Proposed N20.51trn 2023 budget: Debt-servicing to consume N6.31trn




‘…N206.18bn privatisation proceeds to fund 2023 budget deficit

…Lawan, Gbajabiamila urge total war against oil thieves

…Early presentation ensures stability – Uwaleke

…Projections unrealistic – Olamilekan

President Muhammadu Buhari Friday presented 2023 budget estimates totalling N20.51 trillion and tagged: Budget of Fiscal Consolidation and Transition, to the joint session of the National Assembly in Abuja.

The federal government has proposed to spend the sum of N6.31 trillion to service debts.

According to the President, “A total expenditure of N20.51 trillion is proposed for the federal government in 2023. This includes N2.42 trillion spending by Government-Owned Enterprises.

“The proposed N20.51 trillion 2023 expenditure comprises: Statutory Transfers of N744.11 billion; Non-debt Recurrent Costs of N8.27 trillion; Personnel Costs of N4.99 trillion; Pensions, Gratuities and Retirees’ Benefits of N854.8 billion.

”It also includes Overheads of N1.11 trillion and 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.

“We expect total fiscal operations of the federal government to result in a deficit of N10.78 trillion.”

According to him, this represents 4.78 per cent of estimated GDP, above the three per cent threshold set by the Fiscal Responsibility Act 2007.

He said the principal objective in 2023 was to maintain fiscal stability and ensure a smooth transition to the incoming administration.

“Based on these fiscal assumptions and parameters, total federally-collectible revenue is estimated at N16.87 trillion in 2023.

“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.

“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 NN2.42 trillion.

“The 2023 Appropriation Bill aims to maintain the focus of MDAs on the revenue side of the budget and greater attention to internal revenue generation.

“Sustenance of revenue diversification strategy would further increase the non-oil revenue share of total revenues,” he said.

Lawan, Gbajabiamila

While welcoming President Buhari, the President of the Senate, Ahmad Lawan, called on the federal government to take what he described as “desperate drastic measures” to stop oil thieves who had declared “war” on the country.

Lawan described the oil thieves as the “worst enemies” of the country and said drastic steps needed to be taken to stop them from “collapsing the nation’s economy.”

He lamented the challenge of dwindling revenue and enunciated some measures that could be taken to reverse the negative economic trend.

“The main source of revenue to the Nigerian Government is Oil and Gas. We always consider the diversification of the economy as crucial and it is indeed crucial.

“The idea of deploying our revenues from the Oil and Gas to support the diversification into real sectors like Agriculture, Manufacturing, Mining, etc is now under serious threat.

“The large-scale and massive stealing of our oil is concerning, as this reduces drastically the revenues available to the government.

“With conflicting figures, projections have put our losses from this malaise at between 700,000 to 900,000 barrels of crude Oil per day, leading to about 29 to 35 per cent loss in Oil revenue in the first quarter of 2022.

“This represents an estimated total fall from N1.1 trillion recorded in the last quarter of 2021 to N790 billion in the first quarter of this year.

“The situation has worsened. Recently, the loss of our Oil has reached 1 million barrels per day. Translated into monetary terms, our loss is monumental.

“The figures show we are not able to meet the OPEC daily quota of 1.8million barrels per day.

“I consider the oil thieves the worst enemies of our country. The thieves have declared war on our Country and our people. I strongly feel that if we do not take the necessary measures to stop the thieves immediately, our economy will be devastated, as efforts to provide infrastructure and diversification of the economy would both be thwarted. It is time to take drastic and desperate measures against the thieves.

“In a difficult time like this, some of the waivers may no longer be justified. In the same vein, we should consider taking off some of the major revenue generating agencies from direct funding by placing them on cost of collection of revenues, as we did for the Federal Inland Revenue Service (FIRS), Nigeria Customs Service.

“In this regard, agencies like Nigeria Ports Authority, (NPA), Nigeria Communications Commission, (NCC), Nigeria Maritime Administration and Safety Agency, (NIMASA), etc can be given encouraging cost of collections of revenues.

