- Plans borrowing N8.80tn to fund 2023 Budget
- Pegs Oil Benchmark At $70, Exchange Rate At N435.57 Per Dollar
- Shows Public Debt Stock Rose From N39.6tn In December 2021 To N42.8tn In June 2022. Capital Expenditure To Gulp N5.35tn, Debt Service N6.31tn.
- Advocates Strict Penalties For Oil Thieves; Claims Government Alone Can't Fund Education; Expert, HURIWA Lament Huge Deficit; Task MDAs On Accountability, Prudence
The National Assembly received an N20.51 trillion total budget proposal from President Muhammadu Buhari Tuesday for the fiscal year 2023.
The Fiscal Consolidation and Transition Budget plan had a deficit of N10.78 trillion, or 4.78 percent of the anticipated GDP, exceeding the three percent cap imposed by the Fiscal Responsibility Act of 2007.
The budget, which includes N2.42 trillion in spending by government-owned businesses, also contains N744.11 billion in statutory transfers, N8.27 trillion in non-debt recurring costs, and N4.99 trillion in personnel costs.
The budget also included N854.8 billion for pensions, gratuities, and retiree benefits; N1.11 trillion for overheads; N5.35 trillion for capital expenditures, including the capital portion of statutory transfers; N6.31 trillion for debt service; and N247.73 billion for sinking funds to retire some maturing bonds.
The President stated that "new borrowings of N8.80 trillion, N206.18 billion from Privatization Proceeds and N1.77 trillion drawdowns on bilateral/multilateral loans secured for specific development projects/programs" will be used to pay for the deficit.
The proposed budget is based on several important parameters and assumptions, including the benchmark oil price of $70 per barrel, an estimate of daily oil production of 1.69 million barrels (including condensates of 300,000 to 400,000 barrels per day), an exchange rate of N435.57 per US dollar, and projected GDP growth rates of 3.75 percent and 17.16 percent.
Buhari informed lawmakers that the projected total federally collectible revenue for 2023 is N16.87 trillion based on these financial factors and assumptions. Additionally, he stated that the expected total nationally distributable revenue for 2023 is N11.09 trillion, while the estimated total revenue available to support the federal budget for 2023 is N9.73 trillion.
The President said, "This includes the earnings of 63 Government-Owned Enterprises." "Oil revenue is predicted at N1.92 trillion, non-oil taxes are estimated at N2.43 trillion, and FGN independent revenues are projected to be N2.21 trillion," according to Buhari's presentation. While the GOEs' retained income reached N2.42 trillion, other revenues total N762 billion.
The President gave an explanation of the previous borrowings, saying: "Over time, we have turned to borrow to pay our fiscal gaps. Loans have been used to fund important development projects and programs that further improve our economic climate and increase the provision of public services to our citizens.
"As you are aware, over the tenure of this Administration, there have been two economic recessions. Our ability to generate revenue has significantly decreased as a direct result of this.
"We had to spend our way out of recession in both instances, which increased the public debt and debt payments. Without the ongoing government spending financed by debt, it is unlikely that our recovery from each of the two recessions would have been as quick.
He stated that finance bills will accompany the budget and that they were being evaluated to create a draft finance bill for 2022 in order to "help the realization of budgetary projections."
We want to present the Finance Bill 2022 to the National Assembly for consideration along with the 2023 Appropriation Bill after ongoing consultations are finished, he continued.
The 2023 budget's subject and aims were explained by the President. As the eighth and final budget of his Administration, he said that the 2023 Budget Proposal "reflects the major difficulties currently facing our country, essential changes necessary to overcome them, and imperatives to achieve higher, more inclusive, diversified, and sustainable growth."
"The expenditure policy of the government in 2023 is designed to achieve the strategic objectives of the National Development Plan 2021 to 2025," he said. "These objectives include macroeconomic stability, human development, food security, an improved business environment, energy sufficiency, improving transport infrastructure, and promoting industrialization with a focus on Small and Medium Scale Enterprises."
According to him, it is crucial that we enhance our macroeconomic environment and deal with ongoing issues as a nation in light of the difficult global and domestic economic environments.
