25% of 2022 capital spending may go unfunded – Economists
APPROXIMATELY 25% of the planned capital expenditure of N4.5 billion in the Appropriation Act 2022 may go unfunded, depending on the federal government’s funding priority in FY 2022, according to the findings of a report by economists from AgustoConsulting.
The economists of AgustoConsulting, a renowned business consulting firm, particularly in economics, finance and strategy, revealed this in their report on “The 2022 appropriations law: impact on the construction industry”.
The report was presented at the just-concluded Business Roundtable, organized by the Nigerian Institute of Quantity Surveyors and the Construction Industry Federation, and was obtained by our NIQS correspondent in Abuja on Sunday. .
In the report, Agusto & Co. Ltd Founding Managing Director Olabode Agusto explained that the Federal Government’s plan, based on the Appropriation Act 2022, was to spend N14.7 billion in 2022.
A breakdown of this fund showed that the government’s plan was to spend N3.9tn in interest on loans, N0.9tn on statutory transfers, N41.tn on payroll and unfunded pensions, N1. 4tn on other recurrent expenditure and N4 .5tn on capital expenditure.
The report, however, went further to determine how much the government could raise in 2022. It said the government could raise 5.5 billion naira from revenue, 0.4 billion naira from borrowings. external, 4 billion naira to the markets and 4 billion naira to the central. Bank of Nigeria, totaling N13.9 billion.
On how the government would prioritize its spending over the projected 13.9 billion naira it would raise, experts at the consultancy firm said around 4.5 billion naira would go to interest on loans , N4.1 billion on payroll and unfunded pensions, N0.8 billion on statutory transfers and N1.1tn on other recurrent expenditure.
“The balance available to fund capital expenditure is N3.4 billion.” they said, adding that “this means that the Federal Government of Nigeria should be able to finance N3.4 billion out of the planned capital expenditure of N4.5 billion (75%).”
Based on the information above, this then implies that approximately 25% of capital spending in the 2022 Appropriation Act may not be federally funded in 2022.
Commenting on this, NIQS Chairman Olayemi Shonubi said the construction sector was vital for the development of the country, stressing the importance of financing investment projects.
He said, “The construction industry is a major contributor to Nigeria’s gross domestic product and a barometer to gauge the health of the economy due to various linkages and multiplier effects it has on other sectors of economy and employment.
“It has therefore become timely to reflect and analyze the details of the Appropriation Act 2022 which commences in June 2022 with particular emphasis on the total total expenditure for this year of N17.1 billion, a total of 5, 4 billion naira is expected to be spent on capital expenditure.”
For his part, FOCI President, Nasiru Dantata, said the recent hyper inflationary trend in the basic prices of major construction resources in the country has become a big concern for its members.
He said: “In the space of January to March 2022, prices for major base materials jumped several points from their original prices at the start of the year.
“This position is further aggravated by the price allocation variation in all ongoing projects, which is limited to 5%, but which is now virtually unrealistic given the current hyperinflation of the economy.
“This situation is therefore affecting the fate of construction projects and activities in the country, critically disrupting the execution of contracts, cash flow and the economics of job creation related to these ongoing projects.”
Dantata, however, noted that operators in the construction sector hoped to obtain solutions that would ensure the favorable implementation of the 2022 appropriations law.
He said industry players were also waiting for recommendations on how to address some of the challenges facing the construction sector.
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