The minister of finance, budget and national planning, Mrs. Zainab Ahmed yesterday said the federal government was proposing an aggregate expenditure of N19.76 trillion for the 2023 fiscal year.
The minister, who made this known at the 2023-2025 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) interaction with the house of representatives committee on finance, however said she may not be able to make provision for treasury funded capital projects in the 2023 fiscal year.
Ahmed also said the budget deficit for the 2023 fiscal year may be between N11.30 trillion and N12.41 trillion, depending on the choice that would be made by the federal government on the issue of fuel subsidy payment.
She stated that the federal government was projecting total revenue of N8.46 trillion, out of which N1.9 trillion was expected to come from oil-related sources while the balance would come from non-oil sources.
Ahmed explained that the benchmark crude oil price was pegged at $70 per barrel and at an exchange rate of N435.57 to a dollar, oil production was put at 1.69 million barrel per day, real Gross Domestic Product (GDP) growth was projected at 3.7 per cent while inflation was put at 17.16 per cent in the MTEF.
She said petrol subsidy would remain up to mid-2023, based on the 18-month extension announced early 2021, in which case only N3.36 trillion would be provided for it in next financial year.
The minister also pointed out that Nigeria has been able to consistently without defaulting, service her debt, adding that the country does not have any projections even in the near future, to fail in its debt obligation.
Speaking further, Ahmed said although the amount currently used to service the country’s debt had overshot what was appropriated for in the budget, measures have been put in place to manage the situation.
While lamenting that revenue generation had remained a major fiscal constraint for the country, she said efforts would however focus on improving tax administration and collection efficiency.
She added that there would be tighter enforcement of the performance management framework for Government Owed Enterprises (GOEs) that would significantly increase operating surplus/dividend remittances in 2023.
“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 per cent threshold stipulated in the Fiscal Responsibility Act (FRA), 2007.
“This deficit level assumes that petrol subsidy reform will be implemented from mid-2023 in line with the timeline for suspension thereof. 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.
“Overall, fiscal risks are somewhat elevated, following weaker-than-expected domestic economic performance and structural issues in the domestic economy.
“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. The Nigeria economy has despite these challenges sustained its recovery from recession for the sixth quarters. While Q1 2022 was 3.11 per cent, this has appreciated to 3.54 per cent in the second quarter of 2022. Most sectors of the economy record positive growth.”
Responding to questions by members of the committee chaired by Mr. James Faleke on oil theft and its effects, the minister said from what happened in 2022, it clearly showed the country was not getting value from spending on oil as production continues to decline, hence the need to do something differently.
Ahmed however said security agencies and the Nigerian National Petroleum Company Ltd (NNPCL) as well as the regulators have been working very hard to find solutions.
“From the performance in April, at 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 and costing us revenue.
“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,” she said
The minister pointed out that the Petroleum Industry Act has given the NNPC Limited some independence from the federation and has to perform in line with the laws of the Company and Allied Matters Act.
“A lot of the expenditure the federation used to carry will now be carried by NNPC Limited. NNPC will be paying taxes and dividends and we believe in the medium term the federation will end up earning more revenue.
“It also means that the NNPC will need to go and borrow money on its own. That will improve efficiency on the company. They have to pay dividends and royalties to the federation which they were not doing before.”
Commenting on the outlook of the global economy, she said: “As inflation is going up and also as it appears the war between Russia and Ukraine is not abating, what we are projecting is that there will be continuous pressure on prices. What we have to do is to look at how we can push in (those) pressure to the inflationary trend.
“While we projected $70 per barrel when the actual crude oil price is now $103 per cent, groups like the International Energy Association (IEA) that are specialists in projecting oil prices are projecting a decline in oil prices come 2023.
“On production, we are projecting 1.69 million barrels per day. Based on the projection of NNPC, they are projecting that all the measures taken now are going to result in increased production and we hope it works out. If it doesn’t the deficit situation we found ourselves in will even be worse.”
On the issue of Morocco-Nigeria gas pipeline, she said: “the Federal Executive Council a few weeks ago approved funding for the feasibility study, which means that it’s still at the feasibility study phase. The National oil company can provide the details.”
The Guardian