The budget for 2023, therefore, reflects fiscal sustainability and transition. Maintaining fiscal stability and ensuring a seamless transition to the new administration are our major goals for 2023.
The president stated that the biggest threat to Nigeria's economic stability has persisted since the 2022 budget's performance review.
As a result, he observed, the government has intensified efforts to ensure that every taxable Nigerian declares their income from all sources and pays their taxes on time to the proper authorities.
Buhari continued, "We are also keeping an eye on the internally produced funds of MDAs to make sure they are properly accounted for and remitted to the Consolidated Revenue Fund.
In addition, the president said that "as of the end of July 2022, the fiscal activities of the Federal Government resulted in an expected budget deficit of N4.63 trillion," adding that this amounts to 63% of the estimated deficit for the entire year.
He emphasized that "this is mostly due to revenue shortfalls and greater debt servicing costs as a result of rising debt levels and interest rates."
The overall public debt stock climbed from N39.6 trillion at the end of December 2021 to N42.8 trillion at the end of June 2022, he added, because the deficit was primarily covered by domestic borrowing totaling N4.12 trillion.
However, according to President Buhari, the nation's debt level is still within reasonable and acceptable bounds when compared to peer nations.
He stated, "As of the end of June 2022, overall public debt is under our self-imposed limit of 40% of GDP, which is far below the international criterion of 55% for comparator countries, and a global average of 99% post-COVID-19.
However, our debt-service-to-revenue ratio needs strict attention, he added, adding that serious attention would be devoted to Nigeria's debt-service-to-revenue ratio. The current underwhelming revenue performance of the government is demonstrated by the meager revenue-to-GDP ratio of just 8%. Our medium-term goal is still to increase this ratio to 15%, at which point the debt service to revenue ratio won't be an issue.
Additionally, Buhari claimed that "the Finance Act 2020's 50% cost-to-income ratio has greatly boosted operational surplus remittances by Government Owned Enterprises" (GOEs).
"I, therefore, request the National Assembly's continued cooperation in upholding the legal requirement and other prudential constraints imposed on the GOEs throughout the approval of the GOEs' budget proposals," he continued.
Buhari also stated that the government cannot alone provide funding for tertiary institutions in the nation in the midst of the ongoing conflict between the Federal Government and the Academic Staff Union of Universities.
However, he claimed that N470 billion had been allocated in the budget for tertiary institution revitalization and pay increases. He urged all higher institution employees to understand the country's current economic difficulties.
"The government observes with shock the crisis that has rendered the nation's public universities completely inactive. We anticipate that the employees of these institutions will demonstrate a greater understanding of the nation's current situation.
We have allocated a total of N470.0 billion in the 2023 budget from our limited resources, he said, "in the deliberate attempt to fix the issue, for revitalization and wage improvements in the tertiary institutions."
On the inability of the government to finance tertiary institutions, Buhari, said: “Distinguished Senators and Honourable members, it is instructive to note that today's 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.
“This is why we have remained resolute that we will not sign any agreement that we would be unable to implement. Individual institutions would be encouraged to keep faith with any agreement reached in due course to ensure stability in the educational sector.
"The government is similarly dedicated to raising the caliber of instruction at lower levels. Incentives have recently been put into place in our schools with the goal of inspiring and advancing teacher development.
The administration plans to concentrate its efforts on renovating infrastructure and outfitting existing facilities in the health sector. The manufacture of essential drugs and vaccinations locally will also be emphasized.
"Since human capital is the most important resource for national development, our general policy thrust is to increase our investment in education, health, and social protection," the President continued.
Following the President's presentation, Mr. Femi Gbajabiamila, Speaker of the House of Representatives, gave a vote of gratitude and called for harsher punishment for those who commit oil theft in the nation. He bemoaned the terrible damage that oil theft has done to the nation's economy.
As the discussion of the 2023 Budget gets underway, the Speaker also issued a caution to the MDAs, urging them to carefully abide by the laws governing their accounting procedure.
He said that the National Assembly would use its entire parliamentary jurisdiction to hold accountable anyone who fails to give the documents required to make an educated conclusion about the Appropriations Bill.
Gbajabiamila emphasized the risks that oil theft poses to Nigeria in his remarks, saying: "Mr. President, permit me to convey the disquiet in the House of Representatives arising from the reports of a massive decline in the volume of crude oil exports due primarily to theft and diversion by criminal elements.
