2022 Budget: FG Ignores Rivers, Lagos VAT Row, Targets N316bn

Despite ongoing legal tussle over which tier of government to collect Value Added Tax, the Federal Government (FG) has estimated N316.69bn as its share of VAT in 2022.

The sum is part of what the Federal Government plans to fund the 2022 Budget according to the details of the Appropriation Bill sighted by our correspondent on Friday.

The Federal High Court, Port Harcourt, had on August 10 ruled that states, and not the Federal Inland Revenue Service, had the legal rights to collect VAT and income tax. The FIRS has appealed the judgment.

Meanwhile, Rivers and Lagos State Governments have since signed laws authorising states to collect VAT.

The Southern Governors Forum had in a meeting held in Enugu recently also expressed support for the collection of VAT by state governments.

Despite the development, the Federal government listed its N316.69bn share from VAT as part of its share of non-oil taxes that it plans to fund the 2022 Budget with.

The projected share from VAT is N78.2bn more than the N238.42bn share in the 2021 budget and the supplementary budget of the same year.

Still, on non-oil taxes, the Federal Government plans to get N909bn as a share of CIT; N834bn as a share of Customs; and N71.9bn as a share of Federation Account Levies.

In all, the government is targeting N2.1tn from its share of non-oil taxes as against N1.5tn in 2021.

It is also targeting N3.15tn from its share of oil revenue as against N2tn in 2021.

The government is also targeting dividends from Nigeria Liquified Natural Gas and Bank of Industry totalling N195bn.

Its share of minerals and mining is put at N2.5bn among other sources of revenue.

FG begins aggressive revenue mobilisation plan, to sanction MDAs for unmet revenue targets

To tackle the revenue problem, the Federal Government said it was beginning aggressive revenue mobilisation initiatives.

As such, the minister said the government was working on a plan to sanction ministries, departments and agencies if they failed to meet up with their revenue targets.

This, according to her, will boost the revenue performance and remittance of government-owned enterprises.

“We are working to ensure that MDAs appropriately account for and remit their internally generated revenue

“GOEs’ revenue performance/remittance will be enhanced through effective implementation of the enhanced performance management framework, including possible sanctions should they default on their targets; tighter expenditure control including enforcing of Finance Act 2020 provision limiting GOEs cost-to-revenue ratio to a maximum of 50 per cent; and regular independent monitoring and reporting of revenue and expenditure performance of GOEs by both the Budget Office of the Federation and the Office of the Accountant General of the Federation,” the minister said.

She noted that the agencies were limited to spending not more than 50 per cent of what they generated.

“These agencies cannot spend more than 50 per cent of what they generate. And this is one major revenue that would be coming into the government’s treasury,” she said.

According to her, a robust monitoring mechanism has been put in place to assess the performance of the agencies.

She added that the new plan to sanction them for revenue target failure would be included in the Finance Act 2021 or as a directive from the President.

She said, “We have some provisions that we hope to make in the Finance Act that we are currently working on. But in addition to that, we also have a robust monitoring mechanism that is regular and continuous and tracking the performance and alerting these agencies where they are already falling short.

“It did not use to happen. A long time ago, people just worked and tracking was not done. By the time you make an assessment and underperformance is reported, it is already late.

“So, we are doing more constant tracking and monitoring, continuous monthly reconciliation is being done with the revenue-generating agencies and specific sanctions may be provided either in the Finance Act or be directed by the President because that is a discussion that is ongoing. And for agencies that continually default on their targets, the leadership of those agencies will have to face some consequences.”

Earmarks N1.64tn for 2023 poll, others
Also, the need for additional budgetary provisions for the 2023 polls, national population census next year and the implementation of the Petroleum Industry Act, among others, has forced the Federal Government to review the 2022-2024 Medium-Term Fiscal Framework and the 2022 budget.

Consequently, not less than N1.643tn has been earmarked for special police operations, national poverty reduction programme, payment of government agencies, among other critical projects, aside from the advance preparations for the 2023 polls and a national population census next year.

The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, made this disclosure during a public presentation of the highlights and breakdowns of the 2022 Appropriation Bill in Abuja on Friday.

ing, Mrs Zainab Ahmed, made this disclosure during a public presentation of the highlights and breakdowns of the 2022 Appropriation Bill in Abuja on Friday.

She said, “The increase on the expenditure side was motivated by the need to provide for additional critical expenditures, as well as the need to present a more comprehensive FGN budget.

