Nigeria’s president unveiled a record 16.39 trillion naira ($39.8 billion) budget for 2022 on Thursday 7th of October, with a projected 25% year-on-year rise in government spending as the economy struggles with the impact of the pandemic.

Nigeria’s President unveils record for 16.39 trillion budget.

The plan for Africa’s most populous country and top oil exporter assumes crude production of 1.88 million barrels a day and an oil price of $57 per barrel, Muhammadu Buhari said.

The deficit would rise to 6.26 trillion naira, or 3.39% of GDP, funded mostly by new borrowing and privatizations, he told a joint session of both houses of parliament.

“Some have expressed concern over our resort to borrowing to finance our fiscal gaps. They are right to be concerned. However, we believe that the debt level of the Federal Government is still within sustainable limits,” he said.

“It is unlikely that our recovery from each of the two recessions would have grown as fast without the sustained government expenditure funded by debt,” he added, referring to a 2016 recession and to the 2020 crisis brought on by COVID-19.

Buhari confirmed a previously published 2022 GDP growth forecast of 4.2% and an inflation projection of 13%.

“Our target over the medium term is to grow our Revenue-to-GDP ratio from about 8 percent currently to 15 percent by 2025,” said Buhari.

“At that level of revenues, the Debt-Service-to-Revenue ratio will cease to be worrying. Put simply, we do not have a debt sustainability problem, but a revenue challenge which we are determined to tackle to ensure our debts remain sustainable.”

Nigeria has passed a string of record budgets since Buhari took office in 2015, but the country has struggled to fund the spending plans due to low revenues. The pandemic has added to the revenue problems.

The economy is projected to grow by up to 3% this year after it expanded by 5% in the second quarter. It contracted in 2020 due to the pandemic, though it managed to exit recession in the fourth quarter, but growth is fragile.

($1 = 412.0000 naira) (Reporting by Chijioke Ohuocha, Felix Onuah, MacDonald Dzirutwe and Camillus Eboh Writing by Estelle Shirbon Editing by David Goodman and Andrew Heavens)