Federal Government (FG) is proposing a budget with estimates totalling N19.76tn, while the deficit will hover between N11.30tn and N12.41tn in the 2023 fiscal year.
If the deficit settles at N12.41tn in 2023, the FG may need to borrow to finance it, which could raise Nigeria’s total debt to a record N54.01tn.
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Nigeria’s current debt is N41.6tn, according to the 2022 first quarter data from the Debt Management Office.
The debt will likely exceed the three per cent limit prescribed in the Fiscal Responsibility Act, which was earlier overshot by the current administration in 2020.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, said in Abuja on Monday, that the government might be unable to provide for treasury-funded capital projects next year, especially due to dwindling revenue and payment of subsidy on Premium Motor Spirit popularly known as petrol.
Ahmed, in his presentation to the House of Representatives’ Committee on Finance at the hearing on the proposed 2023-2025 Medium Term Expenditure Framework and Fiscal Strategy Paper, expressed concern that crude oil production challenges and the petrol subsidy deductions by the Nigerian National Petroleum Company Limited (formerly Nigerian National Petroleum Corporation) constituted a major threat to the country’s revenue growth targets.
The minister added that the country must do things differently to get results.
She stated that bold, decisive and urgent action must be taken to address revenue under performance and expenditure efficiency at the national and sub-national levels.
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The minister explained;
In this scenario, the budget deficit is projected to be N11.30tn in 2023, up from N7.35tn in 2022. This represents 5.01 per cent of the estimated GDP (Gross Domestic Products), above the three per cent threshold stipulated in the Fiscal Responsibility Act, 2007.
Ahmed, who analysed the available options, said the government could opt for payment of petrol subsidy from January to December, adding that;
Given the severely constrained fiscal space, budget deficit is projected to be N12.41tn in 2023, up from N7.35tn budgeted in 2022, representing 196 percent of total FGN revenue or 5.50 per cent of the estimated GDP.
She stated;
This is significantly above the three per cent threshold stipulated in the Fiscal Responsibility Act 2007 and there will be no provision for treasury funded MDA’s capital projects in 2023.
According to the minister, under the first scenario, the government’s projected revenue for 2023 is N6.34tn, out of which only N373.17bn is expected from oil related revenue, while the balance of N5.97tn will come from non-oil sources.
On the second scenario, Ahmed said;
In addition to subsidy reform, this scenario assumes an aggregate implementation of cost-to-income limit of the government-owned companies. With these, the 2023 FGN revenue is projected at N8.46tn out of which N.99tn or 23 per cent is projected to come from oil revenue sources.