“Some of these provisions include N100bn additional provision for the Independent National Electoral Commission towards advance preparations for 2023 general elections; N400bn for National Poverty Reduction with Growth Strategy; N178.1bn provision for population and housing census scheduled for 2022; N50bn Police Operations Fund; N37bn additional provision for Ministries and Departments’ electricity bills debts; N517.5bn additional multi-lateral/bi-lateral project-tied loans; N54bn to NASENI, which represents one per cent FGN share of federation account; and N305.99bn for TETFUND (funded by the education tax).”

The President, Major General Muhammadu Buhari (retd.), had on Thursday presented the 2022 Appropriation Bill consisting a total aggregate revenue of N16.39tn before a joint session of the National Assembly.

Buhari told the lawmakers that his regime would finance the N6.26tn deficit contained in the 2022 budget proposal with N5tn which his regime proposed to borrow from local and foreign sources.

Economic and financial experts, however, advised the Federal Government to consider selling refineries and other assets being used to siphon public resources in order to realise resources required to finance part of its budget deficit of N6.3tn.

The advice came following a recommendation by the Senate asking the Federal Government to reduce its spate of borrowing and high deficit financing.

But giving the breakdown of the budget on Friday, Ahmed justified the high borrowing.

She also explained the reasons for the reviews of the 2022-2024 MTFF and the 2022 budget proposal.

According to the minister, the underlying drivers of the 2022 fiscal projections, such as oil price benchmark, oil production volume, exchange rate, Gross Domestic Product growth, and inflation rate have remained unchanged in the previously approved 2022-24 MTEF and FSP.

However, she pointed out that the revision in the medium-term fiscal framework was necessitated by the need to reflect the new fiscal terms in the Petroleum Industry Act 2021, as well as other critical expenditures in the 2022 budget.

Minister justifies excessive borrowing, blames insecurity, COVID-19
On the excessive borrowing by the Federal Government, Ahmed said the Federal Government exceeded its fiscal borrowing threshold in 2021 due to rising security spending and the COVID-19 pandemic.

She noted that the government borrowed N3.65tn to finance its N4.3tn fiscal deficit between January and August this year.

“This year, we have exceeded the three per cent (borrowing threshold) by 0.39 per cent, and this also has been allowed in the Fiscal Responsibility Act through a provision that said that Mr President can exceed the three per cent threshold where there is a national emergency.

“And it is our collective view that the current security situation that we have, the need to properly address the economic conditions occasioned by the COVID-19 pandemic and the crash of crude oil price qualify as a national emergency.”

She also attributed Nigeria’s recovery from two economic recessions to the constant borrowings.

The minister said, “To compound matters, the country has technically been in a situation where we have had several security challenges. With the pervasive security challenges across the nation, there is a need for sustained funding of the security services.

“This has necessitated massive expenditures on security equipment and operations, and this has contributed again to the fiscal deficit; defence and security sector accounts for 22 per cent of the budget expenditure for 2022.”

She added, “We have resorted to borrowing to finance our fiscal gaps. However, we believe that the debt levels of the Federal Government are still within sustainable limits

“We have a revenue challenge that we need to continue to address. The truth is that we don’t have a debt sustainability problem, but a revenue problem. And that is what we are working to address.”

With a proposed aggregate expenditure of N16.39tn, the government plans to spend N3.61tn on debt servicing, which is 22 per cent of the total expenditure.

FG appropriates N469m for vaccine procurement, distribution
Meanwhile, the Federal Government has again appropriated a total of N469,519,350 for vaccine procurement and distribution in the 2022 budget proposal despite allocating N83.5bn for the same purpose in the 2021 supplementary budget.

According to an analysis of the budget, N308,622,093 has been earmarked for the procurement of vaccines for travellers and pilgrims while N160,897,257 will be for the distribution of vaccines from the cold store of the National Primary Healthcare Development Agency to the six geopolitical zones as well as from the six zones to the 36 six states and the Federal Capital Territory.

Nigeria has so far received a total of over nine million doses of vaccine in donation from other countries through the COVAX facility. It has also acquired a little over 29 million doses of the Johnson and Johnson vaccine through the AVATT facility.

Only seven million doses of the vaccine have been used as of October 8, 2021.

In March, a total of 3.9 million doses of AstraZeneca vaccine was donated to Nigeria through the COVAX facility.

The United States also donated a little over four million doses of the Moderna vaccine.

Also, Nigeria got 669,760 doses of the Astrazenca vaccine from the United Kingdom in August via the COVAX facility while another 501,600 doses were donated by France to the country.

The Federal Government also received 177,600 doses of the J & J vaccine which it purchased in collaboration with the African Union, with the country still expecting close to 29 million doses between now and the end of 2022. However, the J& J vaccine has yet to be distributed.

