The deficit in the 2023 fiscal year is expected to range between N11.30 trillion and N12.41 trillion, according to the federal government’s proposed budget, which has estimates totaling N19.76 trillion. Zainab Ahmed, the minister of finance, budget, and national planning, announced this in Abuja on Monday. She bemoaned the possibility that the government might not be able to fund treasury-funded capital projects the following year due in part to declining tax revenues and the payment of subsidies on Premium Motor Spirit, more commonly known as gasoline. In his presentation to the House of Representatives Committee on Finance at the hearing on the proposed 2023–2025 Medium Term Expenditure Framework and Fiscal Strategy Paper, Ahmed noted that the country’s revenue growth goals are seriously threatened by problems with crude oil production and PMS subsidy deductions by the Nigerian National Petroleum Company Limited (formerly the Nigerian National Petroleum Corporation).
She said that to address revenue underperformance and expenditure efficiency at the national and sub-national levels, immediate, bold, and decisive action must be done. The budget deficit is anticipated to increase from N7.35 trillion in 2022 to N11.30 trillion in 2023 under this scenario, the minister added. This exceeds the 3% threshold outlined in the Fiscal Responsibility Act of 2007 by 5.01 percent of the anticipated GDP (Gross Domestic Product).
The government could choose to pay the gasoline subsidy from January to December, according to Ahmed’s analysis of the options. She also noted that “given the severely constrained fiscal space, the budget deficit is projected to be N12.41tn in 2023, up from N7.35tn budgeted in 2022, representing 196 percent of total FGN revenue or 5.50 percent of the estimated GDP.” She said there will be no provision for treasury-funded MDA’s capital projects in 2023 as this is far above the 3% threshold required in the Fiscal Responsibility Act 2007.
In the first scenario, the minister claims that the government’s predicted revenue for 2023 is N6.34 trillion, of which only N373.17 billion is anticipated to come from sources related to oil, with the remaining N5.97 trillion coming from non-oil sources. The second scenario, according to Ahmed, assumes an aggregate implementation of cost-to-income restrictions of Government Owned Companies in addition to subsidy reform. With these, the estimated 2023 FGN revenue is N8.46 trillion, of which N.99 trillion, or 23%, is expected to come from sources related to oil revenue.
She pointed out that the reform scenario assumes that petrol subsidies will continue up to mid-2023 based on the 18-month extension announced in early 2021, in which case only N3.6tn will be provided for. The business-as-usual scenario assumes that PMS subsidies, which are estimated to be N6.7tn for a full year, will remain in 2023 and be fully provided for. Regarding the fundamental presumptions of the proposed 2023 budget, Ahmed stated that the benchmark oil price is estimated to be $70 per barrel, with a benchmark oil production benchmark of 1.69 million liters per day, an exchange rate of N435.02 to the dollar, and an inflation expectation of 17.16%. According to the minister, the GDP is projected to increase by 3.75 percent, but there will be upward pressure on prices due to the war in Russia and Ukraine, domestic unrest, rising import costs, exchange rate depreciation, and other supply-side constraints, as well as the immediate and lag effects of the global price surge.
James Faleke, the chairman of the finance committee, emphasized that given the nation’s current financial circumstances, all of the government’s studied revenue streams were insufficient.
Every element of the nation suffers when there is a lack of revenue, according to Faleke, who urged all agencies testifying before the committee to give the committee the accurate status of their earnings. He issued a warning that no government agency would be permitted to tamper with the nation’s tax money.
