Minister of Finance, Budget and National Planning, Mrs Zainab Shamsuna Ahmed has said the federal government may not be able to make provision for treasury-funded capital projects in the 2023 fiscal year.
The finance minister painted a grim picture of what the infrastructural efforts of the Federal Government would look like as she also proposed to borrow over N11 trillion to finance the proposed 2023 budget deficit.
The minister also revealed that the budget deficit for the 2023 fiscal year may run between N11.30 trillion to N12.41 trillion depending on the choice that will be made by the government on the issue of subsidy payment on premium motor spirit otherwise known as petrol.
Speaking during the presentation of the 2023-2025 Medium Term Expenditure Framework and Fiscal Strategy Paper before the House of Representatives Committee on Finance, put the aggregate expenditure of the government for 2023 at N19.76 trillion.
She hinged her projection on crude oil production challenges and PMS subsidy deductions by the Nigerian National Petroleum Company (NNPC), saying that those constitute significant threats to the achievement of the nation’s revenue growth targets.
According to her, decisive and urgent actions are required to address revenue underperformance and expenditure efficiency at national and sub-national levels.
“In this scenario, the budget deficit is projected to be N11.30 trillion in 2023, up from N7.35 trillion in 2022. This represents 5.01 percent of the estimated GDP, above the three percent threshold stipulated in the Fiscal Responsibility Act, 2007”, she said.
In scenario 1 which, she said, involves funding subsidies from January to December, the minister said, “Given the severely constrained fiscal space, the budget deficit is projected to be N12.41 trillion in 2023, up from N7.35 trillion budgeted in 2022, representing 196 percent of total FGN revenue or 5.50 percent of the estimated GDP.
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This is significantly above the three percent threshold stipulated in the Fiscal Responsibility Act 2007 and there will be no provision for treasury funded MDA’s capital projects in 2023”.
She further gave an overview of government revenue, using two scenarios, saying, “Under the first scenario, the Federal Government revenue for 2023 at N6.34 trillion, out of which only N373.17 billion is expected from oil-related revenue, while the balance of N5.97 will come from non-oil sources.”
In scenario two, she said, “In addition to subsidy reform, this scenario assumes an aggregate implementation of cost to income limit of Government Owned Companies.
With these, the 2023 FGN revenue is projected at N8.46 trillion out of which N.99 trillion or 23 percent is projected to come from oil revenue sources.”
On the key assumption on which the 2023 budget will be based, the minister said the oil benchmark for 2023 is estimated at $70 per barrel, with an oil production benchmark of 1.69 million litres per day and an exchange rate of N435.02 to the dollar, while inflation is expected to grow at 17.16 percent.
She stressed that GDP is expected to grow at 3.75 percent, while upward pressure on prices is expected to be driven by the current and lag effect of the global price surge due to the Russia-Ukraine war, domestic insecurity, rising costs of imports, exchange rate depreciation as well as other supply-side constraints. She noted that growth in nominal consumption has been adjusted in line with revised estimates based on changes in the components of GDP and historical performances, stressing that medium-term nominal consumption is projected at N121.93 trillion in 2023.
Speaking further she said investment, especially from foreign sources, is expected to be dragged down by interest rate hikes in advanced economies, foreign exchange management concerns and other domestic challenges, including insecurity.