Nigeria’s 2021 Budget — Your Guide to Another Bogus Budget

11 min readOct 17, 2021

Many people have said that analyzing Nigeria’s budget is a waste of time as it has proven to be a jamboree. This is something I buy into as well. However, because it is what we have penned down that will likely remain when this administration is gone, it is important to put this out to show how the country is in Year 2021. This occured to me when an economics student reached out to me after reading an edition of Freshly Pressed newsletter where we reported that President Buhari presented the National Assembly with the budget for the 2022 fiscal year. (1) (fiscal technically means financial and it is a term reserved for government as it relates to taxation, public revenue and debt. (2)). He wanted to know what it means and how it applies to him.

Nigeria’s 2021 Budget
In my personal finance classes, one of the very first things I teach is budgeting. Budgeting makes you create a plan for your spending. I have often said that past a certain point, it is not what you earn that matters but what you are able to keep. It is an essential part of living a disciplined life. Patrick Rush who is a Forbes’ recognized financial advisor to several wealthy people said that one of the most important things wealthy people do is create a financial plan, which includees budget, for themselves.(3) Fortunately, for countries, it is a constitutional requirement for the leader of the state to present a plan of how public funds will be spent and received.

Therefore, on October 7, President Buhari presented the 2022 budget to the National Assembly; a record 16.39 trillion in naira terms. Nigeria’s budget continues to increase in naira terms. From N700 billion in 2000 when we returned to democracy, the budget has grown 20 times to the proposed figure for 2022. In the last five years alone, the national budget grew three times from N4.5 trillion in 2015 to ₦14 trillion in 2020.

If you have heard that the president presented the appropriation bill and you are confused, what it means is that a law was proposed by the executive arm of the government to authorize them to spend government funds. (4) Without the legislative arm agreeing to pass that law, the executive cannot touch touch its funds. It should not be taken for granted that the budget is ready to be passed at this time. It is to be commended that we may be seeing the budget ready to be implemented as the new year kicks off. In fact, this is the third consecutive year that a full year — January to December -budget implementation will be possible. It used to be quite comical. For instance, in 2017, the National Assembly did not pass a budget meant for that year until May of that year — 5 months after the year had begun. (5)

This happens for several reasons including bad blood between the executive and the legislative. Several times the National assembly asks the executive to increase their budget and the executive refuses. Most times, the National assembly, which is already one of the highest renumerated in the world (6), gets its way. Already, a member of the House has said that the amount allocated in the 2022 appropriation bill is inadequate. (7) He called for an increase in the allocation to the National Assembly “for it to fulfill its mandate”. This is despite the House’s refusal to give details of its annual budgetary allocations like other ministeries of the government and the inclusion of an extra N6 billion to the initital N125 billion allocated. There are insinuations that the notorious National Assembly will up the figures again before passing the budget.

Key Issues of the Budget
The shenanigans of the National Assembly in passing the budget is not the most serious part of the budget. The more important issue is that the ₦16.39 trillion is an unrealistic budget. When you decide to make a budget, you consider how much you are expecting as revenue to decide what your expenditure would be. Not Nigeria. Nigeria consistently projects unrealistic revenue. In 2020, Nigeria projected to generate N5.3 trillion but could only generate N3.93 trillion. (8) Since 2016, the Buhari administration has been able to generate only 55% of its project revenue. In 2022, it is projecting to generating $10.13 trillion. Where will the funds come from? I will talk about this in a bit.

It should be noted the reasons for this misguided projections. A look at the line item from Grants and Aid show that the government expects to receive N63.38bn in 2022. This is despite the fact that from 2015 to 2020, Nigeria has received only $26.9bn in foreign support according to the Minister of State for Budget and National Planning. (9) Many have said the oil and non-oil projected revenue are also off the mark considering where we are. For instance, as at July 2021, total non-oil revenue has only met a pro-rated target of 73%. (10) For the oil revenue, Nigeria says we will produce 1.8 million barrels per day next year. This year, we have only been able to produce 1.2 million barrel despite OPEC increasing the quota to 1.6 million. (11) Only a target of 56% of the revenue from oil has been achieved so far.

All these is to say that the government already knows that it’s revenue project is not feasible. So where cometh the confidence to continue making the projection?

The Power of Debt
Since Muhammadu Buhari got into office, the rate of accumulating debt has been legendary. When the Jonathan administration came to an end in 2015, Nigeria’s total foreign debt was $7.3 billion. As at December 2020, the Buhari government has increased the debt to $28.57 billion. This means that the president incurred $21.27 billion on foreign loans to the country’s debt portfolio. Overall, the current administration has accumulated debt of N17.06 trillion as of March 2021. This is a 173.2 percent increase from when he was elected president in 2015. (12)

What is concerning about this debt is that the current administration borrows these funds in violation of existing financial laws in the country. The ministry of finance herself admitted that the Fiscal Responsibility Act is being flaunted as the federal government exceeded its 3 percent fiscal borrowing threshold. (13) Last month, I joined two of my friends to sue the Central Bank of Nigeria to court (14) for breaching the law stipulating that overdrafts to the government by the CBN should not exceed 5 percent of the previous year’s actual revenue. (15) By the end of 2020, CBN overdrafts to the Buhari government exceeded the limit by 69 percent of the revenue generated in 2019.

