By Deji Elumoye, Sunday Aborisade and Udora Orizu:
President Muhammadu Buhari yesterday, while presenting a record N20.51 trillion 2023 appropriation bill to a joint session of the National Assembly in Abuja, announced the discontinuation of subsidy on petrol in the country effective next year.
The President, who did not indicate the specific month the removal would take effect, described the subsidy regime as grossly unsustainable “in the current reality of low revenues occasioned by oil theft and insecurity.”
President Buhari indicated that budget 2023, which is almost N3 trillion more than the N17.126 trillion budgeted for 2022, will also have a record N10.78 trillion deficit, which is above the three per cent threshold set by the Fiscal Responsibility Act 2007.He said the proposal tagged, “Budget of Fiscal Consolidation and Transition”, the last by his administration, was designed to address critical issues and lay a solid foundation for the incoming administration.
The President said: “We expect the total fiscal operations of the federal government to result in a deficit of N10.78 trillion. This represents 4.78 per cent of estimated GDP, slightly above the three per cent threshold set by the Fiscal Responsibility Act 2007.“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.”He explained that the budget deficit would be financed mainly through borrowings.
Buhari said this would include new borrowings totaling N8.80 trillion, N206.18 billion from privatisation proceeds and N1.77 trillion drawdowns on bilateral/multilateral loans secured for specific development projects/programmes.
President Buhari said: “Over time, we have resorted to borrowing to finance our fiscal gaps. We have been using loans to finance critical development projects and programmes aimed at further improving our economic environment and enhancing the delivery of public services to our people.“As you are aware, we have witnessed two economic recessions within the period of this Administration. A direct result of this is the significant decline in our revenue generating capacity.
“In both cases, we had to spend our way out of recession, resulting in higher public debt and debt service. It is unlikely that our recovery from each of the two recessions would have been as fast without the sustained government expenditure funded by debt.”Based on fiscal assumptions and parameters, total federally-collectible revenue is estimated at N16.87 trillion in Budget 2023. Oil price benchmark was pegged at $70 per barrel; with a daily oil production estimate of 1.69 million barrels, inclusive of Condensates of 300,000 to 400,000 barrels per day. Exchange rate was pegged at N435.57 per US Dollar with projected GDP growth rate of 3.75 per cent and 17.16 per cent inflation rate.
The expenditure comprises of 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.The President said: “Total federally distributable revenue is estimated at N11.09 trillion in 2023, 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.
“Oil revenue is projected at N1.92 trillion, non-oil taxes are estimated at N2.43 trillion, 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 MDAs on the revenue side of the budget and greater attention to internal revenue generation. Sustenance of revenue diversification strategy would further increase the non-oil revenue share of total revenues.”
President Buhari disclosed that N470 billion intervention had been provided for in the 2023 budget estimates to fund tertiary institutions.While urging varsity lecturers under the aegis of the Academic Staff Union of Universities (ASUU) to show understanding in government efforts to address the concerns, the President noted that the government alone cannot provide the resources required for funding tertiary education.
He nevertheless said the federal government would not sign any agreement that would be difficult to implement with ASUU.“In most countries, the cost of education is jointly shared between the government and the people, especially at the tertiary level. It is imperative therefore that we introduce a more sustainable model of funding tertiary education. The government remains committed to the implementation of agreements reached with staff unions within available resources.
“This is why we have remained resolute that we will not sign any agreement that we would be unable to implement. Individual institutions would be encouraged to keep faith with any agreement reached in due course to ensure stability in the educational sector,” said the President.He also announced the discontinuation of the oil subsidy regime from next year.
He described the oil subsidy regime as grossly unsustainable in the current reality of low revenues occasioned by oil theft and insecurity.Buhari said: “The 2023 Appropriation Bill aims to maintain the focus of MDAs on the revenue side of the budget and greater attention to internal revenue generation. Sustenance of revenue diversification strategy would further increase the non-oil revenue share of total revenues.”In his welcome address, the President of the Senate, Ahmad Lawan proffered suggestions on how to reverse the increasing trend of deficits in the nation’s budget.
Lawan told President Buhari that the nation’s economy was still challenged by dearth of revenues, and the idea of deploying revenues from the Oil and Gas sector to support the diversification into real sectors like agriculture, manufacturing, mining, etc, was now under serious threat.According to him, oil thieves have declared war on the country and its people, and if necessary measures were not taken to stop the thieves immediately, the economy would be devastated.
Lawan said, “The large-scale and massive stealing of our oil, is concerning, as this reduces drastically the revenues available to the government. With conflicting figures, projections have put our losses from this malaise at between 700,000 to 900,000 barrels of crude oil per day, leading to about 29 to 35 per cent loss in oil revenue in the first quarter of 2022. This represents an estimated total fall from N1.1 trillion recorded in the last quarter of 2021 to N790 billion in the first quarter of this year.
“The situation has worsened. Recently, the loss of our oil has reached 1 million barrels per day. Translated into monetary terms, our loss is monumental. The figures show we are not able to meet the OPEC daily quota of 1.8 million barrels per day. Mr. President, I consider the oil thieves the worst enemies of our country. The thieves have declared war on our country and our people.”
Speaking further, the Senate President suggested taking off some of the major revenue generating agencies from direct funding by placing them on the cost of collection of revenues, as we did for Federal Inland Revenue Service (FIRS), Nigeria Customs Service.In this regard, Lawan said agencies like Nigeria Ports Authority, (NPA), Nigeria Communications Commission, (NCC), Nigeria Maritime Administration and Safety Agency, (NIMASA), etc can be given encouraging cost of collections of revenues.
CUPP Knocks Budget
The Coalition of United Political Parties, (CUPP) has described the 2023 budget proposal as one with unrealistic projections, lacking in substance and as empty as the government that presented it.
In a statement by its spokesman, Ikenga Ugochinyere, CUPP said the fiscal document would be a budget to draw the curtain on eight years of “malfeasance, budget padding, unbridled borrowing, unprecedented corruption and wasteful expenditure.”
The group opined that a budget with far less than 30% vote for capital expenditure was not a budget meant to serve the people and accused the APC of presenting it so as to enable it to loot the money since most of the money was tied to consumables and recurrent expenditure which is easy to loot.He said, “How can a government whose first full budget in 2016 was just N6.06 trillion, justify and celebrate over N20 trillion budget in 2023. The indices were still the same. It is all about padding, borrowing, shortfall in revenue generation and vision-less implementation which has not meant well for Nigerians and for which the government really has nothing to show.”
