The Senate, on Tuesday at plenary received a request from President Muhammadu Buhari for the approval of the adjustments to the 2022 fiscal framework.
Some of the key highlights of the adjustments include the increase in the oil benchmark from $62 per barrel to $73 per barrel and reduction of the projected oil production volume from 1.883 million barrels per day to 1.60 million barrels per day.
The request was contained in a letter dated April 5, read at plenary by Senate President Ahmad Lawan.
Other provisions in the adjustment are approval for an increase in the estimated provision for petrol subsidy for 2022 from N442.72 billion to N4 trillion, reduction in the provision for federally funded upstream projects being implemented from N352.80 billion to N152.80 billion.
President Buhari, in the letter, explained that an adjustment to the 2022 fiscal framework became imperative due to new developments in both the global and domestic economies which were occasioned by spikes in the market price of crude oil, which were a fallout of the Russian-Ukraine war.
Buhari in the letter said, “As you are aware, there have been new developments both in the global economy as well as in the domestic economy which have necessitated the revision of the 2022 Fiscal Framework on which the 2022 Budget was based.
“These developments include spikes in the market price of crude oil, aggravated by the Russian-Ukraine war, significantly lower oil production volume due principally to production shut-ins as a result of massive theft of crude oil between the production platforms and the terminals.
“The decision to suspend the removal of Petroleum Motor Spirit (PMS) subsidy at a time when high crude oil prices have elevated the subsidy cost has significantly eroded government revenues.’’
The president asked the senate to approve an increase in the oil benchmark by $11 per barrel, from $62 per barrel to $73 per barrel.
The President also sought a reduction in the projected oil production volume by 283,000 barrels per day, from 1.883 million barrels per day to 1.600 million barrels per day.
Buhari emphasized the need for a reduction in the provision for federally funded upstream projects being implemented by N200 billion, from N352.80 billion to N152.80 billion.
He proposed an increase in the projection for Federal Government Independent Revenue by N400 billion; and an additional provision of N182.45 billion to cater for the needs of the Nigerian Police Force.
He said, “Based on the above adjustments, the Federation Account (Main Pool) revenue for the three tiers of government is projected to decline by N2.418 trillion, while FGN’s share from the Account (net of transfer to the Federal Capital Territory and other statutory deductions) is projected to reduce by N1.173 trillion.”
He said that the amount available to fund the federal budget was projected to decline by N772.91 billion due to the increase in the projection for Independent Revenue (Operating Surplus Remittance) by N400 billion.
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He explained further that Aggregate Expenditure is projected to increase by N192.52 billion, due to increase in personnel cost by N161.40 billion and other service wide votes by N21.05 billion (both for the Nigeria Police Force), additional domestic debt service provision of N76.13 billion, and net reductions in Statutory Transfers by N66.07 billion.
Giving a breakdown, he said the net deductions would result in a cut by N13.46 billion from N102.78 billion to N89.32 billion for NDDC.
NEDC, by 6.30 billion from N48.08 billion to N41.78 billion; UBEC, by N23.16 billion from N112.29 billion to N89.13 billion; Basic Health Care Fund, by N11.58 billion from N56.14 billion to N44.56 billion; and NASENI, by N11.58 billion from N56.14 billion to N44.56 billion.
The President noted that the total budget deficit is projected to increase by N965.42 billion to N7.35 trillion, representing 3.99% of GDP. And would be financed by new borrowings from the domestic market.
Recall that President Muhammadu Buhari had earlier in a written communication to the House of Representatives, formally sought for an increase in the 2022 budget deficit to be financed through borrowing from the domestic market.
The move which will further add to Nigeria’s already huge debt profile is coming a few days after the Debt Management Office (DMO) released a schedule of the Federal Government’s N720 billion domestic borrowing plan for the second quarter of 2022.