Just as individuals are required to pay debt, it is even more important that countries pay their debts. Therefore, as a result of debt accumulated, Nigeria is having to spend 74% of its revenue to service its debt. (16) Earlier this month, even the respected General Overseer of the RCCG, Enoch Adeboye, lamented the high rate of debt service in Nigeria. He said those close to the government have told him that the country uses 90% of what it makes to service debts. (17) Curiosly, a few days later, a member of his congregation, Vice President Yemi Osinbajo, came out to say Nigerians should not panic over the nation’s risign debts. (18)

Should Nigeria’s Debt Worry You?
While Muhammadu Buhari is taking more debts — he is seeking another aproval to borrow another $5 billion from the National Assembly (19)- he is actively calling on Nigeria’s debtors to forgive the country’s debt. Just some days after he made that request to NASS, he was at the 76th Session of the UN General Assembly in New York where he appealed to ”rich nations” and international financial institutions for outright debt cancellation for Nigeria (20). This was just just some few weeks when he receive approval from NASS to borrow $9 billion which outraged the opposition party, PDP. (21)

The Nigerian government believes that debt is the only feasible route to the nation’s development. As is, Nigeria is one of the countries in the world with the most exposure to debt risk according to the World Bank. (22) Experts say that the projects financed by these loans upon analysis would not have any meaningful impact on the economy, so it will be a lose-lose situation.

Former President Obasanjo has called this administration’s appetite for loans for the next generation to pay ‘criminal’. (23) Obasanjo knows a thing or two about loans. In 2006, he paid off some of Nigeria’s external debts. (24) Regarding the loans being piled up by this administration, he stated that “If we are borrowing for recurrent expenditure, it is the height of folly. If we are borrowing for development that can pay for itself, that is understandable. Then the payment, how long will it take to pay itself?” The World Bank Country Director for Nigeria, Shubham Chaudhuri, in a June 2021 report said that as it stands Nigeria ““faces interlinked challenges in relation to inflation, limited job opportunities, and insecurity”. (25) This makes the utilization of these loans to impact lives difficult because the loans are not being appropriately channeled. While the government says it is taking the loans to for infrastructure, the World Bank report states that lack of commitment to the necessary reforms will hinder progress.

To be clear, more borrowings means that an increasing proportion of revenues generated will be devoted to debt service. And with reports that foreign investors’ interest in Nigeria has declined by 27.5%, it shows how difficult a terrain investors find the business and economic climate. (26) “Do I see the plans that these borrowings will facilitate the diversification of the economy? My straight answer is No, I do not see the plan.” This was said by Pat Utomi, Professor of Social and Political Economy at the Pan-Atlantic University. A view that many experts continue to echo. (27) The chairman of President Muhammadu Buhari’s Economic Advisory Council (EAC), Dr. Doyin Salami, has said Nigeria’s current public debt stock is unsustainable. (28) Muhammad Enagi, Vice Chairman of the Senate Committee on Foreign and Local Debts, in March 2020, aptly noted that, “the big question in the minds of average Nigerians aware of this fact is, what did we do with the money? In other words, where did the money go? (29) What do we have to show as a people for these huge debts?” He is from the President’s party.

What Should Do?
As usual, in many analysis, I reserve the last section to discuss possible actions that the individual Nigerian can take. You may already have guessed that it’s likely for the 2022 to be of much benefit to the Nigerian. Despite increasing the budget three times in the last five years, more Nigerians are poorer today than in 2015 (44% vs 38%). (30) The GDP per capita has reduced ($2000 vs $3000). (31) Nigeris is budgeting more on recurrent expenditure today than on capital expenditure that will create future wealth. We are not spending on the economy that will lead to business growth and the attendant effect of employment, which means that the underlying cause of rising insecurity such as high poverty level and lack of economic opportunities may not go away anytime soon.

- Target Fast Growing Sectors. Data from the National Bureau of Statistics show that the fastest growing sectors in the Nigerian economy include Information and Communication sector, Electricity, Gas, Steam and Air Conditioning Supply sector, and Water supply, Sewerage, Waste Management and Remediation. (32) Fast growing sectors imply that those operating in these industries earn significantly more profits than those in the other sectors of the economy. Because of this, they are able to attract investments into their sectors and there are more opportunitire for job growth and creation. With all the incentives put in place by this administartion and state givernments, mechanized agriculture is also a great sector, if you can battle challenges of insecurities.

- Brace Up for More Food Inflation & Devaluation. It was preposterous to see that the echange rate in the budget was pegged at N410. The Vice President himself gave himself away when he said the N156 spread between the dollar at the banks and that in the black market is too wide, tacitly endorsing devaluation. (33) Some have faulted this stance but like I say, reality will always catch up. The president in 2015 said he was never going to devalue but reality caught up with him. From N200 to a dollar, Nigeria has devalued to N410. If you think we can continue with this huge spread between these markets, then you have not been paying attention to Nigeria’s economy realities. Devaluation means things will become more expensive because we import most of what we consume. So what can you do now to guard yourself? Put on your thinking caps.

- Make a Deliberate Effort to Increase Your Income. While millions of people fell into poverty between 2015 and now, there are those who intentional found their way to earn more. There is no reason that cannot be you. One of your privileges is reading this article that encourages you to prepare. Upskill and reskill yourself. Get in-demand skills and be intentional about your career. In my personal finance classes, I teach that young people should not stay more than 2/3 years in a job because my observation is that Nigerian employers are not inclined to baseline your salaries against the dollar, so you may earn the same in naira terms but inflation will ensure that you have much less to spend. One of the surest ways of increasing your income is going to another employer.

- Earn, Save and Invest in Dollars. Because of Godwin Emefiele’s crackdown on the dollar in recent terms, I will not say more on this but many of my articles and posts are dedicated to this topic.

- — -

Nigeria’s 2021 Budget — Your Guide to Another Bogus Budget

Written by 'Tosin Adeoti

Responses (1)