Sunday, 28th May 2023

Buhari plans borrowing N8.80tn to fund 2023 Budget

By Azimazi Momoh Jimoh, Adamu Abuh, Anthony Otaru and Joseph Chibueze (Abuja) 
08 October 2022   |   4:36 am
President Muhammadu Buhari yesterday presented a total budget proposal of N20.51 trillion to the National Assembly for the 2023 fiscal year.

President Muhammadu Buhari during the presentation of the 2023 budget to the joint session of the National Assembly in Abuja… yesterday. PHOTO: PHILIP OJISUA. INFOGRAPHICS: OLAKUNLE OLANIYI

• Capital Expenditure To Gulp N5.35tn, Debt Service N6.31tn
• Pegs Oil Benchmark At $70, Exchange Rate At N435.57 Per Dollar
• Reveals Public Debt Stock Rose From N39.6tn In Dec. 2021 To N42.8tn In June 2022.
• Says Government Alone Can’t Fund Education
• Gbajabiamila Canvasses Strict Penalty For Oil Thieves *Expert, HURIWA Lament Huge Deficit, Task MDAs On Accountability, Prudence

President Muhammadu Buhari yesterday 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. 

“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.

“Government is equally committed to improving the quality of education at other levels. Recently, we implemented various incentives aimed at motivating and enhancing teachers’ development in our schools.

“In the health sector, the government intends to focus attention on equipping existing hospitals and rehabilitating infrastructure. Emphasis will also be on local production of basic medicines/vaccines.”

The President added, “as human capital is the most critical resource for national development, our overall policy thrust is to expand our investment in education, health and social protection.”

Delivering the vote of thanks after the President’s presentation, the Speaker of the House of Representatives, Mr. Femi Gbajabiamila, canvassed stricter penalty for those who indulge in oil theft in the country. He lamented that theft of oil has inflicted grievous harm on the economy of the country.

The Speaker also handed down a warning to the MDAs to adhere strictly to laws governing their accounting process as the consideration of the 2023 Budget commences.

He gave assurance that the National Assembly would exercise the full authority of parliament to hold to account those who fail to provide the records needed to make informed decisions on the Appropriation Bill.

Highlighting the dangers oil theft portends for Nigeria, Gbajabiamila said: “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.  

“It is the sense of the House of Representatives that those engaged in these activities are agents of economic sabotage determined to bring our country to its knees.  

“Therefore, our position is that their actions constitute treason against our country, for which they and their enablers must be held accountable to the fullest extent permitted by law. 

“Nigerians no longer want to hear about crude oil theft. The question has now become what are we doing about it”. Reacting to the budget, a financial expert, Professor, Uche Uwaleke, has argued that revenue generation remains the greatest threat to the implementation of 2023 budget.
Analysing the budget, Uwaleke said: “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.”
Uwaleke who is a professor of Capital Market at the Nassarawa State University, Keffi, told The Guardian in an interview that it was more worrisome that capital expenditure as a proportion of total spending has gone down well below the government’s target of 30 per cent while debt service at over N6 trillion is in excess of amount budgeted for capital expenditure.
He expressed appreciation for the early presentation by Mr. President stressing: “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.”

According to him, “it is ‘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.”
Uwaleke added: “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.
“I also think the fiscal deficit of over N10 trillion can be trimmed especially by pruning down the over N1 trillion overhead costs.”
On its part, the Human Rights Writers Association Of Nigeria (HURIWA) has described the yearly presentation of the budget to the full session of the National Assembly as a hollow ritual and a dramatisation of political comedy with zero utilitarian value.

It called on the National Assembly to amend relevant laws so only the Minister of Finance, Budget and National Planning should do the budget presentation. 

The group also asked Nigeria to borrow idea from first world democracy such as Great Britain whereby the Chancellor of Exchequer is responsible for the preparation and presentation of the budget to the parliament.

In a statement by its National Coordination, Emmanuel Onwubiko, HURIWA said: “We call on the National Assembly to see how their legislative times can be maximised for carrying out effective oversight responsibilities in federal agencies of government and ministries to compel compliance to procurement and appropriation laws and cover all the loop holes that are in place due to bureaucratic corruption which give way for leakages and heists of public fund by ministries and agencies of government.”

HURIWA recalled that in the UK, the Chancellor of the Exchequer, who is responsible for its preparation, submits budget to parliament. It added: “The emphasis of the chancellor’s budget speech is on taxation and the state of the economy rather than on the detail of expenditures; public discussion is devoted mainly to the chancellor’s tax proposals. The estimates of expenditures are sent to parliament with less fanfare and are reviewed by the departmental select committees on estimates of the House of Commons. The reviews hardly touch matters of policy. While the committees do not amend the budget, they are influential through their criticism and advice.”

The rights group further stated that in Britain, in the preparation of the budget, the Treasury appears to have virtually complete authority over the government departments on matters of detail.

“Major issues are settled in Cabinet discussions, the records of which are not available. The British system thus vests extensive controls in the Treasury bureaucracy. A major part of the budget speech by the chancellor of the Exchequer, is addressed to forecasts of employment, prices and the balance of payments, together with a discussion of fiscal and monetary policies. Economic analysis is a continuing preoccupation of the Treasury. Forecasts are prepared three times a year, although only published once a year with little detail; a budget committee composed of important financial and economic officials meets continuously to discuss policy matters. Their attention, however, is focused on tax, borrowing, and monetary policies rather than on the details of government spending.”

HURIWA has also asked the National Assembly to compel both the Independent Corrupt Practices and Related Offences Commission (ICPC) and the public procurement Authority (PPA) to be up and doing to get the respective line agencies and federal ministries to be prudent with public fund and comply with extant procurement laws.