2023 budget and impact on business development

The Nigeria 2023 budget was captioned “Budget of Fiscal Consolidation and Transition” in a speech presented to the National Assembly by President Muhammadu Buhari. The budget proposal is the eighth and final budget of his administration which he started on May 29, 2015. It claims that it reflects the serious challenges currently facing our country, key reforms necessary to address them, and imperatives to achieve higher, more inclusive, diversified and sustainable growth. It also claims that the expenditure policy of the government in 2023 is designed to achieve the strategic objectives of the National Development Plan 2021 to 2025, including macroeconomic stability; human development; food security; improved business environment; energy sufficiency; improving transport infrastructure; and promoting industrialisation focusing on Small and Medium Scale Enterprises. The budget speech claimed it is the aim of Buhari’s administration to remain resolutely committed to its goals of improving the living standard of Nigerians and effectively delivering public services.

One fact about this budget is that it is the last opportunity for the administration to impress Nigerian sceptics. The president stated that “against the backdrop of the challenging global and domestic economic environment, it is imperative that Nigeria strengthens her macroeconomic environment and address subsisting challenges as a country. The 2023 Appropriation, therefore, is a ‘Budget of Fiscal Sustainability and Transition’. Our principal objective in 2023 is to maintain fiscal viability and ensure smooth transition to the incoming administration”. The 2023 to 2025 Medium Term Expenditure Framework and Fiscal Strategy Paper sets out the parameters for the 2023 Budget as follows: Oil price target of 70 US Dollars 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 per US Dollar; and Projected Gross Domestic Product (GDP) growth rate of 3.75 percent and annual average of 17.16 percent inflation rate.

Based on these fiscal assumptions and parameters, total federally-collectible revenue is estimated at N16.87 trillion in 2023. Total federally distributable revenue is estimated at N11.09 trillion in the same year, while total revenue available to fund the 2023 Federal Budget is estimated at N9.73 trillion. This includes the revenues of 63 Government-Owned Enterprises (GOEs). Oil revenue is projected at N1.92 trillion, Non-oil taxes are estimated at N2.43 trillion, and Federal Government of Nigeria (FGN) independent revenues are projected to be N2.21 trillion. Other revenues total N762 billion, while the retained revenues of the GOEs amount to N2.42 trillion. The 2023 Appropriation Bill aims to maintain the focus of ministries, departments and agencies (MDAs) on the revenue side of the budget and greater attention to internal revenue generation.

Sustenance of revenue diversification strategy aims to further increase the non-oil revenue share of total revenues. A total expenditure of N20.51 trillion is proposed for the Federal Government in 2023. This includes N2.42 trillion spending by GOEs. The proposed N20.51 trillion 2023 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 is expected that the total fiscal operations of the Federal Government will result in a deficit of N10.78 trillion. This represents 4.78 percent of estimated GDP, above the 3 percent threshold set by the Fiscal Responsibility Act 2007.

From the above, one can see that the tone of Mr. President’s speech and the provisions of the budget are not different from what we are used to in the past. The budget rightly identified the problems facing the country, but failed to state how they will be solved. Inflationary rate was estimated to peak at 17.16 percent, but inflationary rate in Nigeria, as at October 2022 stood at 23.34 percent. This made the World Bank to recently list Nigeria among the top ten (10) countries in the world with the worst inflation rates. Sensing that insecurity is a business annihilator, the government stated that “as envisaged by the law, we need to exceed this threshold considering the need to continue to tackle the existential security challenges facing the country.” Curbing the insecurity in the country, which has seriously affected the economy including trade and transportation, needs more assurance than mere listing in a budget speech. Prospective investors need to know what the government plans to do to curb banditry, kidnapping and highway armed robbery.

The oil price target of 70 US dollars per barrel is uncertain due to numerous risks facing the global oil and gas market. As at November 9, 2022, Arise Television reported that oil prices dipped 1% on China demand and United States midterm elections. The government plans to finance the deficit occasioned by its expenditure and revenue generation mainly by new borrowings totalling N8.80 trillion, N206.18 billion from privatisation proceeds and N1.77 trillion draw-downs on bilateral/multilateral loans secured for specific development projects/programmes. 

The debt service of N6.31 trillion is outrageous! For a very long time, the country has resorted to borrowing to finance her fiscal gaps and over time, we have not seen any meaningful economic development and growth because of the high rate of corruption. A corrupt nation like Nigeria needs financial discipline to evolve. Major part of the loans taken by the nation in the past went down the drain. A serious nation will only take loans to develop economic infrastructure which will create employment and generate revenues for the nation. Of what benefits is social infrastructure to a nation where an average youth is unemployed?

The budget that Nigeria needs at this moment is “Budget of Industrial Development”. Our trade balance in 2021 (deficit 5.01 billion USD) is unfavourable for economic development. The Nigeria Export Promotion Council (NEPC) ‘zero-oil plan’ is supposed to have considerable budget provisioning and air cargo in Nigeria ought to be developed. The Nigeria Startup Act 2022 needs generous funding and serious execution. The government needs to invest in infrastructure, including cargo airports and security, which will ease the transportation of agriculture produce from Nigeria with the view of earning foreign exchange and reducing the dollar exchange rate, which recently went as low as N900 to a dollar at the black market! While the idea of generating income from moribund and abandoned government facilities is welcome, the government needs to state how this will be done and also, the government should consider putting its over 50,000 abandoned properties, which have been estimated to be worth about N9.0 trillion, into income generation, either by selling or leasing them.

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