FG wants to borrow N11.3 trillion to pay for the N19.76 trillion 2023 budget.

In order to finance the proposed N19.76 trillion budget for 2023, the Federal Government has suggested borrowing N11.3 trillion.

According to Tribune, Dr. Zainab Ahmed, Minister of Finance, Budget, and National Planning, revealed this when delivering the Fiscal Policy Paper (FSP) and Medium Term Expenditure Framework (MTEF) to the House of Representatives’ Committee on Finance, which is led by Honorable Abiodun Faleke.

She stated that the financial parameters for the year showed that oil production volume was estimated to be 1.69 million barrels per day, oil benchmark was $70 per barrel, exchange rate was N435.57/$, total oil and gas revenue was N8.501 trillion, derivation was N1.105 trillion, total oil and gas revenue was N7.396 trillion after derivation was estimated, deductions were estimated to be N3.538 trillion, and other federally funded upstream projects were estimated to be N3.432 trillion.

A business-as-usual scenario with gasoline subsidies estimated at N6.72 trillion for the entire year 2023 and a potential provision of N3.36 trillion for mid-year 2023 were outlined by the minister (reform scenario).

However, the lawmakers expressed serious worries on the cause of the fiscal deficit’s sharp increase, which is estimated to reach N11.30 trillion for 2023 compared to N7.35 trillion for 2022.

The minister said during his discussion of the federal government’s revenue forecast for 2023 to 2025.

Only N373.17 billion, or 5.9 percent, of the N6.34 trillion in federal government revenue forecast for 2023 will come from sources tied to oil, according to the first scenario. The remaining N5.97 trillion will come from sources other than oil.

The second scenario involves aggressive adoption of cost-to-income limitations for GOEs in addition to reforming subsidies. With this, the estimated revenue for the Federal Government in 2023 is N8.46 trillion, which is 15.1% or N1.51 trillion less than the budget for that year, but N2.12 trillion higher than scenario one.

“Of this N8.46 trillion, N1.99 trillion, or 23.6%, is expected to come from sources related to oil, with the remaining N8.46 trillion expected to come from sources unrelated to oil,” she said.

In addition, she stated the following regarding the Federal Government’s expenses during the years under consideration:

The budget deficit in this (business as usual) scenario is predicted to be N12.41 trillion in 2023, up from N7.35 trillion budgeted in 2022, representing 196% of total Federal Government revenues or 5.50% of the estimated GDP. This is due to the extremely constricted fiscal space.

This is much more than the three percent cap outlined in the Fiscal Responsibility Act of 2007, and there won’t be any funding for capital projects for treasury-funded MDAs in 2023.

The expected total federal government spending in 2023 is N19.76 trillion (inclusive of GOEs). According to this scenario, the budget deficit will increase from N7.35 trillion in 2022 to N11.30 trillion in 2023.

The Fiscal Responsibility Act of 2007 stipulates a three percent barrier, yet this represents 5.01 percent of the expected GDP, the minister stated.

The minister stated the following in response to inquiries over the poor oil industry revenue:

“Based on what has occurred in 2022, what we are spending is not providing us with much value because productivity is continuing to fall, which suggests that whatever we are doing is ineffective and we need to take a fresh approach.

According to what I gather, security agencies, the National Oil Company, and regulators have been working hard to find answers, and they tell us they are starting to see improvements; performance in April was 1.3 million barrels per day, and by July it was 1.4 million.

Because it is costing us not only N3.2 billion in security expenses but also in revenue, we do hope that the rise will be extremely big. The oil and gas revenue as of April is performing very poorly at 39%. The oil and gas revenue threshold has to be raised.

The Federal Executive Council (FEC) just approved funds for the feasibility study, therefore the Moroccan-Nigerian gas pipeline issue is still in the feasibility study stage.

We eliminated federal spending on that from the MTEF for the years 2023 to 2025 on the grounds that the Nigerian National Petroleum Corporation (NNPCtransition )’s to NNPC Limited would result in the NNPC Limited bearing the expense outright rather than the federation. The NNPC now has some degree of independence from the federation according to the Petroleum Industry Act. Additionally, since they are a registered corporation under the Company and Allied Matters Act (CAMA), they must adhere to its regulations.

NNPC Limited will now be responsible for a large portion of the expenses that the federation formerly handled. In the medium term, we think the federation will end up making more money because NNPC will be paying taxes and dividends.

Additionally, it implies that the NNPC will have to seek out independent financing. The company’s efficiency will increase as a result. They now give the federation dividends and royalties, something they did not previously. She spoke up

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