The 2023 Appropriation Bill signed into law by President Muhammadu Buhari recently has led to a change of reactions from experts from all walks of live who have argued that the fiscal policy that is expected to drive economic activities may not bode well for the economy on the long run, reports Ibrahim Apekhade Yusuf.
WHEN President Muhammadu Buhari signed the 2023 Appropriation Bill into law penultimate Friday, not many people heaved a sigh of relief. The reason for this is not far to seek: in the view of analysts, the fiscal policy was short on hope but high on nemesis, especially for the incoming government, who analyst argued may suffer the fallouts.
X-ray of 2023 budget
Specifically, while Mr. President proposed an annual budget of N20.51 trillion for 2023, (a 19.8 per cent increase over the N17.13 trillion approved for 2022, including the supplementary budget), he ended up signing a 2023 Appropriation Act of N21.83 trillion. The president however deferred the signing of the Finance Bill, which is still being reviewed because of some contentious contents, especially parts that conflict with the fiscal term of the Petroleum Industry Act (PIA).
The (proposed) Finance Bill is said to have taken away all concessions given by the PIA; for instance, it dis-incentivises investments in the petroleum sector, leading to massive protest by the international oil companies (IOCs), especially in the area of gas flaring—a development that in part, accounts for the exodus of some IOCs from Nigeria in recent times. Yet, the Finance Bill forms the backdrop that spells out the sources of funding for the annual budget already signed into law. How soon the ‘review’ of the Finance Bill will be completed is a matter for conjecture given the several loose ends in the Budget itself that urgently need to be tied up.
In reality, at every stage of the 2023 Budget signing event, Mr. President expressed his hesitation to assent to the Appropriation Bill, arguing for instance, that his decision to sign the 2023 appropriation bill into law, as passed by the National Assembly, was to enable its implementation commence without delay, “considering the imminent transition process to another democratically elected government.”
With this product of ‘exigency’ (the budget) in place, the President expressed the hope that “the National Assembly would cooperate with the executive” in the much work that still needed to be done on the budget. He said “We have examined the changes made by the National Assembly to the 2023 executive budget proposal”, adding that “the amended fiscal framework for 2023, as approved by the National Assembly, shows additional revenues of N765.79 billion, and an unfunded deficit of N553.46 billion.
“It is clear that the National Assembly and the executive need to capture some of the proposed additional revenue sources in the fiscal framework. This must be rectified.
“I have also noted that the National Assembly introduced new projects into the 2023 budget proposal for which it has appropriated N770.72 billion. The National Assembly also increased the provisions made by Ministries, Departments and Agencies (MDAs) by N58.55 billion,” the President pointed out.
According to the President: “As I stated, the balance has accumulated over several years and represents funding provided by the CBN as lender of last resort to the government to enable it to meet obligations to lenders, as well as cover budgetary shortfalls in projected revenues and/or borrowings.
“I have no intention to fetter the right of the National Assembly to interrogate the composition of this balance, which can still be done even after granting the requested approval.
Further attempting to coerce the Legislators, President Buhari said: “Failure to grant the securitisation approval will, however, cost the government about N1.8 trillion in additional interest in 2023 given the differential between the applicable interest rates, which is currently MPR plus three per cent and the negotiated interest rate of nine per cent and a 40-year repayment period on the securitised debt of the ways and means.”
Besides, the budget also showed that the Senate had increased the 2023 budget by 6.4% to N21.83 trillion ($49 billion) and delayed a decision to the president’s request to convert the CBN’s overdrafts to his administration to long-term bonds after some lawmakers questioned the plan.
Budget of fiscal consolidation
In a document released by the Federal Ministry of Finance recently, the focal point of the 2023 fiscal policy tagged, “Budget of Fiscal Consolidation and Transition” is in all practical purpose to maintain financial viability and ensure a smooth transition to the incoming administration. The projected fiscal outcome in the 2023 Budget is based on the petrol subsidy reform scenario.