The 2022 budget read in part, “Procurement of travellers and pilgrim vaccine as an ongoing project to gulp N308,622,093. Vaccine distribution and movement from the National Strategic Cold store to the six zones and from the zones to the 36 states to the FCT posted as an ongoing project and to gulp N160,328,960.”

NASS to get N134bn
The legislative and the judiciary arms of the Federal Government are to get the sum of N154bn in the next fiscal year.

According to the details of the budget proposal, the National Assembly is to get N134bn, while the judiciary (excluding the Federal Ministry of Justice) is to get N110bn.

The National Assembly and the judiciary are part of the bodies under statutory transfers, whose funds are shared as first line charge.

In 2021, N125bn was proposed for the National Assembly and its affiliates but it was eventually raised by the lawmakers by N8,999,950,000, putting the new total estimates at N133,999,950,000.

In 2020, the National Assembly raised its budget from the proposed N125bn to the N128bn that was eventually approved.

The National Assembly Management, Senate, House, National Assembly Service Commission, Legislative Aides, Public Accounts Committee – Senate, PAC–House, General Service, National Institute for Legislative and Democratic Studies, Service Wide Vote, and Office of the Retired Clerks and Permanent Secretaries, are the line items under National Assembly.

The judiciary has been receiving N110bn in the last three years. It had N100bn in 2017.

Buhari had proposed N100bn for the Judiciary in the 2018 budget but the National Assembly jerked it up to N110bn, an amount that was maintained till 2021.

Besides, the Director-General, Budget Office of the Federation, Ben Akabueze, has insisted that the Federal Government must continue to spend more to remain out of recession, while justifying the borrowing spree embarked upon by the regime due to revenue shortage.

Speaking on the growing budget deficit, Akabueze stated, “As in all situations, whether at the level of individuals or families, you weigh your decision vis-a-vis the options that you have. What is the option? The option is not to spend at a time like this? Is it time not to spend on security?”

The DG of Budget Office made this known while featuring on Politics Today, a current affairs programme on Channels Television, monitored by one of our correspondents on Thursday.

Akabueze said, “Of this budget of N16.39tn, between defence and internal security, you have N2.3tn provided. Yet, the defence/security agencies still say it is not enough and they are probably right.

“In this budget, you have the aggregate provision for the education sector at N1.16tn, which is 11.5 per cent. Yet, the education sector is crying that it is underfunded. The aggregate provision for health in this budget is about N684bn, and the sector says it is underfunded.

“Everybody says they are underfunded. For Works and Housing, we have N389bn provided for the projects. The Minister of Works (Babatunde Fashola) now says he needs three times that number. So, what is the option when people say we should not (spend) at a time like this?”

Buhari, Osinbajo’s offices to spend N2bn on international trips
For its 2022 appropriation bill, the Federal Government has earmarked N2,009,750,909 for international trips for the offices of the President and Vice President.

This is aside from the N1,077,577,290 allocated for local travels, bringing the total amount budgeted for transportation to N3,087,328,199.

According to the details of the bill, the Presidency would receive N91.63bn, N16.25bn, N42,71bn for personnel, overhead costs and capital projects respectively. This brings the total amount to N150.59bn.

A closer look into the bill revealed that N12.3bn, N24.83bn and N1.18bn were allocated for the State House headquarters, Office of the President (State House Operations) and Office of the Vice President respectively.

A breakdown of the above amount revealed that N644.3m was allocated for food and refreshment, N76.6 million on residential rent and N7.3m on “anti-corruption.”

A further breakdown shows that the State House Headquarters would gulp N135.66m for refreshment and meals while State House operations for the President and Vice President’s offices would guzzle N30.65m and N20.26m respectively.

To purchase foodstuff and catering materials, N301.13m and N156.66m were earmarked for the Office of the President and Vice President, respectively.

Also, N120.70m was allocated for cooking gas at the State House catering service as well as fuel for the State House.

N21.32m was allocated for medical expenses for the State House Medical Centre while an additional N21.97bn would go for the construction of the Presidential Wing of the State House Medical Centre. Drugs and medical supplies for the Medical Centre will gulp N50.29m

Still, in the State House, N1.6bn was allocated for the “phased replacement of vehicles and spares” while N5.18bn would go for annual routine maintenance of mechanical/electrical installations of the villa.

The President defended his regime’s decision to borrow N6.258tn to make up for the budget deficit, saying that Nigeria’s debt level was still within sustainable limits.

He had said, “We expect the total fiscal operations of the Federal Government to result in a deficit of N6.26tn.

“This represents 3.39 per cent of estimated GDP, slightly above the three per cent threshold set by the Fiscal Responsibility Act 2007.

“Countries around the world have to of necessity over-shoot their fiscal thresholds for the economies to survive and thrive.”