Amid high deficit, Buhari signs unreconciled N21.83tr budget

President Muhammadu Buhari, yesterday, ended uncertainty over the fate of his administration’s eighth appropriation, signing the bill, containing some unreconciled and frivolous estimates, as transmitted by the National Assembly, into law.
Minister of State for Finance, Prince Clem Ikanade Agba (left); Minister of Finance, Zainab Ahmed; President Muhammadu Buhari; President of the Senate, Dr. Ahmad Lawan and Speaker, House of Representatives, Femi Gbajabiamila during the signing of 2023 budget into law at the State House, Abuja… yesterday. PHOTO: PHILIP OJISUA
Minister of State for Finance, Prince Clem Ikanade Agba (left); Minister of Finance, Zainab Ahmed; President Muhammadu Buhari; President of the Senate, Dr. Ahmad Lawan and Speaker, House of Representatives, Femi Gbajabiamila during the signing of 2023 budget into law at the State House, Abuja… yesterday. PHOTO: PHILIP OJISUA

• Makes provisions for elections, transition programme
• Initial spending jacked up by N1.32tr
• New expenditure contains unfunded N553.46b
• Yusuf: Figure too high for govt’s revenue mobilisation capacity
• Signing indicates improved fiscal culture, says Ife
• 2015 to 2023 fiscal deficit may surpass N43tr
• FG to spend N1.8tr to service unsecuritised N22.7tr CBN’s overdraft

President Muhammadu Buhari, yesterday, ended uncertainty over the fate of his administration’s eighth appropriation, signing the bill, containing some unreconciled and frivolous estimates, as transmitted by the National Assembly, into law.

The President, thus, pushed the headache of reconciling lawmakers with the Minister of Finance, Budget and National Planning, Zainab Ahmed, hoping that the parliament would “cooperate” with her.

He gave the need for timely implementation of his transition programmes as reason for the hasty assent.
The spending component of the 2023 Appropriation Law, the last in the life of the administration, was raised at the National Assembly by a whopping N1.32 trillion (or 6.1 per cent) to N21.83 trillion, a decision many thought would trigger extended bickering between the two arms of government.

But the President, without any drama, signed the bill into law on the morning of the first working day of the year, consolidating the Federal Government’s commitment to January-December budget cycle.

Many experts have described the timely presidential assent as a milestone in efforts to breathe fresh air into the economy, despite the document falling flat on the revenue side, with so many frivolous assumptions. Some people are worried that the document is as good as mere ritual and largely unimplementable.

While implementation of the new budget could kick off forthwith, as it has become a legal document, it will be recalled that the Senate had approved Buhari’s request for extension of the 2022 Appropriation Law implementation to the end of the first quarter of this year, to enable the President finish ongoing capital projects, many of which are 80 per cent completed.

The President also signed the 2022 Supplementary Appropriation, translating to N819.5 billion in additional spending, earlier passed by the lawmakers.

“The year 2022 has witnessed the worst flood incident in recent history, which has caused massive destruction of farmlands at a point already close to harvest season.

“This may compound the situation of food security and nutrition in the country. The flood has also devastated road infrastructure across the 36 states and the Federal Capital Territory, as well as bridges nationwide that are critical for the movement of goods and services. The water sector was equally affected by the flood, and there is a need to complete some ongoing critical projects that have already achieved about 85 per cent completion.

“The nine critical projects proposed in the sector cut across water supply, dam projects and irrigation projects nationwide. I have approved a supplementary budget for 2022 appropriation of N819.536 billion, all of which are capital expenditures. The supplementary budget will be financed through additional domestic borrowings, which will raise the budget deficit for 2022 to N8.17 trillion and deficit to GDP ratio to 4.43 per cent,” a letter by the President to the National Assembly noted.
The additional funding request would increase last year’s fiscal deficit estimate from N7.35 trillion to N8.17 trillion, the highest ever recorded by the country.

