By Abdul Seye The federal government is proposing a N19.49 trillion budget for the year 2023. More than half of the money is to be b...
By Abdul Seye
The federal government is proposing a N19.49 trillion budget
for the year 2023. More than half of the money is to be borrowed.
To finance the budget, the federal government plans to
borrow N11.03 trillion and privatize several assets to raise the capital.
The government plans to generate only N8.5 trillion, out of
the N19.47 trillion budget.
Buhari’s administration plans to finance the huge budget by
borrowing N7.4 trillion from the domestic market and N1.8 trillion from foreign
entities. In addition, FG is expecting N206.1 billion from privatization
proceeds and N1.7 trillion multilateral project-tied loans.
This borrowing plan is far above the recommended threshold
stipulated by the fiscal responsibility Act. The law provides that the deficit
should not exceed 3% of GDP. However, this plan is 5.01% of the GDP.
Section 12 (1) of the FRA states: “Aggregate expenditure and
the aggregate amount appropriated by the National Assembly for each financial
year shall not be more than the estimated aggregate revenue plus a deficit, not
exceeding three per cent of the estimated Gross Domestic Product or any
sustainable percentage as may be determined by the National Assembly for each
financial year.”
However, the law gives the President power to cross the
threshold based on the approval of the National Assembly if the president
believes that there is a reason to cross.
But the president has steadily crossed the deficit with
different justifications. In 2021, it was 3.5% with the argument that there is
a need to finance COVID-19 recovery. In the past, the administration premised
its argument on funding the defence sector due to insecurity.
This time, the government is making petroleum subsidy the
central argument for the huge deficit. However, it’s worth noting that, in this
current proposal, subsidy will only be paid for 6 months.
While the government is using subsidy as an excuse, there is
a part of being unable to generate revenue. In 2014, government daily oil
production was 2.33 barrels per day, but the government is projecting to
produce 1.69 BPD in 2023.
On Monday, when the Minister of Finance, Zainab Ahmed
appeared before the House or Reps Committee on Finance, she lamented that oil
theft has reduced the capacity of the government to fund the budget.
She said the inability to produce sufficient oil has made it
impossible to meet the crude oil for PMS swap deal as the government is now
paying cash instead of crude oil.
“We need the crude to undertake the DSDP arrangement where
crude is swapped for PMS. It means we have to pay for PMS ourselves,” she said.
Furthermore, Nigeria is unable to meet its OPEC quota of
1.86 million barrels per day.
It would be recalled that the federal government recently
signed a N4 billion monthly pipeline surveillance agreement with Government
Ekpemupolo, better known as Tompolo.
It is a reversal of the initial stance which saw the
cancellation of the contract months after President Buhari assumed office.
According to the Debt Management Office (DMO), as at the
first quarter of the year, the debt of the country stood at N41.6 trillion.
Before the year runs out, Nigeria is expected to have added
to it and by 2023, FG alone is expected to add N11.03 trillion to the profile.
Dr Adesanya Moses, an Economist at the Nigerian Army
University, Biu, said any borrowing that is not going into financing the
capital component of the budget is not sustainable.
“If they keep borrowing not for capital projects, then it is
not sustainable because part of it will go into recurrent expenditures and debt
servicing. It will be more efficient if the investment can repay the loans— it
is what we call derived demand. When you spend money on capital projects, it
will help the economy to grow.
“The problem is that borrowing to finance subsidy is not
sustainable because the vast majority of the subsidy goes to the high and
middle income earners. It is not creating jobs or improving the life of the
people. Borrowing to finance subsidy is not sustainable,” he said.
While this is going to be President Buhari’s last budget, a
large part of it will be implemented by another administration, hence, whoever
emerges as the president in 2023, will inherit a huge budget built on
borrowing.
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