TheCable

Ben Akabueze, director-general, budget office of the federation, says Nigeria is deliberately diversifying in 2022, as oil revenue failed to meet its projected target in 2021.

Akabueze said this during a webinar organised by Nigerian Exchange Limited (NGX) on Thursday, tagged “2021 Market Recap and Outlook for 2022′.

He said Nigeria’s revenue trajectory is positive as non-oil revenue performed better than oil revenue in 2021. 

According to him, oil revenue was targeted at 35 percent in the 2022 budget — far from 58 percent in 2015 — to prevent reliance on the oil sector.

“What we have seen is that when you look at the 2015 budget, for instance, oil revenue was 58% of FGN’s projected revenue. If you look at the 2022 budget oil revenue is 35 percent,” Akabueze said.

“So, basically, as a matter of deliberate strategy, we are focusing on non-oil revenue; and when you look at the results that we achieved in 2021, we were very encouraged that this is moving in the right direction. 

“In 2021, non-oil revenue came in at 15 percent above target while VAT came in at 69% above target, customs revenue collections came in at 10 percent above target. 

“Federal government’s independent revenues, mostly transfers from our government-owned enterprises, came in at 18 percent above target. 

“What led us down in 2021 was the oil sector, and oil let us down fiscally for three reasons.”

According to him, fuel subsidy resurfaced in 2021 even though it was pronounced to be gone in the previous year.

He noted that this was largely driven by the combination of higher oil prices and a devaluation of naira as it was not feasible by the relevant authorities to continue to adjust the pump prices of petrol further. 

“The subsidy scheme operates as a deduction upfront withdrawals from oil and gas revenue before it even hits the federation account to be shared. We lost over N1 trillion as a matter of impact in 2021. Oil revenue came short for that reason,” he said.

“The other reason why oil revenue came short was that production for most of 2021 came in below the 1.86 million barrels per day we had projected.”

The DG said despite the significant increase in oil price above the 2021 budget benchmark, Nigeria ended up with oil revenues at 50 percent below the projected target.

“All of that combined depressed oil revenue and that was what led us down for revenue projections in 2021,” he said. 

On the other hand, Akabueze said the Nigerian National Petroleum Corporation (NNPC) provided the executive with an N3 trillion bill for fuel subsidy because of the soaring oil prices.

The federal government had proposed an 18-month extension of its implementation — retaining petrol subsidy that gulped N1.4 trillion in 2021.  

“By mid-last year, when we were working on the projections for 2022, the estimated cost, if the subsidy scheme was in place for the full year, was put at N885 billion,” he said. 

“And because we then projected that it will go off by the middle of the year, in the 2022 fiscal framework, provision was made for only N443 billion.

 “When we ran the projections, the daily petrol consumption number that was used was N60 million. Now, NNPC has revised that to N65 million based on current circumstances.

“Secondly, we projected that crude oil prices will grow, which is why the benchmark price in 2022 was slightly higher than 2021; but we didn’t see oil prices as high as they are now.

 “Crude oil price is the biggest determinant of the prices of the refined crude oil; so that has gone higher than was projected. 

“Exchange rate also is higher. The 2021 budget was predicated on N379 to the dollar exchange rate, 2022 is N410.11.”