The principal objective of a national budget is macroeconomic stability, which is the foundation of growth and development. On this fundamental count, the 2023 Nigerian national budget is off the mark.
The key parameters of the budget and the underlying assumptions are utterly out of sync and unworkable. It seems that the All Progressives Congress (APC)-led Federal Government does not care about what becomes of Nigeria at the end of its second term in May 2023.
Planned expenditure is N20.51 trillion (up from the N17. 13 trillion of 2022) out of which broad recurrent expenditure (inclusive of debt service, personnel costs and overheads, e. t. c) is about N15. 2 trillion and capital expenditure about N5. 3 trillion.
Meanwhile, the total accessible revenue to fund the budget is only N9. 73 trillion (down from N10.74 trillion in 2022) leaving a deficit of N10.78 trillion (up from the N6. 39 trillion of 2022) which would be financed by further borrowing of N8. 8 trillion, bilateral and multilateral facilities of N1. 77 trillion and privatization proceeds of N216.18 billion. Debt service will consume N6. 31 trillion, up from the N3. 61 trillion of 2022.
The exchange rate of the U.S. dollar is projected at N435, when it is already trading in the parallel market at over N700, with an arbitrage of almost N300 per dollar, further encouraging round-tripping – as those who access it at the official rate turn round to sell off in the parallel market. Crude oil output is estimated at 1.69 million barrels a day when we can hardly make 1.0 million, today.
The dangers ahead are clear from these day-dream estimates which can never stand together without volatility in interest rate, exchange rate and inflation rate, which inescapably lead to widespread socio-economic crises. The gold standard is that, for stability, revenues should cover recurrent expenditure and make a contribution to productive capital expenditure, the balance of which you may borrow.
In this budget, we are going to borrow for capital expenditure as well as for recurrent expenditure. Fiscal deficit will grow by about 69 percent, from N6. 39 trillion in 2022 to N10. 78 trillion, which is 4.78 percent of the Gross Domestic Product (GDP) in excess of the 3.0 percent limit recommended by the Fiscal Responsibility Act. Recurrent (or consumption) expenditure will rise while revenue and the capital expenditure, which propels the momentum of growth will decline to a paltry 25 percent.
As at June 2022, Nigeria’s public debt stood at N43 trillion (USD 103.31 billion) or 20.3 percent of the GDP, without any multiplier effect to show for it. Instead, employment, exchange rate, power supply, insecurity and other social and economic indicators have worsened. In this budget, that debt will rise, forcing Debt Service to rise by 75 percent, from N3. 61 trillion in 2022 to N6. 31 trillion in 2023.
The Minister of Finance, Mrs. Zainab Ahmed begs the question by rationalizing the borrowing spree with her purported 21 percent Debt to GDP Ratio of Nigeria, relative to the universally acceptable 50 – 55 percent.
She ought to know that GDP-based ratios could only be presumed for dynamic economies, marked by efficient allocation of resources and domestic capacity to respond to government spending, demand and supply conditions and other measures required to drive the economy from equilibrium to equilibrium, while the Debt to Revenue Ratio applies to inelastic, non-productive and import-dependent economies.
Worse still, the ethical track record of the government is very bad. For example, under its watch, the principal source of foreign exchange (crude oil sales) has been highly diminished by organized theft, incomplete remittance of sales proceeds and concessionary foreign exchange allocation to cronies of the government.
Our output quota by the Organization of Petroleum Exporting Countries is 1.8 million barrels a day, but we are barely producing 1.0 million barrels. Funds are also dissipated by inefficient allocation, budget and contract padding, reckless tax waivers, the scam called fuel subsidy and atrocious remuneration and retirement packages of political office holders, e. t. c.
The 2023 budget scenario becomes grimmer when the aftermath of the pervasive insecurity in the land, the Russia–Ukraine war as well as climate change, flooding and other natural disasters disrupting supply chains around the world are factored into it.
For example, the floods of October 2022, together with the dislodgement of farmers by marauding Fulani herdsmen and bandits from the farms, is bound to worsen food inflation, which is a major component of composite inflation. Federal Government’s propensity to resort to Ways and Means financing (printing of unearned money by the Central Bank) to meet domestic obligations, would also pour more fuel on the inflationary fire.
For these and other reasons, we at the Business Hallmark do not approve of the 2023 national budget. The National Assembly must prune it drastically.
We are against further borrowing. We would like to see the curbing of cost of government, crude oil theft and all other forms of stealing and the leakages in the flow of public revenues, first of all.
We would like to see sincere and far-reaching measures for security of life and property; promotion of the enabling environment for production, particularly, for the micro, small and medium scale enterprises; sectoral diversification of the economy and proactive containment of natural disasters, e. t. c.
For only then could a budget accelerate economic growth, staring with self-sufficiency in food and other basic needs of the people; improve the supply of foreign exchange; regenerate the Naira; minimize inflation and expedite macro-economic stability; which are the ultimate goals of a national budget.