Mixed reactions trail 2023 budget proposal
…LCCI cautions on new N10.57 Loans, urges FG to seek ‘efficient alternatives’
… Govt should use debt to service capital expenditure – ANAN CEO
Mixed reactions have trailed the N20.51 trillion 2023 appropriation bill presented to the joint session of the National Assembly by President Muhammadu Buhari.
The budget is about N750bn higher than the N19.76tn earlier proposed in the 2023-2025 Medium Term Expenditure Framework and Fiscal Strategy Paper.
However, the key provisions in the proposed N20.51tn budget have attracted reactions from major stakeholders, including the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Lagos Chamber of Commerce and Industry, economists and lawmakers, among others.
Of the N20.51tn budget, statutory transfers amount to N744.11bn; non-debt recurrent costs, N8.27tn; personnel costs, N4.99tn; pensions, gratuities and retirees’ benefits, N854.8bn; overheads, N1.11tn; capital expenditure, N5.35tn, including the capital component of statutory transfers; debt service, N6.31tn; and sinking fund of N247.73bn to retire certain maturing bonds.
In his presentation, Buhari said, “We expect total fiscal operations of the Federal Government to result in a deficit of N10.78tn. This represents 4.78 per cent of estimated GDP, 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.”
LCCI
Reacting to this, the Lagos Chamber of Commerce and Industry (LCCI) has urged the Federal Government to consider more ‘efficient alternatives’ to borrowings, rather than issuing N10.57trillion new loans to finance a deficit of N10.78 trillion, as proposed in the 2023 budget.
The Chamber, in a statement issued on Sunday, and signed by its Director General, Dr Chinyere Almona, argued that, while a budget deficit of N10.78 trillion was not out of place, it, however, disagreed with issuing N10.57 trillion new loans, to finance the deficit.
The business advocacy body, therefore, called on the Federal Government to embrace equity financing, as an exclusive way of funding budget deficits; since it would save the country from paying huge interest payments.
“We are of the view that while nothing is wrong with the N10.78 trillion deficit, everything is wrong with the plan to issue N10.57 trillion (N8.8 trillion in new commercial loans and N1.77 trillion drawdown on bilateral and multilateral loans) new loans to finance the deficit, at a time that we are already placed on the watch-lists of some of our foreign bondholders.
“Massive equity financing is the choice we should all urge the Federal Government to consider now. Nigeria should henceforth use equity financing as an exclusive way of funding budget deficits.
“If we embrace equity financing, we do not have to make huge interest payments, and we can use some of the proceeds of our equity issuance to pay some of down debt, to make the fiscal situation more sustainable and rekindle much-needed confidence in our economic and fiscal resilience.
“It is not too late to use equity to fund the 2023 deficit proposal. The current administration should be encouraged to take advantage of the equity choice to bequeath a legacy that the incoming administration can build upon as we find our way back to the path of fiscal sustainability as a nation,” the Chamber stated.
While commending the Federal Government on the early transmission, consideration and signing of the federal budgets in recent times, the body however charged the Federal Government and the National Assembly on the need to ensure an earlier transmission and signing into law of the budget, this year.
The Chamber also commended the government on the strategic objective of the expenditure policy, which focuses on macroeconomic stability, human development, food security, improved business environment, energy sufficiency, improving transport infrastructure, and promoting industrialization by focusing on Small and Medium Scale Enterprises.
It, however, counselled on the need to improve the performance of the 2023 budget by studying how the 2022 budget had performed, to enable the government make some corrections in the implementation of the new budget.
The Chamber also urged governments at all levels to put actionable policies in place to address the high costs of fuels and food, noting that high rate of inflation would continue to distort most of the budget assumptions and targets, if not curtailed.
While commending the Federal Government on its allocation of N470 billion to revitalise the tertiary institutions and enhance salaries of university staff, in the proposed budget, the Chamber however called for a more sustainable funding model that would grant financial autonomy to the universities.
CPPE x-rays
The Chief Executive, Centre for the Promotion of Private Enterprises, Dr Muda Yusuf, told one of our correspondents that the budget had further showed a troubling fiscal outlook for Nigeria.
He stated that the deficit would grow more than what was projected in the budget before the year ends, adding that financing from the Central Bank of Nigeria (CBN) could also accelerate.
Yusuf said, “The 2023 Federal Government budget has further amplified the troubling fiscal outlook for the economy. Expenditure continues to accelerate amid consistent weak revenue performance.
“We have a budget of N20.51tn and revenue projection of N9.73tn. This is a deficit of N10.78tn. In all probability, the deficit will be much bigger by year end because of the track record of revenue under-performance over the last couple of years.
“We are also likely to see an acceleration of the CBN financing of the fiscal deficit given the revenue performance trajectory. The public debt stock is growing and currently at N42tn. With additional new borrowing of N8.8tn, the debt profile will be inching close to N50tn by May next year.
“If we take into account the borrowing from the CBN (ways and means), which is currently about N20tn, we will have a total debt of N70tn by the end of 2023. This should be a cause for concern.”
NACCIMA
On his part, the Director-General, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Olusola Obadimu, described the budget proposals as unhealthy for the productive sector.
He said the Federal Government’s plan to borrow N8.4tn while projecting debt servicing at N6.3tn would translate to merely borrowing to service existing debts.
Obadimu noted that despite budgeting trillions of Naira in previous budgets, the Buhari regime “has nothing to show for it.”
He said, “It doesn’t look good at all. This is not good for productivity. I think this budget is targeted mainly at the upcoming elections. It is not targeted at tackling our weak infrastructure or creating an enabling environment for businesses. We have to adopt fiscal discipline along the line.
“We have to start cutting our coats according to our clothes. We have to look for more ways to start earning foreign exchange. We are still dependent on this monolithic source of income, which is crude oil. But the non-oil exports are very low.”
ANAN CEO
Speaking to Nigerian NewsDirect, the Chief Executive officer Association of National Accountants of Nigeria (ANAN), Dr. Kayode Olushola said, “I feel the budget is comprehensive enough, however, it’s just an estimate for 2023, worthy of note is that we are having a larger projection to cater for Nigerians in 2023 as N20.51trn is about the largest in Nigeria’s history.
“Don’t also forget that budget is about the people, the capital expenditure is lower than recurrent expenditure; ideally it should have been the other way round for development purpose. This is because our recurrent expenditure profile is too extravagant. We have always known that we need more fiscal discipline.
“Also of note is the fact that the debt servicing is higher than the capital expenditure; this shows the alarming rates of our borrowing. However, government and relevant authorities must ensure that these debts are judiciously used for capital projects for the good of Nigerians and not recurrent issues. We also need to slow down on debts so that it’s servicing will not be this burdensome on Nigerians.
“I am impressed that this government returned the fiscal year back to what it should be according to our constitution of January to December. Recall that our budget cycle before now had always violated that provision until this administration came into power some years back and has been consistent with it.”
Dr. Fasua stressed that it is implementation that will determine the impact of the budget on Nigerians.
He posited, “We look forward to effective implementation after the legislature has done their work on the appropriation bill and President Sign it into law.”
Recall that President Buhari had last week Friday presented N20.51trillion as the 2023 budget proposal to the National Assembly.
