/ Levy Accounts comprising: TSA (Foreign currency component) – N25 billion; MOFI CHQ optional – N5 billion; and Foreign Revenue E-Collection – N30 billion; 65 per cent Wheat Flour Levy – N15 billion; 5.15 per cent Wheat Grain Levy – N15 billion and Rolled-Over Capital (unspent) – N5 billion.
He added that the balance of N722.40 billion, which is for capital expenditure on the procurement of additional equipment for the security agencies and capital supplementation would be sourced from new borrowing.
Barau stated that the committee, in line with the harmonised position with its House of Representatives counterpart recommended an upward review of the funding of some security agencies that were grossly underfunded or not funded in the supplementary Appropriation Bill.
He listed the agencies to include the Nigerian Navy, Ministry of Police Affairs, Defence Intelligence Agency, Department of State Security Services (DSS) and Economic and Financial Crimes Commission (EFCC).
A breakdown of the capital expenditure for Ministries, Departments and Agencies of government in the supplementary budget shows that N8,500,000,000 was approved for the Ministry of Police Affairs; N22,586,121,511 for the police; N33,673,461,231 for the Defence Headquarters; N207,543,863,993 for the Nigerian Army; N157,780,421,836 – Nigerian Navy; N239,477,882,473 – Nigerian Air Force; N43,326,943,687 – Defence Space Administration and N16,887,229,426 – Defence Intelligence Agency.
Others include: Nigeria Security and Civil Defence Corps – N14,822,575,648; Office of the National Security Adviser – N17,000,000,000; Department of State Services – N17,500,000,000; National Intelligence Agency – N4,870,350,000; Economic and Financial Crimes Commission (EFCC) – N3,500,000,000; and National Agency For the Control of AIDS (NACA) – N1,685,000,000.
Under the Federal Ministry of Health, the sum of N2,800,000,00 was approved for the procurement of molecular laboratory equipment to hospitals (N300 million); National Orthopaedic Hospital, Igbobi (N300 million); National Eye Centre, Kaduna (N300 million); National Fistula Centre, Abakaliki (N300 million); National Fistula Hospital, Sokoto (N300 million); Federal Neuro-Psychiatric Hospital, Calabar (N300 million); University of Nigeria Teaching Hospital (N300 million); Federal Medical Centre, Asaba Annex, Aniocha (N300 million) and FMC Nguru (N400 million).
In addition, N6,715,338,874 was approved for the procurement and installation of new oxygen plants nationwide and repairs of oxygen plants in FCT hospitals; and N60,728,332,500 for vaccines procurement cost (Federal Government of Nigeria Funding – $298,500,000 for 29.85 million Johnson & Johnson vaccines.
Of the total sum of N982,729,695,343 billion passed, N123,332,174,164 billion is for recurrent (nondebt) expenditure; and N859,397,521,179 billion as contribution to the development fund for capital expenditure.
Also yesterday, the House Committee on Appropriation, in its report presented by the Chairman Hon. Muktar Betara, increased the budget size to N982,729,695,343, representing an increase of N86.9 billion to Buhari’s proposal.
Betara said N123,332,174,164 was for recurrent (nondebt) expenditure, while N859, 397,521,179 was for contribution to the development fund for capital expenditure for the year ending on December 31, 2021.
Senate Approves $6.183bn External Loan Request
Meanwhile, the Senate has approved the federal government's request for $6.183 billion (N2.343 trillion) as external borrowing in 2021 Appropriation Act.
It also directed the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed; the Director-General of the Debt Management Office (DMO), Patience Oniha, and the Governor of the Central Bank of Nigeria, (CBN), Mr. Godwin Emefiele, to submit to the National Assembly within 10 working days (excluding the day of close of trading), a letter containing the United States dollars amount so raised and received as a result of the approval together with the applicable exchange rate.
The external borrowing is expected to be sourced through the issuance of Eurobond in the international capital market.
The approval by the Senate was sequel to the consideration of a report by the Committee on Local and Foreign Debts.
Presenting the report, Chairman of the Committee, Senator Clifford Ordia, said in considering the president’s request, the committee noted the serious concerns of Nigerians about the level of sustainability and servicing of Nigeria’s external borrowing.
