Abdulwahab Isa 
Revenue challenge, borrowings and huge debt servicing are obvious impediments to the N20.50 trillion 2023 budget expectations, Abdulwahab Isa reports
Nigeria is still on expansionary budget lane. The N20.50 trillion 2023 budget put out to the public a few days ago didn’t depart from Nigeria’s expansionary pattern of fiscal budget. For over a decade, the country is consistent with expansionary budget laced with huge deficit to be financed through borrowings. Informed experts are of the opinion that, like the ones before it, the 2023 N20.50 trillion budget is prepared with unrealistic targets.
2023 budget overview
President Muhammadu Buhari presented the administration’s last budget to the joint members of the National Assembly on October 7. Tagged “Budget of Fiscal Consolidation and Transition, the proposed N20.50 trillion is predicted on following key assumptions: Oil price benchmark of $70 per barrel; daily oil production estimate of 1.69 million barrels (inclusive of Condensates of 300,000 to 400,000 barrels per day); exchange rate of N435.57/$ and projected GDP growth rate of 3.75% and 17.16 per cent inflation rate. Its 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; 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. It listed other sources of funding the deficit to include new borrowings totalling N8.80 trillion and N1.77 trillion drawdowns on bilateral/multilateral loans secured for specific development projects/programmes.
Revenue challenge
As always the case, the budget is being interrogated on many angles by experts. Availability of revenue to fund a N20.5 trillion size budget is a key issue shaping budget conversation. The Federal Government estimated its collectable revenue at N16.87 trillion in 2023. Total federally distributable revenue is estimated at N11.09 trillion while total revenue available to fund it is estimated at N9.73 trillion. This includes the revenue of 63 government- owned enterprises (GOEs). Oil revenue is projected at N1.92 trillion, non-oil taxes are estimat-ed at N2.43 trillion, and independent revenues for the Federal Government are projected to be N2.21 trillion. Other revenue total N762 billion, while the retained revenues of the GOEs amount to N2.42 trillion.
Meeting revenue target espoused in the budget, with reference to the oil revenue projectionof N1.92 trillion is unlikely given homongous oil theft in oil producing region of the country. In his interrogation of revenue challenge, as a hurdle to 2023 budget implementation, Director, Centre for Social Justice, Eze Onyekpere, described it as “unrealistic.” According to him, there is no justification for government to preset such budget at a period of low revenue and ability to repay debts is doubtful. He said a review of some of the objectives of the government’s macroeconomic projections in the Medium Term Expenditure Framework showed some inherent challenges with evidencebased forecasting and logical consistency. “My immediate comment is that 2023 budget is unrealistic. The revenue projection is not realistic.
“Deficit is high and has opened room for new borrowing. President Buhari is likely to leave power with N73 trillion debt,” Onyekpere said. He said that the prospect of raising more income through taxation was limited, because of the poor state of the economy and manufacturing sector. The World Bank biannual analysis of the near-term regional macroeconomic outlook indicated that economic growth in Sub- Saharan Africa (SSA) is set to decelerate from 4.1 per cent in 2021 to 3.3 per cent in 2022, a downward revision of 0.3 percentage points since April’s Pulse forecast, mainly as a result of a slowdown in global growth, including flagging demand from China for commodities produced in Africa.
Onyekpere said the budget would only end up pushing the country into bigger debts and debt service costs.
Persistent borrowings, high debt servicing
The 2023 budget has borrowing provision as a means of funding the deficit. It listed deficit funding sources to include, new borrowings totalling N8.80 trillion and N1.77 trillion drawdowns on bilateral/multilateral loans secured for specific development projects/programmes. It has provision of debt service in the sum of N6.31 trillion and sinking fund of N247.73 billion to retire certain maturing bonds. Experts said consistent reliance on unrestrained borrowing, and by extension huge debt service is unhealthy to economy. The Federal Government proposed to spend N4.5tn on interest charges for domestic debt by 2023.
This is an increase of 243.51 per cent from the N1.31tn proposed allocation for interest charges on domestic debt in 2016. Speaking at the launch of the World Bank’s Nigeria Development Update titled, ‘The urgency for business unusual,’ held recently in Abuja, the Finance Minister, Zainab Ahmed, had admitted that Nigeria was struggling to service its debt.
She said: “Already, we are struggling with being able to service debt because even though revenue is increasing, the expenditure has been increasing at a much higher rate, so it is a very difficult situation.” In a document by the Director- General of the Debt Management Office, Patience Oniha, DMO DG, said high debt levels would often lead to high debt services and affect investments in infrastructure. According to the DG, “high debt levels lead to heavy debt service which reduces resources available for investment in infrastructure and key sectors of the economy.”
Experts’ view
Reacting to the budget, Senate Chief Whip, Sen. Orji Kalu, called for reduction in the cost of governance to address the economic challenges confronting the country. The former Abia state governor expressed concern in a statement. He said the country was undergoing some economic challenges due to low productivity, adding that more resources and commitment should be directed to improving productivity. He said that the only way out of borrowing is by boosting the manufacturing sector and increasing productivity. According to him, “I am not saying I am in love with this budget, I am not saying I am dissatisfied with the budget, but I am saying there are areas the Senate Committee on Finance and Appropriation needs to look into. “We should be able to look into this yearly reoccurrence.
I used to ask my colleagues, does it mean that civil servants are the people buying the same stationery, same furniture and same equipment every year?’’ While describing the cost of governance as huge, the former governor suggested it be reduced and part of it channeled to manufacturing. “The cost of governance is too heavy and should be channeled into the manufacturing sector and= into productivity sector.
“We are not producing anything, we are just a consuming nation,” he said. He also urged the Senate Committee on Finance and Appropriation to scrutinise the budget thoroughly with a view to identifying any irregularity. “What I have seen in this budget is what I saw last year in the same budget, and it is not going to be good for us if we continue recycling what we have,’’ Kalu said.
On his part Uche Uwaleke, a professor of capital market, harped on revenue side of the budget. “It is, however, worrisome that capital expenditure as a proportion of total spending has gone down well below the government target of 30 per cent while debt service at over N6 trillion is in excess of 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 said.
Last line
Though, it’s expansionary in size, the budget implementation, however, rests on availability of revenue.
