25% of 2022 capital expenditure may not be funded –Economists

Agency Report
Agency Report

ABOUT 25 per cent of the projected N4.5tn capital expenditure in the 2022 Appropriation Act may not be funded, going by the funding priority of the Federal Government in the 2022 fiscal year, findings contained in a report by economists at AgustoConsulting showed.

Economists at AgustoConsulting, a renowned firm in business advisory including economics, finance and strategy, disclosed this in their report on ‘The 2022 Appropriation Act: Impact on the Construction Industry.’

The report was presented at the just concluded business roundtable organised by the Nigerian Institute of Quantity Surveyors and the Federation of Construction Industry, and was obtained by our correspondent from the NIQS in Abuja on Sunday.

In the report, the founding Managing Director, Agusto & Co. Ltd, Olabode Agusto, explained that the plan of the Federal Government, based on the 2022 Appropriation Act, was to spend N14.7tn in 2022.

A breakdown of this fund showed that the plan of the government was to spend N3.9tn as interest on loans, N0.9tn on statutory transfers, N41.tn on payroll, and unfunded pension, N1.4tn on other recurrent expenditures, and N4.5tn on capital expenditure.

The report, however, went further to ascertain the amount which the government could raise in 2022. It stated that the government could raise N5.5tn through revenue, N0.4tn from external borrowing, N4tn from the markets and N4.tn from the Central Bank of Nigeria, making a total of N13.9tn.

On how the government would prioritise its spending of the projected N13.9tn that it would raise, experts at the consulting firm stated that about N4.5tn would go as interest on loans, N4.1tn on payroll and unfunded pensions, N0.8tn on statutory transfers and N1.1tn on other recurrent expenditures.

“Balance available to finance capital expenditure is N3.4tn.” they stated, adding, “this means that the Federal Government of Nigeria should be able to fund N3.4tn out of the planned capital expenditure of N4.5tn (75 per cent).”

Going by the above information, it then implies that about 25 per cent of the capital expenditure in the 2022 Appropriation Act may not be funded by the Federal Government in 2022.

Commenting on this, the President, NIQS, Olayemi Shonubi, stated that the construction sector was vital for the development of the country, stressing that it was important to fund capital projects.

He said, “The construction industry is a major contributor to the Gross Domestic Product of Nigeria and a barometer for measuring the health of the economy due to various linkages and multiplier effects it has on other sectors of the economy and employment.

“It has therefore become expedient to brainstorm and analyse the details of the Appropriation Act 2022 which commences in June 2022 with special emphasis on this year’s total aggregate expenditure of N17.1tn, a total of N5.4tn is projected to be spent on capital expenditure.”

On his part, the President of FOCI, Nasiru Dantata, said the recent hyper inflationary trend on the basic prices of key construction resources in the country had become a great concern for its members.

He said, “Within the space of January to March 2022, the prices of key basic materials have jumped several points over their original prices at the beginning of the year.

“This position is further compounded by the Variation of Price allowance in all ongoing projects which is limited to five per cent, but are now practically unrealistic in the light of the current hyperinflation of the economy.

“This situation therefore affects the fate of construction projects and activities in the country, critically disrupting contract execution, cash flows and the economics of job creation tied to these ongoing projects.”

Dantata, however, noted that operators in the construction industry were hopeful to get solutions that would ensure the favourable implementation of the 2022 Appropriation Act.

He said industry players were also expecting recommendations on how to resolve some of the challenges faced by the construction sector.

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