NIGERIANS pushing for a cut in government spending through the reduction of recurrent expenses to raise more revenue may not have their wishes granted.
This is because the federal government believes that doing away with all overheads and the entire allocation to the National Assembly “will not move the needle” in addressing revenue shortfall.
Director General of the Budget Office of the Federation Mr. Ben Akabueze made this known in Abuja on Friday when he met with journalists.
According to him, the solution to generating more revenue is not to cut the cost of governance but to increase the scope of government spending. Cutting spending is not a viable revenue generating option. The solution he said is to fix the nation’s revenue challenge.
Akabueze went on to state that “we cannot cut our way out of fiscal expenditure, it does not represent the true solution.”
To reduce or cut fiscal expenditure he added will require government retrenching workers or cutting their salaries. These two options he said the government cannot entertain because of the socio-economic implications that will follow such decisions.
According to Akabueze, the 2022 budget has an estimated N4.1 trillion expenditure item, “cutting it will mean retrenching workers,” a decision he said the government is not ready to consider.
However, the government, he said: “will continue to rationalize our expenditures as we cannot afford waste. In reality, our largest expenditure items are currently personnel cost, debt service and capital expenditure, which between them account for 85 percent of the 2022 budget. There is very little scope for cuts in any of these over the medium term.”
Government’s target over the medium term he stated “is to grow our Revenue-to-GDP ratio from about 8 – 9 percent currently to 15 percent by 2025. At that level of revenues, the Debt-Service-to-Revenue ratio will cease to be a critical concern. We believe that the debt level of the Federal Government is still within sustainable limits, but we cannot continue to grow at current rate without significant growth in revenues”.
Speaking more on the 2022 budget, the DG Budget said: “the underlying Fiscal Framework guiding the 2022 budget is premised on a hybrid of January-June (based on current fiscal regime) and July-December (based on Petroleum Industry Act (PIA) fiscal regime).
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“What this means is that there will be two budget cycles in 2022, the first from January to June will follow the current pattern that will accommodate subsidy and other spending that the oil industry might make on the budget, while from July to December, 2022 such expenditures like subsidy will cease to exist.”
The DG Budget disclosed that “the projected aggregate revenue available to fund the 2022 budget of N10.13 trillion (inclusive of GOEs) is 24.8 percent higher than the 2021 projection of N8.12 trillion.
“Without the government Owned Enterprises (GOEs) retained revenue, the Federal Government of Nigeria (FGN) revenue is projected at N8.40 trillion,” he said.
To promote fiscal transparency, accountability and comprehensiveness, Akabueze stated that “allocations to TETFUND and the budgets of 63 GOEs are integrated in the FGN’s 2022 Budget proposal. In aggregate, 34.8 percent of projected revenues are to come from oil-related sources while 65.2% is to be earned from non-oil sources”.
Provision to retire maturing bonds to local contractors/suppliers in 2022 is put at N292.7 billion or 1.79 percent of total expenditure. “This provision is in line with the FGN’s commitment to offset accumulated arrears of contractual obligations dating back over a decade” he said.
In the two successive economic recessions over the past five years, Akabueze said the government “had to spend our way out of recession, which contributed significantly to the growth in the public debt. It is unlikely our recovery from each of the two recessions would have been as fast without the sustained government expenditure funded partly by debt.”
For the current budget year, the DG Budget said N9.93 trillion (or 90.8 percent) has been spent out of the N10.93 trillion prorated budget. “This performance is inclusive of expenditure estimates of the GOEs but exclusive of Project-tied Loans”.
So far in 2021, the government has spent N3.42 trillion on debt servicing, and N2.89 trillion for personnel costs, including Pensions. As at September 2021, N2.55 trillion had been expended for capital.
Of this, N2.51 trillion represents 85 percent of the provision for MDAs’ capital, and N40.51 billion as GOEs capital expenditure.
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