How We Will Fund N10.78tr Budget Deficit – Minister

The Federal Government yesterday laid out how it will navigate the balance of the  N20.51 trillion Budget on a total revenue of N9.73 trillion in 2023, with a hint that it may borrow more than the current estimate of N10.78 trillion in 2023.

Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, at the public presentation of the breakdown and highlights of the 2023 budget proposal, said the overall budget deficit of N10.78 trillion for 2023 will largely be financed through domestic loans.

She said that the budget deficit will be financed mainly by borrowings including domestic sources, N7.04 trillion; foreign sources, N1.76 trillion; multilateral and bi-lateral loan drawdowns, N1.77 billion and expected N206.18 billion proceeds from privatization of national assets.

“There is a continuing need to exceed this threshold considering the existential security challenges facing the country,” Ahmed said.

The minister said Nigeria has no plan to restructure its debt as government remains committed to meeting its domestic and external debt obligations.

According to her, government will continue to utilize appropriate debt management tools to streamline the cost and risk profile in the debt portfolio, including through concessional loans, spreading out of debt maturities to avoid bunching, and re-profiling of the debt maturities by refinancing short-term debt using long-term debt instruments.

She explained that total revenue available to fund the 2023 FGN Budget is estimated at N9.73 trillion. This includes the gross revenues of 63 Government-Owned Enterprises (GOEs) totalling N3.48 trillion. Of this, Federal government oil revenue share is projected at N1.92 trillion, non-oil taxes are estimated at N2.43 trillion, and independent revenues are projected to be N2.21 trillion. Other revenues total N762 billion. The GOEs will remit N1.06 trillion to federal government’s Consolidated Revenue Fund, and retain N2.42 trillion for their expenditures and reserves.

In aggregate, 20 per cent of projected revenues is expected from oil-related sources, while 80 per cent is to be earned from non-oil sources.

The 2023 Aggregate FGN expenditure (inclusive of GOEs and project-tied Loans) is projected to be N20.51trillion, which is 18.4 percent higher than the amended 2022 Budget. Recurrent (non-debt) spending, estimated to amount to N8.47 trillion, inclusive of N200 billion social investment programme.

Aggregate capital expenditure of N5.34 trillion is 26 per cent of total expenditure; and 8.8percent lower than the 2022 Budget, inclusive of capital component of statutory transfers, GOEs capital and project-tied loans expenditures. At N6.31 trillion, debt service is 30.8 per cent of total expenditure. This is 71.2 per cent higher than the 2022 estimate as it includes interest payment of N1.2 trillion for Ways and Means.

Total public debt as a percentage of Gross Domestic Products (GDP) stood at 23.06 percent as at June 30, 2022, within 55 per cent threshold recommended by the International Monetary Fund (IMF) and World Bank (WB) as well as Nigeria’s self-imposed limit of 40 percent set in the MTDS 2020-2023, even after including the outstanding balance on CBN Ways and Means Advances.

The exposure of the total public debt portfolio to exchange rate risk remains moderate, as the share of domestic debt in the total public debt comprises 60 per cent. Target ratio under the MTDS 2020-2023 is 70:30, with the Debt Management Office (DMO) expecting to achieve the target by the end of the year 2023.

Ahmed affirmed that the exposure to refinancing risk remained stable as a result of the strategy of issuance of long dated securities in the domestic and international markets in addition to accessing long term funds from multilateral and bilateral lenders.

She said some of the parameters underlying the 2023 projections deviate from the projections in the National Development Plan (NDP) 2021-2025. “They have been updated based on a combination of current realities and a modified medium-term outlook”.

The real GDP growth is projected at 3.75 percent in 2023 compared to 4.39 per cent in the NDP. Growth is expected to moderate to 3.30 per cent in 2024 before picking up to 3.46 per cent in 2025. The inflation rate is projected to average 17.16 per cent in 2023, and the 14.93 per cent projected in the NDP for 2023.

“The projected fiscal outcome in the 2023 Budget is based on the Premium Motor Spirit (PMS) subsidy reform scenario. In the 2023 Budget framework, it is assumed that: petrol subsidy will remain up to mid-2023 based on the 18-month extension announced early 2022. In this regard, only N3.36 trillion has been provided for PMS subsidy, “there will be tighter enforcement of the performance management framework for GOEs that will significantly increase operating surplus and dividend remittances in 2023,” Ahmed said.

Regarding the Ministry of Finance Incorporated, the finance minister said the government has “started the process of re-engineering the Ministry of Finance Incorporated (MOFI), saddled with the responsibility of managing government assets”. MoFI is in charge of all government investments.

She lamented that “MOFI has been existing since too many years ago and has gradually become quite inefficient. So, we have got the president’s approval to start the process of re-engineering MOFI and we are now at the stage where we hope in the next one month or six weeks, we will be able to relaunch MOFI”.

She then revealed that the government has “been able to take stock of the assets that are in the books of MOFI and even without taking stock of the ones that are not in the books of MOFI, we have about N30 trillion in terms of assets size. So, if we are looking for a debt of N10 trillion, we already have assets of N30 trillion”.

She added that the government is “going to open these assets for investments, so we will issue different kinds of equities investments into these assets. The government doesn’t have the kind of resources to recapitalize these assets”.

“When I talk about assets, I am talking about our investments like the Bank of Industry (BoI), the Development Bank of Nigeria (DBN), Galaxy backbone and several other agencies of government: Companies that the government has set-up. A few of them are doing well and delivering the books but our assessment is, what they’re doing can still be better by incremental adjustments,” Ahmed said.

She went on to state that “we have the railways in the books of MOFI at something like N20 million as the asset size and we are conducting a re-evaluation. By the time we finish the re-evaluation, the value of the Nigerian Railway Corporations will run into trillions. Also, by the time we finish the re-evaluation of our airports, it will run into trillions”.

“There is a process that is ongoing, we’ll have MOFI fully set up a world class investment company with a new management and a new board to move from the civil service structure where it sits as a unit under the office of the Accountant General of the Federation, and get core professionals that are really focused and specialized in portfolio management and driving investments to run better,” Ahmed said.

On why and how to grow revenue on the back of the informal sector, the finance minister stated that “currently the Joint Tax Board (JTB) chaired by the chairman FIRS is working with each state chair of FIRS as a member, they are currently working at upgrading the process of TIN to include NIN and you know that there is a lot of progress that has been made in the NIN registration process”.

The NIMC she said “reports that the numbers are now at up to 84 million Nigerians that have been registered on the database. So, there will be a link between the NIN and the TIN, that’s another way that we are going to be able to use to track tax payers’ registration as well as tax compliance and its gradually expanding the tax net as well. We are able to check where a company has paid its tax, to look behind the company to the directors of the company and also look at the tax compliance of the directors of the companies”.