Last week Friday, October 7, 2022 the President, Muhammadu Buhari ,presented his 2023 Budget to the National Assembly, his last as the President of Nigeria, in requirements of the law.
It was the same period last year October he presented the 2022 budget to the two Chambers to keep fate with the January-December financial year circle which he instituted two years ago.
Budget presentation usually discloses the planned income and expenditure for the incoming year, accompanying fiscal, monetary and other policy frameworks for the new year. The 2033 budget as presented by the President, tagged “Budget of Fiscal Sustainability and Transition” is the highest in the history of this country with total estimates of N20.51trillion.
Juxtapose this with the 2022 budget of N16.39trillion tagged “Budget of Economic Growth and Sustainability” being operated now and the 2021 budget N13.558trillion, we can see that the President made a statement with this budget. But whether this will bring positive outcomes is another issue altogether.
Some of the highlights of the proposed 2023 budget include; Oil price benchmark of $70 per barrel, Daily oil production of 1.69 million barrels a day, Exchange rate of N435.57 per USD, Projection of GDP growth rate of 3.75% and 17.75% inflation rate within the year under view.
As usual, President Buhari presented the 2023-2025 Medium Term Expenditure Framework and Fiscal Strategy Paper which sets out the parameters for the budget.
The 2023 appropriation bill has some highlights like; Capital Expenditure of N5.35trillion, Overheads of N1.11trillion, Personnel cost of N4.99trillion, Debt Service N6.31trillion and N1.55trillion allocated to Defence in view of the current security challenges the country is facing.
In the words of the President, “We expect total fiscal operations of the Federal Government to result in a deficit of 10.78trillion Naira, representing 4.78% of estimated GDP, above the 3 percent threshold set by the Fiscal Responsibility Act of 2027.”
According to the president, the deficit will be financed mainly by new borrowings totalling 8.80trillion Naira. This is serious.
In view of the microeconomic projections and other variables which a budget of this nature supposed to deal with, various analysts have posited various views on some of the fundamentals of the 2023 budget. For example, some holds the view that this budget can’t work giving some reasons, like the current gap between official and nonofficial exchange rate regime, the high deficit components which will result to more borrowing, revenue shortfalls which will not take care of debt service, inflationary trend which may likely go higher than the current about 22% according to the National Bureau of Statistics (NBS), as against projected 17.7% in the budget amongst others.
To me however, giving all the parameters, the 2023 budget is a mix bag of possibilities and impossibilities. For example, the oil output projection of 1.69 barrels per day (bpd) is realisable if the oil thrift and illegal bunkering problem is checkmated. This still fall short of 1.8m bpd allocated to us by the OPEC.
Secondly, exchange rate problem will persist as long as our foreign earning is low. However, with improvement on oil output and current high oil price which may be higher than the projected rate due to the Russia-Ukraine war, added to diaspora remittances, and proper management by the Central Bank of Nigeria (CBN), exchange rate may reduce and this will help stabilize inflation and improve import-dependent goods.
With revenue projection of N9.73trillion which includes retained revenue of 63 government owned enterprises estimated at N2.42trillion, which is above 30% threshold GDP, government may run into trouble here. The reason is that this projection is not realisable for the fact that the 2022 performance so far is mere 63%.
With this, government will resort to further borrowing as is the case now part of which goes to salary payment. This is dangerous to the economy. Apart from corruption which makes it impossible to realise revenue projections, security situation which hinders farmers from accessing their farms, food insecurity will still persist.
On the whole, the political season which we are in already will throw more money hidden by politicians into the system thus causing a lot of distortions in economic performance and projections in spite of CBN interventions through various monetary policies.
The oil subsidy of N3.6trillion in the next year budget is another headache to government and other players in the country’s economic horizon.
One thing is sure, things are not about to improve until the next government comes in. Maybe slight improvement on the security issue but not on the economic. As we seen for years, budget performance in this country hardly gets to 50% capital. Recurrent and overhead will hit 100% as usual but this doesn’t account for economic development and general wellbeing of the citizenry.
The new government will surely amend the budget.