Home Finance Fiscal sustainability of 2022 budget may not be different from 2021 budget

Fiscal sustainability of 2022 budget may not be different from 2021 budget

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The former director-general of the Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf, has said that the outlook for the 2022 budget may not be different from this year’s budget, emphasizing that the main budget concern is the sustainability of public finances, particularly in the context of recent weak revenue performance.

According to him, revenue performance had repeatedly remained well below targets over the years. Regarding the outlook, he affirmed that the year 2022 would be characterized by high risks since the deficit would exceed the budgeted threshold.

“Debt sustainability challenge would persist. Debt service would continue to exert severe pressure on government finances. The Central Bank of Nigeria (CBN) financing of the fiscal deficit would likely persist. This has serious consequences for inflation because of the profound impact on money supply growth.

“The capital budget will be financed entirely from borrowing. The Finance Minister has already hinted that government revenue could barely cover recurrent expenditure and debt service. Fuel subsidy regime would persist with attendant fiscal pressure and leakages,” he explained.

Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), lamented that the huge and growing recurring expenses would continue while the prospect of reducing administrative costs would remain slim.

On the way forward, he said: “There is the need to fix the security problems to create the environment for increased real sector activities. Review the foreign exchange policy regime to reduce distortions, eliminate arbitrage opportunities, minimise uncertainties, reduce exchange rate volatility and mitigate investment risks.

“Align CBN financing of deficit strictly to the provisions of the CBN Act. Demonstrate the political will to deal with the crisis at the Lagos ports. Refrain from imposing new Excise Duties on the manufacturing sector. The sector is  grappling with too many macroeconomic and structural challenges already.”

He advocated the need for the government to stop the accumulation of commercial debt for sustainability reasons. While insisting that some of the budget assumptions were realistic and some were not.

He noted the assumptions and used them as a benchmark for the oil price of $57 per barrel, the oil production of 1.88 million barrels per day, the exchange rate of N410.15 per USD, the rate Gross Domestic Product(GDP) growth of 4.2 per cent and an inflation rate of 13 per cent.

He said: “The foregoing assumptions are generally realistic but for two of the assumptions. The first is the exchange rate assumption, which does not reflect the current exchange rate realities. The second is oil production. Oil output had continued to suffer setbacks as a result of security challenges faced by oil-producing companies.  The companies have also been contending with numerous policy and regulatory challenges.’’

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