By Merit Ibe
The Lagos Chamber of Commerce and Industry (LCCI) has said that approving the Federal Government request for a supplementary budget will raise the budget deficit for 2022 from N10.78 trillion to N11.6 trillion, about 4.43 percent deficit to GDP ratio.
President Muhammad Buhari had asked the National Assembly to approve a supplementary budget of N819 billion, which he intends to use to finance infrastructural projects across the country.
But reacting to the request, the Director-General of the chamber, Dr. Chinyere Almona, said the implications of the massive borrowing by the government to the economy include crowding out credit to the private sector, increasing the cost of debt servicing and making the economy more vulnerable to unforeseeable shocks in an election year.
The chambers noted that the unprecedented damage inflicted on some of our infrastructure due to flooding in most parts of the country require urgent financing action by the government and expects the supplementary budget to be used totally to repair damaged infrastructure, calling on government to invest more in building infrastructure to prevent future disasters.
In the face of current realities, Almona urged government at all levels to be more proactive rather than reactive to nature-induced casualties, climate change impacts and damages caused by human activities.
“In August this year, the Nigerian Meteorological Agency (NiMet) warned of possible flooding in about 20 states, but unfortunately, both citizens and the governments paid no significant attention to it.
“This brings to question what support is given through the utilisation of ecological funds shared among the three tiers of government to finance projects aimed at both adaptation and mitigation activities against natural disasters. We must also ask the states and local governments to account for the utilisation of ecological funds allocated to them. There is an urgent need for a better management and evaluation model to utilise the ecological funds.
“A deeper look at the figures showed that the supplementary budget if approved, will raise the budget deficit for 2022 from N10.78 trillion to N11.6 trillion and about 4.43 per cent deficit to GDP ratio.
“The most critical issue, though, is not about the level of spending but the cost of borrowing.
“At the end of the first half of 2022, total debt service stood at N2.597 trillion, higher than the prorated sum of N1.978 trillion by N619.81 billion (31.33 percent).
Also, the interest payments on Ways and Means collected from the Central Bank of Nigeria amounted to N714.74 billion.
According to data from the Budget Office of the Federation, the sum of N1.333 trillion was used for domestic debt servicing, a difference of N52.34 billion (4.09 percent) from the prorated half-year projection.
In contrast, N549.70 billion was spent on external debt servicing during the period under review. And with the plan of the Federal Government to restructure its Ways and Means loans of N23 trillion, Nigeria’s total debt would effectively be at N67.7 trillion by the end of 2022. We must watch the cost implications of our borrowing and spending.
On the revenue side, the DG said the economy has not performed to expectations. At the end of the first half of 2022, the Gross Oil Revenue amounted to N2.17 trillion against N4.7 trillion prorated budget projection for the period. This is lower by N2.5 trillion (about 53.63 percent) compared with the 2022 half-year budget estimate. The government must arrest the rising costs and dwindling revenue profile of the economy to boost growth and resolve the many economic ills in the country at this time.