Data analysis conducted by The Guardian revealed that from 2015, when Buhari assumed office, to 2021, the federal budget had accumulated a total of N22.06 trillion fiscal deficit. Plus last year’s estimation, the figure could leap to N32.2 trillion.

Dr. Muda Yusuf, a private sector advocate and Nigeria’s leading economist, told The Guardian, yesterday, that this year’s fiscal deficit could settle for between N12 and N13 trillion. That could take the fiscal deficit incurred from 2015 to 2023, much of which came under Buhari’s administration, to well over N43 trillion.

Whereas the government has incurred trillions in debts, raising the sovereign debts to N44.06 trillion.

The bulk of the amount is owned by the Federal Government, which had relied on the debt market in the past eight years to fund its deficit. But much of the deficit went unfunded, forcing the government into compulsive recourse to the Central Bank of Nigeria (CBN) overdraft window.

Hence, besides the conventional debt, the Federal Government is indebted to the CBN to the tune of N22.7 trillion through its ways and means (W&M) window. Buhari recently requested the National Assembly to approve a plan to convert it to a long-term debt instrument, a demand that was turned down.

While Yusuf admitted that the request is strange and amounts to a contradiction of the CBN Act, which stipulates that such a facility should not exceed five per cent of the previous year’s revenue of the government and must be paid within the financial cycle, converting it to bond remains the most viable option left for the government.

“Let them convert it to bond, so that it would move from the balance sheet of the CBN, so that it will have a neater balance sheet to present. How do you present that kind of balance sheet to people? That you gave so much money to government outside the law that set the institution? When it is converted, it will move to the custody of the Debt Management Office (DMO), which will then plan how to manage it.
“When people subscribe to it, it will be easier to manage the liquidity. Debt is the major cause of the inflationary crisis in the economy; it is high-power money. When we convert it to bond, it may help to manage the macroeconomic challenges better, rather than leaving it as it is,” Muda said.

The economist described the forthcoming change in leadership as a major variable that could alter the direction of the economy. He looked forward to the review of key economic policies by the incoming administration, changes that could raise confidence in the economy and raise investor interest.

He said the timely signing of the budget would help with good planning, but admitted that the budget is too big for revenue generation capacity.

This could push the fiscal deficit to about N13 trillion, which could heat up the economy and continue to crowd out private investment.

“We should even be doing much more, compared to the size of the economy. But our revenue crisis has to be fixed first,” he insisted.

Indeed, the yearly budget of Nigeria, the biggest economy in Africa, is dwarfed by the spending of its peers, such as South Africa and Egypt, according to data obtained and analysed by The Guardian. Last year’s original N17.13 trillion total spending is not more than 30 per cent and 38.5 per cent of South African and Egyptian budgets, respectively.

In terms of per capita spending, Nigeria’s 2022 spending was $180, whereas that of South Africa was $2,156 as against Egypt’s $962. That suggests that Nigeria’s spending per citizen is less than 20 per cent of what each of the two other leading economies spends on their citizens.

Prof. Ken Ife, a consultant to the Economic Community of West African States (ECOWAS), also agreed that Nigeria’s spending would need to improve drastically to put the economy on the path of sustainable growth. He, however, said the country would need to convert the outstanding CBN overdraft to bond to allow the government access fresh support from the window. He also argued that the cost of servicing the debt is much higher than a bond option.
The Federal Government is to pay the prevailing monetary policy rate (MPR), which could be raised from its current 16.5 per cent, plus three per cent as interest on the subsisting CBN overdraft. On the other hand, a 40-year bond offering, Buhari said, would cost nine per cent yearly interest.

Ife said Nigeria should rather convert the long-standing facility to bond, where it could pay an interest rate of about nine cent rather than leaving it “hanging” and paying a higher cost.

As the government embarks on the most ambitious fiscal plan, there are strong indications that it would overshoot the projected deficit and be compelled to take more debts. From 2015 to 2021, the retained revenue of the government converged at N3.4 trillion, with 2020 being the best year when the government earned N4.64 trillion, according to data obtained from the Federal Ministry of Finance, Budget and National Planning.