In the 2023 budget framework, it is assumed that the petrol subsidy will remain up until mid-2023 based on the 18-month extension announced in early 2022. The document said that in this regard, only N3.36 trillion has been provided for PMS subsidy.
The government also envisages tighter enforcement of the performance management framework for government owned entities that will significantly increase operating surplus/dividend remittances in 2023.
A breakdown showed that the total revenue available to fund the 2023 Budget is estimated at N9.73 trillion. This includes the gross revenues of 63 Government-Owned Enterprises (GOEs) totalling N3.48 trillion. Of this, FGN Oil revenue share is projected at N1.92 trillion, Non-oil taxes are estimated at N2.43 trillion, and FGN Independent revenues are projected to be N2.21 trillion. Other revenues total N762 billion. The GOEs will remit N1.06 trillion to FGN’s Consolidated Revenue Fund, and retain N2.42 trillion for their expenditures and reserves.
In aggregate, 20% of projected revenues is expected from oil-related sources, while 80% is to be earned from non-oil sources.
Speaking after the signing of the eighth and final annual budget of his government, the president said the aggregate expenditure of N21.83 trillion was an increase of N1.32 trillion over the initial executive proposal of a total expenditure of N20.51 trillion.
He explained that the 2022 Supplementary Appropriation Act would enable the administration to respond to the havoc caused by the recent nationwide floods, which took a heavy toll on infrastructure and agriculture.
As is customary, he said Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed would subsequently provide more details on the approved budget and the supporting 2022 Finance Act.
Furthermore, Buhari said his decision to sign the 2023 appropriation bill into law, as passed by the National Assembly, was to enable its implementation commence without delay, considering the imminent transition process to another democratically elected government.
He, however, directed the Minister of Finance, Budget and National Planning to engage the legislature to revisit some of the changes made to the executive budget proposal, expressing the hope that the National Assembly would cooperate with the executive in this regard.
Buhari stated, “We have examined the changes made by the National Assembly to the 2023 executive budget proposal.
“The amended fiscal framework for 2023, as approved by the National Assembly, shows additional revenues of N765.79 billion, and an unfunded deficit of N553.46 billion.
“It is clear that the National Assembly and the executive need to capture some of the proposed additional revenue sources in the fiscal framework. This must be rectified.
“I have also noted that the National Assembly introduced new projects into the 2023 budget proposal for which it has appropriated N770.72 billion. The National Assembly also increased the provisions made by Ministries, Departments and Agencies (MDAs) by N58.55 billion.”
Buhari said, “As I stated, the balance has accumulated over several years and represents funding provided by the CBN as lender of last resort to the government to enable it to meet obligations to lenders, as well as cover budgetary shortfalls in projected revenues and/or borrowings.
“I have no intention to fetter the right of the National Assembly to interrogate the composition of this balance, which can still be done even after granting the requested approval.
He directed the Ministry of Finance, Budget and National Planning to work towards early release of the 2023 capital votes to enable MDAs commence the implementation of their capital projects in good time and support efforts to deliver key projects and public services as well as improve the living conditions of Nigerians.
Reiterating that the 2023 budget was developed to promote fiscal sustainability, macroeconomic stability, and smooth transition to the incoming administration, the president said it was also designed to ensure social inclusion and strengthen the resilience of the economy.
On achievement of the revenue targets of the budget, the president directed MDAs and government-owned enterprises (GOEs) to intensify their revenue mobilisation efforts, including ensuring that all taxable organisations and individuals pay their taxes.
To achieve the objectives of the 2023 budget, the president said relevant agencies must sustain current efforts towards the realisation of crude oil production and export targets.
He stated, “To augment available fiscal resources, MDAs are to accelerate the implementation of Public Private Partnership initiatives, especially those designed to fast-track the pace of our infrastructural development.
“This, being a deficit budget, the associated Borrowing Plan will be forwarded to the National Assembly shortly.
“I count on the cooperation of the National Assembly for a speedy consideration and approval of the Plan.”
On the Finance Bill 2022, the president expressed regret that its review, as passed by the National Assembly, was yet to be finalised.
