The 2023 budget and its implementation

President Muhammadu Buhari on Tuesday signed the Appropriation Bill into law. The earlier budget estimate of N20.3 trillion was later increased by N1.3trillion after a joint session of the National Assembly (NASS) to reach N21.82 trillion. The President’s assent also came three months after he presented the budget on October 7, 2022.

The budget is predicated on the following assumptions: oil benchmark of 1.69 million barrels per day, and $75 per barrel, an exchange rate of N435.57/$, and 3.5 per cent growth rate. It also provides N6.55trillion for debt services, N8.32trillion for recurrent (non-debt) expenditure, while N5.97trillion is for capital expenditure, and N967.48 billion as Statutory Transfers.

Earlier, the President had received the approval of the lawmakers for a supplementary budget of N819.54billion domestic loan to fix some infrastructure destroyed by floods last year. A breakdown of the key sectors of the budget shows that Ministry of Works and Housing got the lion’s share of N398.2billion, followed by Defence with N285billion, Agriculture and Rural Development, N248.3billion, Education, N153.7billion and Health, N134.9billion.

Domestic debt (including Ways & Means from CBN) got N4.49trillion, foreign debt servicing N1.81trillion, Sinking fund to repay maturing loans was allocated, N247.72bn. Under Statutory Transfers, the National Assembly severance/inauguration of outgoing and incoming (9th and 10th Assembly) and legislative aides got N30.17billion, NASS Senate Office, N33.26billion, House of Representatives Office, N51.99billion, while NASS Service Commission received N19.55billion.                          Considering the fact that the budget will be substantially funded by borrowing, its effective implementation may be difficult to achieve. It is also likely that the incoming new administration in May 29 might decide to alter some aspects of the Appropriation Act in line with its vision. For instance, if petroleum subsidy is not removed by June this year as planned, it will increase the current deficits, including the Ways & Means, which currently stands at N22.7trillion. 

Already, the W&M is reported to have exceeded the acceptable threshold. This means that the rate of servicing Nigeria’s debts will increase if the binge borrowing continues.  Moreover, the extension of the lifespan of the 2022 budget to March 2023 as requested by President Buhari could hamper a seamless implementation of the 2023 budget.

The implementation of the 2022 budget should have ended by December 31, 2022 in line with provisions of Clause 12 of the Appropriation Act and Section 318 of the 1999 Constitution, which stipulate 12 calendar months of the budget in any given fiscal year. While we call for effective implementation of the budget to achieve service delivery in critical sectors of the economy that will benefit Nigerians, we are also concerned about the multiple challenges facing the country. These include rising debts and deficits, inflation, poverty, unemployment and others.

With the N21.8 trillion budget being the highest in the nation’s budgeting history, it is not so good that more than half of this amount is going to be sourced from external and domestic markets. A budget funded through such huge borrowings is likely to be unsustainable. About 60 per cent of the budget will be used to finance debts of about N6.3trillion; personnel and overhead costs of N4.99trillion and N1.1trillion, respectively. This leaves little for capital expenditure that will stimulate economic growth and development.

With budget deficits and rising debts, the government might increase taxes, which will not augur well for more investments. It will also make investors to move capital to other more fiscally stable countries.  Even though the budget prioritises investment in some of the outgoing administration’s legacy projects, such as roads and rail infrastructure, irrigation and dams, it is uncertain that the next administration will regard such as its areas of focus.

It is also worrisome that the 2023 budget has put less emphasis on diversification of the economy, away from the oil. With the looming global recession in 2023, the budget would have provided a huge vote for the non-oil sector. The manufacturing sector is suffering and the operators are grappling with rising cost of production and volatile foreign exchange regime.

Despite the odds, we urge the government to effectively implement the budget. The problem with our budgets is lack of effective implementation and small vote for capital projects. The country cannot witness the needed economic growth if our budget is heavy on recurrent expenditure and slim on capital expenditure. 

Moving forward, the government must prioritise capital expenditure in its budgets. Besides, the government should strengthen the value of the naira and generate adequate forex earnings to support exports. Although the Fiscal Responsibility Act gives the National Assembly the freedom to adjust the fiscal estimate presented by the executive arm of government, there is need to enact a Budget Law that will streamline our budgeting system and check its excesses.