N19.76 trillion has been proposed by the Federal Government as budgetary expenditures for 2023 fiscal year.
However, the budget may hit a fiscal deficit of between N11.30 trillion and N12.41 trillion, depending on the removal timeline of the subsidy regime.
Minister of Finance, Budget and National Planning, Hajia Zainab Ahmed, disclosed this, yesterday, while presenting details of the 2023-2025 Medium Term Expenditure Framework and Fiscal Strategy Paper, MTEF/FSP, to the House of Representatives Committee on Finance.
According to the minister, if fuel subsidy is removed in June as proposed, the deficit record will be N11.30 trillion, just as N12.41 was the projected deficit should it run from January to December.
She also feared that there might be no fund available for capital projects in the Ministries, Departments and Agencies, MDAs, adding that crude oil production challenges and PMS subsidy deductions by Nigerian National Petroleum Corporation, NNPC, Limited was posing a significant threat to the revenue target of the country.
She said: “The draft 2023-2025 MTEF/FSP has been prepared against the backdrop of continuing global challenges occasioned by lingering COVID-19 pandemic effects, as well as higher food and fuel prices due to the war in Ukraine.
“Revenue generation remains the major fiscal constraint of the federation. The systemic resource mobilisation problem has been compounded by recent economic recessions. Efforts will, however, focus on improving tax administration and collection efficiency.
“Crude oil production challenges and PMS subsidy deductions by NNPC constitute a significant threat to the achievement of our revenue growth targets, as seen in the 2022 Performance up to April.
“Bold, decisive and urgent action is urgently required to address issues of 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 per cent of the estimated GDP, above the three percent threshold stipulated in the Fiscal Responsibility Act, 2007.
“Given the severely constrained fiscal space, 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.
“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″
Ahmed further stated that in the first scenerio, the Federal Government revenue for 2023 was placed at N6.34 trillion, adding that only N373.17 billion was expected from oil related revenue, while the balance of N5.97 trillion will come from non-oil sources.
For the second scenario, 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, of which N.99 trillion or 23 per cent is projected to come from oil revenue sources.”
The minister also said oil benchmark for 2023 was placed at 70 dollars 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 was expected to grow at 17.16 per cent.
According to her, the Gross Domestic Product, GDP, of the country is expected to grow at 3.75 percent.
Engaged on the factors hindering the financial growth of the country, the minister said the experience of 2022 showed that there was a decline in production.
On money spent on pipeline security
Also speaking on the money spent on pipeline security, Ahmed said efforts were being made to find permanent solution to the issue.
She said: “From what has happened in 2022, clearly what we are spending is not giving us much value because production continues to decline and what this means is whatever we are doing is not working and therefore we have to do something totally different.
“My understanding is that security agencies and the National oil company as well as the regulators have been working very hard to find solutions and what they tell us is that they are beginning to see improvement.
“Oil production in April was 1.3 million barrels per day and by July it was 1.4 million. We do hope that the increase will be very significant because it’s costing us not just N3.2 billion in terms of security cost, but the revenue we have earned.
“At 39 per cent, the oil and gas revenue as at April is at very low performance. We need to move oil and gas revenue the threshold.
“In the MTEF for 2023 to 2025, we had removed the federation spending on pipeline security, assuming that with the transition of NNPC to NNPC limited, they will be carrying that cost directly, not the federation.
“The Petroleum Industry Act has given the NNPC some independence from the federation. And also as a registered company now under CAMA, they have to perform in line with the laws of the Company and Allied Matters Act.
Credit: THE VANGUARD.
