There are fresh concerns that Nigeria’s 2022 budget presented last week to the National Assembly by President Muhammadu Buhari would widen the deficit and escalate arbitrage in the foreign exchange (FX) market.
Some economic experts who spoke to Daily Sun at the weekend, based on some of the benchmarks highlighted by the president would mount undue pressure on the nation’s reserves unless oil prices improve with the Federal Government ramping up production locally to increase its foreign currency earnings.
President Buhari had stated that the 2022 Appropriattion Bill was meant to build on the achievements of previous budgets to deliver on the nation’s goals and aspirations as encapsulated in its soon-to-be launched National Development Plan of 2021 to 2025.
Buhari said the 2021 budget performance has seen actual revenues go 34 per cent below target as of July 2021, due to the underperformance of oil and gas revenue sources, citing that the Federal Government’s retained revenues (excluding Government Owned Enterprises) amounted to N2.61 trillion against the proportionate target of N3.95 trillion for the period. He also stated that the priorities of the 2022 budget would be diversifying the economy, with robust MSME growth; investing in critical infrastructure; strengthening security and ensuring good governance; enabling a vibrant, educated and healthy populace; reducing poverty; and minimizing regional, economic and social disparities.
But according to some economic experts, the country spent big for the 2022 budget tagged – Economic Growth and Recovery, stressing that given the government’s track record of revenue underperformance over the years and the absence of any major reform to drive this projection, time will soon tell on the achievability of the revenue projection. They also expressed concerns that pegging the naira official rate at N410 when exchange rate is almost at N600/$1 was an unrealist proposition.
Speaking to Daily Sun via a telephone chat, Head of Research at FSL Securities, Victor Chiazor, argued that even if the Central Bank of Nigeria (CBN) adjusts the Naira to N550 or N500, the parallel market will still move higher because the country is still not producing enough to send that signal that it does not have a liquidity problem in terms of dollar supply.
Commending government’s efforts towards meeting the invisibles, BTA, PTA, medical and hospital bills, Chiazor said the level of demand was not what Nigerians expect, adding that FX challenges still persist and that arbitrage was likely expected given the low supply capacity in the system.
His words, “Luckily we just raised about N4 billion in the Eurobond and we expect that to hit the reserves which are already inching and that should take us up to above $40 billion of our reserves.