Last year, the government hoped to realise N9.78 trillion, close to thrice its average yearly performance in the past eight years. The complete revenue performance scorecard for 2022 is not ready.

Notwithstanding the remarkable improvement, the government is unlikely to hit its tall target, experts have said. Already the signed 2023 budget comes with an unfunded deficit of N553.46 billion.

Buhari said the Minister of Finance, Budget and National Planning, Zainab Ahmed, would, in line with tradition, subsequently provide more details of the approved budget and the supporting 2022 Finance Act.

“We have examined the changes made by the National Assembly to the 2023 executive budget proposal. The amended fiscal framework for 2023, as approved by the National Assembly, shows additional revenues of N765.79 billion and an unfunded deficit of N553.46 billion.”

“It is clear that the National Assembly and the executive need to capture some of the proposed additional revenue sources in the fiscal framework. This must be rectified.

“I have also noted that the National Assembly introduced new projects into the 2023 budget proposal for which it has appropriated N770.72 billion. The National Assembly also increased the provisions made by Ministries, Departments and Agencies (MDAs) by N58.55 billion,” the President said.

Buhari said his decision to sign the 2023 Appropriation Bill into law, as passed by the National Assembly, was to enable its implementation to commence without delay, considering the imminent transition to another democratically-elected administration.

He, however, directed that Ahmed engage with the legislature to revisit some of the changes made to the executive budget proposal, hoping that the National Assembly would cooperate with the executive in that regard.
He urged the National Assembly to reconsider its position on his proposal to securitise the Federal Government’s outstanding W &M.

“As I stated, the balance has accumulated over several years and represents funding provided by the CBN as lender of last resort to the government to enable it to meet obligations to lenders, as well as cover budgetary shortfalls in projected revenues and/or borrowings.

“I have no intention to fetter the right of the National Assembly to interrogate the composition of this balance, which can still be done even after granting the requested approval.

“Failure to grant the securitisation approval will, however, cost the government about N1.8 trillion in additional interest in 2023, given the differential between the applicable interest rates, which is currently MPR plus three per cent and the negotiated interest rate of nine per cent and a 40-year repayment period on the securitised debt of the Ways and Means,” he said.

To ensure more effective implementation of the 2022 capital budget, Buhari thanked the National Assembly for approving his request for an extension of its validity date to March 31, 2023.

The President directed the Ministry of Finance, Budget and National Planning to work towards early release of the 2023 capital votes, to enable Ministries, Departments and Agencies commence implementation of their capital projects in good time, to support efforts to deliver key projects and public services, as well as improve the living conditions of Nigerians.

Reiterating that the 2023 budget was developed to promote fiscal sustainability and macroeconomic stability and ensure a smooth transition to the incoming administration, the President added that it was also designed to promote social inclusion and strengthen the resilience of the economy.

He pledged that adequate provisions have been made in the budget for successful conduct of the forthcoming general elections and the transition programme.

On achieving revenue targets for the budget, the President directed MDAs and Government-Owned Enterprises (GOEs) to intensify their revenue mobilisation efforts, including ensuring that all taxable organisations and individuals pay taxes due.
To achieve the laudable objectives of the 2023 budget, the President said relevant agencies must sustain current efforts toward the realisation of crude oil production and export targets.

‘’To augment available fiscal resources, MDAs are to accelerate the implementation of Public Private Partnership initiatives, especially those designed to fast-track the pace of our infrastructural development.

‘’This, being a deficit budget, the associated borrowing plan will be forwarded to the National Assembly shortly. ‘I count on the cooperation of the National Assembly for a speedy consideration and approval of the plan.’’

On the Finance Bill 2022, the President expressed regret that its review, as passed by the National Assembly, is yet to be finalised.

‘’This is because some of the changes made by the National Assembly need to be reviewed by the relevant agencies of government. I urge that this should be done speedily to enable me to assent into law,’’ he said.

Those who witnessed signing of the budget include Senate President Ahmad Lawan and Speaker of the House of Representatives, Femi Gbajabiamila.

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