The President of the Federal Republic of Nigeria, Muhammadu Buhari, presented the 2022 National Budget to the National Assembly in a joint session, proposing a budget of N16.4tn, which is 12.5% greater than the passed 2021 budget. The 2022 Appropriation Act is projected on the assumption of a growth forecast of 4.2%, with a crude oil benchmark price of $57.0 per barrel, a daily oil production estimate of 1.88million barrels (inclusive of condensates of 300,000 to 400,000 barrels per day and an exchange rate of N410.15/$1.

 Looking into the expenditure breakdown, 41.7% of the budget was set out for recurrent expenditure (recurrent + statutory transfers), 22% was allocated for debt servicing, whilst just 32.7% of the total budget was set for CAPEX spending. On the revenue side, the FGN estimates total projected revenue of N10.1tn (including GOEs), which is 24.8% higher than the 2021 projection of N8.1tn, with oil income 34.9% higher and non-oil revenue higher by 65.1%. Unsurprisingly, due to the sheer size of the proposed 2022 budget, the budget deficit remains robust at N6.22bn, although less than the eventual 2021 budget +NASS supplementary budget.

 Our initial outlook for the implementation of 2022 is that the debt financing shortfall required for the FGN would be even steeper in actual terms. Our position is predicated on continued historical budget underperformance of the revenue segments of previous budgets. 2020 aside (2015-2019), the average five-year revenue performance sits at 77%. In the same period, the actual deficit to budgeted deficit, reports at 1.3X which essentially highlights the FGN disposition to exceed and overborrow from its budgeted deficit positions. For 2022, we expect this trend to continue leading to a potential crowding-out effect, potentially hurting private issuances. 

Please CLICK HERE to download the report.