Nigeria's 2023 Budget proposal (the "Budget") was presented to the Joint Session of the National Assembly on 7 October 2022. The Budget is tagged “Budget of Fiscal Sustainability and Transition''. See highlights and comments below.
Takeaway
The budget deficit is N10.78tr representing 4.78% of Nigeria's estimated GDP, above the 3% threshold set by the Fiscal Responsibility Act 2007 as amended. The exception is said to be necessary to address security challenges. The deficit will be financed N8.8tr from new borrowing, N1.77tr bilateral/multilateral loan drawdown, and N206b from privatisation proceeds. External and economic factors influencing the budget include the war in Ukraine, lingering effect of Covid-19, high inflation and food crisis, exchange rate challenges and insecurity.
The deficit is also significantly higher than the N4.1 trillion projected for 2023 in the National Development Plan 2021-2025. With public debt already about N42tr in addition to the Central Bank of Nigeria's overdraft of over N20 trillion, the total debt stock is likely to exceed N70 trillion by the end of 2023, resulting in higher debt service-to-revenue ratio.
The trend is concerning given that the budget deficit will be mainly financed by borrowing, which exceeds the amount budgeted for capital expenditure. This indicates that a lot of borrowing will be channeled towards debt service and recurrent expenditure contrary to the provisions of the Fiscal Responsibility Act.
There should be urgent steps to drive harmonisation of taxes and revenue agencies as well as the use of data for tax intelligence to curb evasion and aggressive tax avoidance.