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Key highlights of Nigeria’s 2023 Budget
· The 2023 budget expenditure of 21.83 trillion Naira is the greatest in the history of Nigeria and this will be financed by N9.73 trillion in anticipated revenue. The nation's highest-ever deficit of N10.78 trillion (4.78% of anticipated GDP) would be paid for by additional borrowings, earnings from privatizations, and the withdrawal of loans that were previously acquired for certain projects.
· The budget deficit is nearly 11% greater than the 9.73 trillion Naira in anticipated revenue. For Nigeria to be able to fulfil its expenditure demands without any form of borrowing, it would need to earn an additional 111% of its current revenue, or more than twice as much.
· Non-debt recurrent expenditures (NDRE) are 8.27 trillion Naira, which is 16% more than the 2022 revised budget of 7.11 trillion Naira, and still the budget's largest item (approximately 40%). It contains personnel cost of 4.99 trillion Naira, which accounts for 60.33% of non-debt recurrent expenditures (NDRE).
· They estimated 6.31 trillion Naira is the second largest dent service expenditure increased by 71% from 2022. It accounts for 31% of the anticipated budgetary spending for 2023. The skyrocketing increase in debt payment shows that the estimated deficit for 2022 may be greater than expected, necessitating new borrowings in addition to rising interest rates.
· A quarter of the 2023 budget's spending will go toward capital projects, which will cost 4.93 trillion Naira (excluding the statutory transfer component). This is a decrease of 8.88% from 2022.
· The predicted revenue for 2023, 9.7 trillion Naira, is 2.4% less than the projected revenue for 2022, 9.9 trillion Naira.
Lingering fears
In Nigeria, the first and second quarters of 2023 will be dominated by elections and political transitions. This may have the effect of disrupting economic activities and fuelling uncertainties, especially among domestic and foreign investors. The economy may therefore fall short of the 3.5% growth rate assumed in the budget parameters, which would subsequently result in lower revenues and additional borrowings.
Nigeria’s overall debt to GDP ratio of about 37% is sustainable. However, the new round of budgeted borrowing sends the wrong signal to domestic and foreign investors. Deficits and debts imply that taxes will be raised in the future to pay for debts, making investments less profitable. It may also prompt nervous investors to move their capital to more fiscally stable countries.
There are also fears that unrestrained borrowing could tilt the country’s debt portfolio into the realm of unsustainability, which may then lead to defaults in debt repayments and a steep decline in new loans. Government obligations to contractors and other investors would be jeopardised.
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