“This is because some of the changes made by the National Assembly need to be reviewed by the relevant agencies of government. I urge that this should be done speedily to enable me to assent into law,” he said.
Buhari thanked the senate president, Speaker of the House of Representatives, and all leaders and members of the National Assembly for the expeditious consideration and passage of the Appropriation Bill.
He also recognised the roles played by the Ministers of Finance, Budget and National Planning; the Budget Office of the Federation; Senior Special Assistants to the President (Senate and House of Representatives); Office of the Chief of Staff, as well as all who worked tirelessly and sacrificed so much towards producing the 2023 Appropriation Act.
Buhari further stated, “As I mentioned during the presentation of the 2023 Appropriation Bill, early passage of the budget proposal is critical to ensure effective delivery of our legacy projects, a smooth transition programme and effective take-off of the incoming administration.
“I appreciate the firm commitment of the 9th National Assembly to the restoration of a predictable January to December fiscal year, as well as the mutual understanding, collaboration and engagements between officials of the executive and the legislative arms of government.
“These have made the quick consideration and passage of our fiscal bills possible over the last four years.”
This tone of desperation is underpinned by the prospect of Nigeria’s public debt hitting about N77 trillion by the end of Mr. President’s tenure on May 29, 2023. Already, the Director-General of the Debt Management Office (DMO) has warned that the projected debt sum would become a reality if the CBN’s Ways and Means outstanding were not securitized, coupled with the N44.06 trillion total debt stock as at end-September 2022 and the N8 trillion ‘new borrowings.’
The DMO Chief Executive, Ms Patience Oniha, had on her part explained that securitisation was the best option because “at the current interest rate charge of 18.5 per cent, additional N1.8 trillion to N2 trillion may be incurred as interest, if the government fails to securitise the CBN Ways and Means.” But whether the securitisation effort would yield the desired result is yet uncertain, given the fact that most lawmakers are opposed to it—the more reason why the proposal has been undergoing legislative consideration for quite some time now.
Issues with 2023 budget
Economists say that Nigeria’s government is spending more money on debt repayments than on education and health, but Buhari has said his government had no choice but to borrow its way out of two recessions in the past seven years.
Firing the first salvo, Dr. Muda Yusuf, CEO, Centre for Promotion of Private Enterprise, in a monitored television magazine programme on TVC recently, noted that the 2023 Appropriation Bill may have set the tone for another unsatisfying yearly ritual that drains public funds while adding nothing to the economy.
According to him, there is nothing to cheer about the budget, particularly in terms of funding capacity.
The budget, especially the expenditure, is not as large as it appears, Yusuf argued matter-of-factly.
He said “We have a budget proposal of 20.51 trillion dollars and a debt service payment of N6.3 trillion dollars. The amount that is actually available for proper spending in terms of capital or recurring expenditure, that is non-debt, is approximately 14 trillion because we have a debt service of N6.3 trillion.”
Dr. Yusuf stated that any revenue generated by the country is used to pay off the country’s debt before anything else is considered.
According to our track record of revenue performance over the last few years, the best we’ve had is around 60% of target.
The renowned economist further lamented that proposed 2023 budget will be funded almost completely by borrowing.
“With an 8.8 trillion borrowing proposal, new borrowings, you already have a debt profile of nearly 43 trillion. By the time you include this 8.8, the total debt will be close to N50trillion.”
Also the Lagos Chamber of Commerce and Industry, LCCI, has warned that the Federal Government planned supplementary budget will cause severe economic shocks in 2023.
In a statement signed by its Director-General, Dr Chinyere Almona, the LCCI while reacting to the development, said, “A deeper look at the figures showed that the supplementary budget if approved, will raise the budget deficit for 2022 from N10.78 trillion to N11.6 trillion and about 4.43% deficit to GDP ratio. The most critical issue, though, is not about the level of spending but the cost of borrowing.”
LCCI disclosed that the massive burrowing by Buhari’s government had had an enormous impact on the Nigerian economy, stating that increasing the nation’s debt servicing burden would make the country vulnerable to unforeseeable shocks in an election year.