2022 budget: Buhari defends borrowing to fund capital projects

President Muhammadu Buhari has defended his government’s action of borrowing to fund capital and strategic projects in the country.

Presenting the 2022 budget to a joint session of the National Assembly on Thursday, the President stated that borrowing to finance developmental projects is not against the law.

The Nigerian leader acknowledged the concerns of some Nigerians over the level of borrowing of his administration, stating that the debt level of the government is still within sustainable limits.

Buhari said his government has used the loans to finance critical development projects and programmes aimed at improving the economy and ensuring effective delivery of public services to Nigerians.

He said: “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. Borrowings are too specific strategic projects and can be verified publicly.

“As you are aware, we have witnessed two economic recessions within the period of this Administration. In both cases, we had to spend our way out of recession, which necessitated a resort to growing the public debt. 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.

“Our target over the medium term is to grow our Revenue-to-GDP ratio from about 8 percent currently to 15 percent by 2025. 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 that we are determined to tackle to ensure our debts remain sustainable.

“Very importantly, we have endeavoured to use the loans to finance critical development projects and programmes aimed at improving our economic environment and ensuring effective delivery of public services to our people.”

Buhari disclosed that his government will be borrowing N5.01trn, N90.73bn from Privatization Proceeds and N1.16trn trillion drawdowns on loans to fund the 2022 budget deficit.

He added: “We expect the total fiscal operations of the Federal Government to result in a deficit of 6.26 trillion Naira. This represents 3.39 percent of estimated GDP, slightly above the 3 percent 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

“We need to exceed this threshold considering our collective desire to continue tackling the existential security challenges facing our country.

“We plan to finance the deficit mainly by new borrowings totalling 5.01 trillion Naira, 90.73 billion Naira from Privatization Proceeds and 1.16 trillion Naira drawdowns on loans secured for specific development projects.”