“The National Assembly Committees on Finance and the Federal Ministry of Finance, Budget and National Planning should jointly look into this matter immediately.

“The condition would require courageous fiscal policy to redress, by reducing the deficit, not just to avoid further increases in our debts, but to ensure macro-economic stability, grow confidence in the system and guarantee sustainable economic growth.

“The National Assembly will support policy frameworks geared towards prudence, transparency and accountability through rigorous appropriation.”

According to him, the President Buhari’s administration has been consistent in ensuring the delivery of landmark infrastructure across the country.

“The last three Budgets have made generous provisions for different projects. While some have been completed, work on others is ongoing at high paces. The 2023 Budget should therefore focus on completing a lot more.

“I strongly believe that the 2023 Budget should target completion of ongoing projects, especially our legacy projects.

“This is not only because of the importance of infrastructure to the stimulation of economic activities but also to entrench the efforts as a legacy of this administration. Our focus on this sector has been exemplary and the benefit to our growth and development cannot be overstated.”

Also speaking, the speaker of the House of Representatives, Femi Gbajabiamila,called on the government to try suspected oil thieves for treason.

He said there had been disquiet in the House following the on-going massive oil theft in the country.

Gbajabiamila, Lawan, called for urgent measures to curb the malaise.

Reactions

In his reaction, Nigeria’s first Professor of the Capital Market, Uche Uwaleke, said the early presentation of the 2023 budget proposal is commendable as it ensures the sustainability of the return to the January to December budget cycle.

“It’s equally noteworthy that the Finance Bill will be considered alongside the 2023 Appropriation Bill as well as the fact that the budget of Government Owned Enterprises is integrated to promote transparency.

“I think the oil price benchmark of $70 is conservative in line with budget principles. I also think the oil production benchmark of 1.69mbpd is realistic given the assurance by the President that the NNPC Limited is doing something to curb oil theft and pipeline vandalism.

“It is, however, worrisome that capital expenditure as a proportion of total spending has gone down well below the government target of 30% while debt service at over N6 trillion is in excess of the amount budgeted for capital expenditure.

“As the President rightly noted, the greatest threat to budget performance is the revenue side. This is why every effort must be made to improve revenue collection efficiency as well as monitor closely the MDAs and government independent revenues.

“I also think the fiscal deficit of over N10 trillion can be trimmed especially by pruning down the over N1 trillion overhead costs,” he explained.

Gabriel Idakolo, a financial expert, told Blueprint Weekend that, “There is grave danger for Nigeria presently because the revenue generated even in 2022 was not sufficient enough to service debt talk less of anticipated borrowing of over N11 trillion in addition to sales proceeds from privatisation of national assets. The current revenue stream cannot sustain debt servicing taking into consideration additional borrowings in 2023.

“The revenue from oil keeps decreasing because of lower output and the oil benchmark of about 70 dollars will have been realistic if we are producing up to OPEC quota.

“Nigeria’s deficit position will grow wider in 2023 if revenue shortfalls are not addressed.”

On his part, Aliyu Ilias told this reporter in a telephone interview that the major problem of the budget is the amount being proposed as capital expenditure.

According to him, with the proposal for capital budget very low compared to recurrent expenditure, Nigeria would not get the benefit of the budget.

The implication, he said, is that the federal government’s borrowing would hit N12 trillion.

For political economist Adefolarin Olamilekan, the budget is unrealistic considering the federal government’s revenue projection.

In a chat with this newspaper, he insisted that the country was back to the same spot as oil revenues would be used for debt servicing.

“Apparently, the expected economic growth projected at 3.7 for 2023 is going to be a mirage. Again, the target of the budget to boost economic activities would be a failure since debt servicing requires funding.

“Furthermore, the real sector would be affected in a way that the target of the budget to facilitate job creation would be stifled.

“However, we must acknowledge that meeting up with our projected revenues has been failing especially as the government has failed to reinvent a more pragmatic approach to harvest revenues from the non-oil sector,” he said.

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