The House of Representatives believes that those involved in these operations are agents of economic sabotage out to destroy our nation.
Because of this, we believe that their activities amount to treason against our nation, for which they as well as others who helped them must be held accountable to the utmost extent allowed by law.
"Crude oil theft is no longer something Nigerians want to hear about. What are we doing about it now is the question? In response to the budget, Professor Uche Uwaleke, a financial expert, warned that revenue generation continues to pose the biggest threat to the implementation of the 2023 budget.
In his analysis of the budget, Uwaleke stated: "As the President correctly indicated, the revenue side poses the biggest threat to budget success. Because of this, every effort must be taken to increase the effectiveness of tax collection while also keeping a careful eye on MDAs and government-independent income.
In an interview with The Guardian, Uwaleke, a professor of capital markets at Nassarawa State University in Keffi, said that it was more concerning that debt service, which is more than N6 trillion in size, exceeds the amount budgeted for capital expenditure while capital expenditure as a percentage of total spending has fallen well below the government's target of 30%.
"The early release of the 2023 budget proposal is laudable as it ensures the viability of the return to the January to December budget cycle," he said, emphasizing his appreciation for the early presentation by Mr. President.
He said that it is "equally significant" that the Finance Bill and the 2023 Appropriations Bill will be discussed together and that the budget of Government Owned Enterprises has been integrated to encourage openness.
"I believe the benchmark oil price of $70 is conservative and consistent with budgetary standards," Uwaleke continued. The President's guarantee that NNPC Limited is taking action to stop oil theft and pipeline vandalism makes me believe that the benchmark for oil production of 1.69 million barrels per day is also attainable.
"I also believe that the over N10 trillion budget deficit may be reduced, particularly by reducing the over N1 trillion in overhead costs."
The annual presentation of the budget to the full session of the National Assembly has been criticized by the Human Rights Writers Association of Nigeria (HURIWA) as a meaningless ritual and a dramatization of political comedy with no practical purpose.
It requested that the National Assembly change the pertinent laws to limit budget presentations to the Minister of Finance, Budget, and National Planning.
The group also requested that Nigeria adopt ideas from democracies in the first world, such as Great Britain, where the Chancellor of Exchequer is in charge of preparing and presenting the budget to the parliament.
According to a press release from HURIWA's National Coordination, Emmanuel Onwubiko, "We call on the National Assembly to see how their legislative times can be maximized for carrying out effective oversight responsibilities in federal agencies of government and ministries to compel compliance with procurement and appropriation laws and cover all the loopholes that are in place due to bureaucratic corruption which give way for leakages and heists of public fund by ministries and other federal agencies.
HURIWA noted that in the UK, the budget is presented to parliament by the Chancellor of the Exchequer, who is in charge of its creation. It continued: "Public discussion is focused primarily on the chancellor's tax plans; the emphasis of the chancellor's budget speech is on taxation and the state of the economy rather than on the minutiae of spending. The departmental select committees on estimates of the House of Commons assess the expenditure estimates before they are given to parliament with less fanfare. Policies hardly ever come up in the reviews. The committees have a voice through their criticism and recommendations even though they cannot change the budget.
The rights group added that in Britain, the Treasury appears to have nearly total control over the government departments in terms of minute details while preparing the budget.
"Cabinet discussions, the records of which are not public, are where major issues are resolved. Thus, the British approach gives the Treasury bureaucracy broad control. The chancellor of the Exchequer's budget speech includes a discussion of fiscal and monetary policies together with estimates of employment, prices, and the balance of payments. The Treasury has a constant interest in economic analyses. Forecasts are made three times annually, however, they are only briefly released once; a budget committee made up of significant financial and economic figures meets regularly to debate policy issues. They don't pay much attention to the specifics of government expenditure, though; instead, they concentrate on tax, borrowing, and monetary policies.
HURIWA has also requested that the National Assembly order the Public Procurement Authority (PPA) and the Independent Corrupt Practices and Related Offences Commission (ICPC) to get active in enforcing existing procurement rules and enforcing them on the relevant line agencies and federal ministries.
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