President Muhammadu Buhari on Friday presented a total budget proposal of N20.51 trillion to the National Assembly for the 2023 fiscal year.
Tagged Budget of Fiscal Consolidation and Transition, the proposal came with a deficit of N10.78 trillion, which represents 4.78 per cent of estimated Gross Domestic Product (GDP) and above the three per cent threshold set by the Fiscal Responsibility Act 2007.
The budget, which includes N2.42 trillion spending by Government-Owned Enterprises also comprises Statutory Transfers of N744.11 billion; Non-debt Recurrent Costs of N8.27 trillion and Personnel Costs of N4.99 trillion.
The budget also included Pensions, Gratuities and Retirees’ Benefits of N854.8 billion; Overheads of N1.11 trillion; Capital Expenditure of N5.35 trillion, including the capital component of Statutory Transfers; Debt Service of N6.31 trillion and Sinking Fund of N247.73 billion to retire certain maturing bonds.
According to the President, the deficit will be financed by “new borrowings totaling N8.80 trillion, N206.18 billion from Privatisation Proceeds and N1.77 trillion drawdowns on bilateral/multilateral loans secured for specific development projects/programmes.”
The budget as proposed based on key parameters and assumptions, which include oil price benchmark of $70 per barrel; daily oil production estimate of 1.69 million barrels (inclusive of Condensates of 300,000 to 400,000 barrels per day); exchange rate of N435.57 per US Dollar; and projected GDP growth rate of 3.75 per cent and 17.16 per cent inflation rate.
Buhari informed lawmakers that based on these fiscal assumptions and parameters, total federally collectible revenue is estimated at N16.87 trillion in 2023. He also said the total federally distributable revenue is estimated at N11.09 trillion in 2023, while total revenue available to fund the 2023 Federal Budget is estimated at N9.73 trillion.
“This includes the revenues of 63 Government-Owned Enterprises,” the President added. From Buhari’s presentation, “oil revenue is projected at N1.92 trillion, Non-oil taxes are estimated at N2.43 trillion, FGN independent revenues are projected to be N2.21 trillion. Other revenues total N762 billion while the retained revenues of the GOEs amount to N2.42 trillion.”
Explaining the reasons for the past borrowings, the President said: “Over time, we have resorted to borrowing to finance our fiscal gaps. We have been using loans to finance critical development projects and programmes aimed at further improving our economic environment and enhance the delivery of public services to our people.
“As you are aware, we have witnessed two economic recessions within the period of this Administration. A direct result of this is the significant decline in our revenue generating capacity.
“In both cases, we had to spend our way out of recession, resulting in higher public debt and debt service. It is unlikely that our recovery from each of the two recessions would have been as fast without the sustained government expenditure funded by debt.”
The budget, according to him, would be accompanied by Finance Bills, pointing out that, “to support the realisation of fiscal projections, current tax and fiscal laws/regulations are being reviewed to produce a draft Finance Bill 2022.”
He added: “It is our intention that once ongoing consultations are completed, the Finance Bill 2022 would be submitted to the National Assembly to be considered alongside the 2023 Appropriation Bill.”
The President provided explanations on the theme and priorities of the 2023 budget. He stated that the 2023 Budget proposal, being the eighth and final budget of his Administration, “reflects the serious challenges currently facing our country, key reforms necessary to address them and imperatives to achieve higher, more inclusive, diversified and sustainable growth.”
He explained that, “the expenditure policy of government in 2023 is designed to achieve the strategic objectives of the National Development Plan 2021 to 2025, including macroeconomic stability, human development, food security, improved business environment, energy sufficiency, improving transport infrastructure and promoting industrialisation focusing on Small and Medium Scale Enterprises.”
He further stated: “Against the backdrop of the challenging global and domestic economic environment, it is imperative that we strengthen our macroeconomic environment and address subsisting challenges as a country.
“The 2023 Appropriation therefore is a Budget of Fiscal Sustainability and Transition. Our principal objective in 2023 is to maintain fiscal viability and ensure smooth transition to the incoming administration.”
While reviewing the performance of the 2022 budget, the president submitted that revenue shortfall has remained the greatest threat to Nigeria’s fiscal viability.
He noted that as a result, the government has therefore accelerated efforts towards ensuring that all taxable Nigerians declare income from all sources and pay taxes due to the appropriate authorities.
“We are also monitoring the internally generated revenues of MDAs to ensure they are appropriately accounted for and remitted to the Consolidated Revenue Fund,” Buhari added.
The president further stated that, “as at the end of July 2022, the fiscal operations of the Federal Government resulted in an estimated budget deficit of N4.63 trillion,” adding that this represents 63 per cent of the estimated deficit for the full year.
“This is largely attributable to revenue shortfalls and higher debt service obligations resulting from rising debt levels and interest rates,” he stressed.
He said, “the deficit was mainly financed through domestic borrowing amounting to N4.12 trillion; hence, total public debt stock increased from N39.6 trillion as at the end of December 2021 to N42.8 trillion as at the end of June, 2022.”
President Buhari, however, said the country’s debt position remains within cautious and acceptable limits compared to peer countries.
“As at the end of June 2022, total public debt is within our self-imposed limit of 40 per cent of GDP, which is significantly below the 55 per cent international threshold for comparator countries, and a global average of 99 per cent post-COVID-19,” he disclosed.
He said serious attention would be paid to Nigeria’s debt-service-to-revenue ratio, noting: “Nonetheless, our debt-service-to-revenue ratio needs close attention. The current low revenue performance of government as reflected in the lowly revenue-to-GDP ratio of just about 8 per cent. Our medium-term objective remains to raise this ratio to 15 per cent, at which the debt service to revenue ratio will cease to be a concern.”
Buhari also submitted that, “the 50 per cent cost-to-income ratio in the Finance Act 2020 has significantly improved operating surplus remittances by Government Owned Enterprises (GOEs).
“I therefore solicit the continuing cooperation of the National Assembly in enforcing the legal provision and other prudential guidelines imposed on the GOEs during the consideration of the budget proposals of the GOEs,” he added.
Amid the lingering dispute between the Federal Government and the Academic Staff Union of Universities, Buhari also declared that the government alone can’t fund tertiary institutions in the country.
He, however, said the sum of N470 billion has been voted in the budget to take care of revitalisation and salary enhancements in the tertiary institutions. He called on all workers in the tertiary institutions to appreciate the nation’s current economic challenges.
“The government notes with dismay the crisis that has paralysed activities in the public universities in the country. We expect the staff of these institutions to show a better appreciation of the current state of affairs in the country.
“In the determined effort to resolve the issue, we have provided a total of N470.0 billion in the 2023 budget from our constrained resources for revitalisation and salary enhancements in the tertiary institutions,”he revealed.
On the inability of government to finance tertiary institutions, Buhari, said: “Distinguished Senators and Honourable members, it is instructive to note that today government alone cannot provide the resources required for funding tertiary education.
“In most countries, the cost of education is jointly shared between the government and the people, especially at the tertiary level. It is imperative therefore that we introduce a more sustainable model of funding tertiary education.”He said the Government remains committed to the implementation of agreements reached with staff unions within available resources.
