The Federal Government’s budget performance in the first half of the year fell short of expectations, reflecting the prevailing economic challenges and exposing the urgent need to ramp up its income.
BusinessDay’s analysis of the budget performance shows that the government generated revenue of N4.06 trillion in the first half as against a pro-rata target of N5.52 trillion.
Out of the N4.06 trillion generated, N4.02 trillion was used to service debt, representing 99 percent of the revenue. This is against N3.15 trillion on a pro-rata basis and a total of N6.31 trillion budgeted for the whole year.
Oil revenue accounted for N604. 10 billion as against N1.14 trillion budgeted for the period.
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For non-oil revenue, N1.14 trillion was generated, compared to the N1.216 trillion budgeted for the period. The other revenue sources brought in N2.14 trillion, as against a target of N3.16 trillion.
Economic experts who spoke to BusinessDay said the budget performance reflects an “extremely” bad fiscal position, requiring spending efficiency and strong revenue generation drive.
“This first-half performance shows that the economy is experiencing financial stress, and spending over 99 percent of our revenue to service debt is worrisome. It puts the economy in a position where the government is pressured to continue borrowing,” Uche Uwaleke, professor of Finance and Capital Market at the Nasarawa State University, said.
According to Uwaleke, the only way out is for the government to introduce strategies to grow revenue while ensuring that debts are spent correctly.
He stressed the need for borrowing to be spent on projects that are self-liquidating, saying: “It is important to get our spending right; not much should be spent on recurrent expenditure.”
A breakdown of the actual expenditure showed that the total spending in the first six months stood at N7.76 trillion as against a target of N10.91 trillion.
Other expenditures highlighted in the 2023 budget include sinking funds at N248 billion, non-recurrent expenditure at N8.32 trillion, and statutory transfer at N967 billion.
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As of June, the federal government had spent N475.98 billion on capital expenditure as against a target of N2.98 trillion.
A total sum of N2.28 trillion was spent on personnel costs, including pension within the period under review.
“The only way out of this is to grow revenue, and we are happy that the government is thinking about it, just as we see that the tax reforms committee has been tasked with the mandate to raise tax to GDP ratio to 18 percent,” Uwaleke said.
He said: “There is an urgent need to expand our revenue base, not necessarily by increasing tax rate but bringing more people into the tax net, which is also the desire of the president.
“There is a need to ensure that the kinds ofdebt we go for are project-tied and self-liquidating. It is not as though we should keep borrowing but we must ensure that proceeds are able to repay the borrowings. We should pay attention to spending efficiency, and avoid waste both at the federal and subnational levels.”
GabrielOkeowo, country director of BudgIT, said the performance signals a need for increased revenue generation, adding that it appeared the government will not be able to cater for other obligations after debt servicing.
For him, the only respite is that the current administration has announced its desire and shown commitment to reduce borrowing while seeking ways to increase revenues.
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He said, “Literally, the non-payment of subsidy should mean more revenue for the government, as we are already seeing in the amount of money being shared as federal allocation.
“As it stands now, even the government is not finding it easy. The subsidy removal has given us an opportunity to make more revenue but debt servicing is gulping so much. Another thing that we can do is reduce what is spent on maintaining governance at all levels, as well as in the judiciary, executive, and legislative arms of government.”
Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, is hopeful that the several policies of the Tinubuadministration will begin to yield economic benefits, beginning from the second half of the year.
He explained that while revenue may improve significantly, expenditure may likely remain high due to the bloated ministerial appointments.
“This really means that the fiscal position of our economy is extremely bad; it means that all monies spent on expenditure were borrowed but the second half of the year will be better, seeing the several policies recently introduced by the present administration,” he said. “What the government has done thus far is likely to change the picture.”
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