According to results in a paper by economists at AgustoConsulting, over 25% of the estimated N4.5tn capital investment in the 2022 Appropriation Act may not be funded due to the Federal Government’s financial priority in the 2022 fiscal year.
In their analysis titled “The 2022 Appropriation Act: Impact on the Construction Industry,” economists from AgustoConsulting, a prominent firm in business advising encompassing economics, finance, and strategy, revealed this.
The study was given to the Nigerian Institute of Quantity Surveyors and the Federation of Construction Industry’s recent business roundtable, and our correspondent received it from the NIQS in Abuja.
Olabode Agusto, the founding Managing Director of Agusto & Co. Ltd, indicated in the study that the Federal Government planned to spend N14.7 trillion in 2022, based on the 2022 Appropriation Act.
According to a breakdown of the fund, the government planned to spend N3.9 billion on interest on loans, N0.9 billion on statutory transfers, N41 billion on payroll and unfunded pensions, N1.4 billion on other recurrent expenses, and N4.5 billion on capital expenditures.
However, the research went on to calculate how much the government could raise in 2022. The government could raise N13.9 billion from income, N0.4 billion through external borrowing, N4 billion from the markets, and N4 billion from the Central Bank of Nigeria, according to the report.
Experts at the consultancy firm estimated that roughly N4.5 trillion will be spent on interest on loans, N4.1 trillion on wages and unfunded pensions, N0.8 trillion on statutory transfers, and N1.1 trillion on other recurring expenditures from the projected N13.9 trillion.
“The Federal Government of Nigeria should be able to fund N3.4tn out of the planned capital expenditure of N4.5tn (75%),” they said, adding, “which indicates that the Federal Government of Nigeria should be able to fund N3.4tn out of the planned capital expenditure of N4.5tn.”
Based on the foregoing data, the Federal Government may not be able to cover approximately 25% of the capital expenditures in the 2022 Appropriation Act 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 situation is exacerbated by the five percent Variation of Price Allowance in all ongoing projects, which is now practically unattainable in light of the economy’s current hyperinflation.”
“As a result, this situation has an impact on the country’s construction projects and operations, severely interrupting contract execution, cash flows, and the economics of job creation associated with these ongoing projects.”
Dantata, on the other hand, expressed optimism that the construction industry would be able to find solutions that would allow the 2022 Appropriation Act to be implemented smoothly.
Industry players, he added, were also expecting advice on how to address some of the construction sector’s issues.
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