“Due to the shortfall in our annual revenues in relation to our need for rapid infrastructural and human capital development, we had to pass deficit budget every year requiring us to borrow to finance the deficit in our budget,” he stated.
Ordia explained that the new borrowing was calculated at the exchange rate of $1/ N379, and raised from multiple sources – multilateral and bilateral lenders through the issuance of Eurobonds.
He added that the proceeds of the $6.183 billion would be used to fund various specific capital projects in sectors ranging from power, transportation, agriculture and rural development, education and health, as well as the provision of counterpart funding for multilateral and bilateral projects, defence and water resources.
He stated that the final terms and conditions – the interest rate and tenors in the case of Eurobonds – can only be determined at the point of issuance of the bonds and would be subject to market conditions prevailing at the time of issuance.
According to him, the primary listing of the bond will be on the London Stock Exchange while the secondary listing will be on the Nigerian Stock Exchange and Financial Markets Dealers Quotations (FMDQ) Securities Exchange.
The Senate, while adopting the resolutions of the Committee on Local and Foreign Debt approved the issuance of $3 billion but not more than $6,183,081,643.40 Eurobond in the international capital market for the implementation of the new external borrowing of N2,343,387,942,848, for the financing of part of the deficit, authorised in the 2021 Appropriation Act.
It also approved that the amount authorised may be raised from multiple sources as may be available.
In his remarks, the Senate President, Dr. Ahmad Lawan, said that the approved external borrowing was not a fresh loan by the Buhari administration but a request captured in the 2021 Appropriation Act passed by the National Assembly last year.
He, however, tasked committees of the National Assembly to carry out strict oversight on the application of the loans to ensure that they are strictly applied to the implementation of the 2021 budget.
Lawan urged MDAs entrusted with the management of the funds to ensure prudent application to projects nationwide.
Buhari, in a request letter dated May 18, 2021, and read at Senate plenary on June 2, 2021, had asked the Senate to approve N2.3 trillion external loan to fund the 2021 budget deficit.
FG to fund N5.62tn deficit in 2022 budget with external loans.
The federal government has approved the 2022 - 2024 Medium Term Expenditure Framework and the Fiscal Strategy Paper (MTEF & FSP), authorising the funding of an N5.26 trillion budget deficit in 2022 through external borrowings.
Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, told journalists yesterday after the Federal Executive Council (FEC) meeting that 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 VAT, respectively.
She added that the revenue is projected to increase in 2023 to N9.15 trillion.
She said: “We also reported to the council the budget deficit and the financing items for the expenditure. The budget deficit that is projected for 2022 is N5.62 trillion, up from N5.60 trillion in 2021. "This amount represents 3.05 per cent of the estimated GDP, which is slightly above the three per cent threshold that is specified in the Fiscal Responsibility Act. The FRA empowers Mr. President to exceed the threshold if, 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 projected 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 in 2019 was 58 per cent. So, this is an improvement over 2019. In 2020, the ratio was up to 85 per cent. So 2022 is a significant improvement.”
She explained that the MTF FSP describes the federal government's socioeconomic 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.
Ahmed stated that the report to the council highlighted the key drivers of government's revenue and the spending plans.
She said they had also presented to the federal government the projected revenues for the 2022 to 2024.
She said she provided to the council, a macroeconomic background, which affirmed that the Nigerian economy has recovered from a negative growth of 1.8 per cent in 2020 to 2.5 per cent.
She added that inflation has moderated from a 19-month-high in two months, while it's now moderated in two months now, that is coming down to 17.93 per cent.
She said the key macro assumptions that were presented and approved by the council was that crude oil benchmark price would be $57 per barrel of crude oil for 2022, crude oil production of 1.8 8 million barrels per day, and exchange rate of N410 to one US dollar, an inflation rate of 10 per cent in 2022, and a nominal GDP of N149.369 trillion.
Also, Special Adviser to the President on Media and Publicity, Femi Adesina, said FEC approved the Ecological Fund Projects for the third and fourth quarters of 2020 in many states.