By Philip S. Clement & Chris Agabi
Amidst the increasing revenue challenges bedevilling Nigeria’s economy, the country has recorded a deficit of N5.33 trillion between January and August this year. The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed stated this yesterday in Abuja at the ministerial presentation of the 2023 budget proposal.
A fiscal deficit occurs when a government’s total expenditure exceeds the revenue that it generates, excluding borrowings.
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As of August 2022, the minister said the federal government’s retained revenue was N4.23trn, which is 64 per cent of the pro-rata target of N6.65trn.
She said, “The fiscal deficit for 2022 is estimated at N7.53trn. The N5.53trn deficit as at August is N430.82bn above the prorate level”.
On the level of borrowing in the 2022 budget, she said “The level of borrowing is at N1.26trn ahead of August target”.
The federal government’s share of oil revenue, she said, was N395.06bn representing 27.1 per cent performance, while non-oil tax revenue totaled N1.549trn a performance of 102.9 per cent.
Company Income tax (CIT) and Value Added Tax (VAT) collections were N826.27bn and N210.36bn representing 136.3 and 99.6 per cent of their respective targets. Customs collections comprising import duties, excise and fees, and federal account special levies, trailed the target by N102.51bn (17 per cent).
Similarly, other revenues accounted for N2.19trn of which independent revenue was N866.16bn.” She explained.
In terms of expenditure, Mrs Ahmed put the aggregate expenditure for 2022 at N17.32trn with a pro-rata spending target of N11.55trn at the end of August.
The actual spending, as of August 31 was N9.56trn and of this amount, N3.52trn was for debt service and N2.89trn for personnel costs, including pensions.
In addition, the minister stated that N1.78bn was released for capital expenditure in the year under review.
FG to covert N20trn CBN loan to 40-year bond
Speaking further, she said the federal government is owing the Central Bank of Nigeria (CBN), N20 trillion and it plans to raise bonds to repay the amount over a 40-year period.
Checks by Daily Trust show that it is in breach of the law guiding CBN lending to the federal government as the CBN Act does not permit long-term repayment of such advances.
“The total Ways and Means (CBN lending to the FG) today is N20 trillion and we have the approval to securitise and the securitisation will be over in a 40-year period with an interest rate of 9 per cent. But over the years, we have been paying interest component and the current rate that is charged on the ways and means” the minister said.
CBN Act of 2007 prohibited such repayment plans in Section 38 (3b).
The Act states in Section 38 (1) that “Notwithstanding the provisions of section 34 (d) of this Act, the bank may grant temporary advances to the federal government in respect of temporary deficiency of budget revenue at such rate of interest as the bank may determine.”
Sub-section 2 of the section states that “The total amount of such advances outstanding shall not at any time exceed five per cent of the previous year’s actual revenue of the federal government.”
Sub-section 3 further adds: “AlI advances made pursuant to this section shall be repaid- (a) as soon as possible and shall, in any event, be repayable by the end of the federal government financial year in which they are granted and if such advances remain unpaid at the end of the year, the power of the bank to grant such further advances in any subsequent year shall not be exercisable, unless the outstanding advances have been repaid, and (b) in such form as the bank may determine provided that no repayment shall take the form of a promissory note or such other promise to pay at a future date or securitisation by way of issuance of treasury bills, bonds, certificates or other forms of security which are required to be underwritten by the bank.”
N3.3trn provision for 2023
Speaking on subsidy, the minister said the federal government has provided N3.3trn as subsidy for the 2023 fiscal in spite of the shallow revenue position of the FG.
She said: “We have provided N3.3trn to be used for fuel subsidy. For us on the fiscal side, it’s not something we should be doing. But we live in a nation and we have different arms of government so we will have to do what is practical.”
Defence, education, health take lion share
On education, she said N2.02 trillion has been provided for the education sector including N470bn to pay the increment portion of the adjustment of salaries for lecturers as well as the revitalisation that was negotiated with their union.
“This is in addition to the regular salaries. If you factor in that, the total package will be N515 billion,” she noted.
Further breakdown of the budget for the education sector shows that N1.23 trillion was budgeted for the Ministry of Education and its agencies, N248 billion for the Tertiary Education Trust Fund (TETFUND) and N95.30 billion for Universal Basic Education Commission (UBEC).
The Defense and security sector is expected to gulp N2.74 trillion. The amount is to be shared by the military, police, intelligence and paramilitary (recurrent and capital).
Infrastructure is expected to take N998.93 billion.
In the same vein, Social Development and Poverty Reduction Programmes is also set to take N756 billion.
In the health sector, checks by Daily Trust show that N1.58 trillion with N1.42 trillion budget for the health ministry’s capital and recurrent expenditure, N69 billion for Gavi/Immunisation funds and N47 billion transfer to the Basic Health Care Provision (BHCPF).
Meanwhile, the federal government is expected to run the 2023 budget on N10.78trn in 2023 budget. The breakdown shows that N7.04 trillion will be sourced from domestic sources while N1.76 trillion from foreign sources, which include multilateral/bilateral loan drawdowns and privatiSation proceeds of N206.18bn.
NNPC deductions hampering revenue growth – Finance minister
In another development, Mrs. Ahmed admitted that the deduction for fuel subsidy by the Nigerian National Petroleum Company Ltd is badly affecting the nation’s revenue growth.
“Revenue generation remains the major fiscal constraint of the federation. The systemic resource mobilisation problem has been compounded by the recent economic recession
However, crude oil 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 August,” she said.
She further stated that bold, decisive and urgent action is needed to address revenue underperformance and expenditure efficiency at the national and subnational levels
Mrs Ahmed also announced that “The goal of fiscal interventions will be to further stimulate the economy through carefully calibrated regulatory/policy measures designed to boost domestic value addition and attract external investments and sources of funding”.
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