Hours after President Muhammadu Buhari laid the controversial 2023 federal budget before the joint session of the national assembly, worrying signals are emerging that the appropriation plan, his eight and last will struggle to deliver the growth Nigeria desperately needs.
First the good part. Buhari says his government expects a GDP growth of more than the population growth rate for the continent’s most populous nation to revive an economy that has struggled to recover since it exited recession two years ago.
The president has for the first time acknowledged what many have always said which is that the state alone cannot bear the burden of financing university education where undergraduates have been at home for seven months because of a teacher’s strike over funding of education. While this has laid open the door to a substantial rise in tuition fees, some hope the serious conversation about a sustainable model for education funding can now begin.
The president also said his government plans to remove a costly oil subsidy that is draining state finances but he did not explain why a staggering provision of more than N6trn for fuel subsidy has been made in the same budget.
One big worry is that President Muhammadu Buhari said in his budget presentation to lawmakers on Friday that government expenditure is projected to increase by 18% next year at 20.5 trillion naira ($47 billion),
The spending plan he promised will help drive economic growth, with a 3.75% expansion in gross domestic product forecast for 2023, but the budget deficit is forecast at 10.78 trillion naira or 4.78% of GDP, a deliberate plan to work outside the country’s legal threshold of 3% stipulated enshrined in Nigeria’s fiscal responsibility law.
Read also: Full text of President Muhammadu Buhari’s 2023 budget speech
In the past, the government often fell short of its growth, revenue and deficit targets, and Buhari’s budget is likely to be overhauled by the incoming administration of the candidate that wins February’s presidential elections to replace him.
“Revenue shortfalls remain the greatest threat to Nigeria’s fiscal viability,” the president said.
Buhari said the administration expects to raise 16.87 trillion naira in revenue, 1.9 trillion naira of which will be generated from crude sales and taxes but he would not say how the government hopes to overcome vast revenue shortfalls recorded every year of his administration.
The other worry that analysts have pointed out is that Buhari’s budget assumes an oil price of $70 a barrel, an exchange rate of 435.57 naira that Nigeria’s developmental partners have roundly criticized in the past and crucially that the country will pump an average of 1.69 million barrels a day when it is struggling to produce 1.16 million barrels daily currently.
The government spent 1.59 trillion naira on fuel subsidies in the six months through June this year but plans to scrap it in 2023, Buhari said. “Its current fiscal impact has clearly shown that the policy is unsustainable,” he said.
The country’s budget office in August projected that the fiscal deficit could rise to as much as 12.4 trillion naira in 2023, nearly three times total revenue, or 5.5% of GDP if the government continues to subsidize fuel. Subsidy payments are expected to cost 6.72 trillion naira next year, it said.
To plug the funding gap, the government plans to borrow as much as 8.8 trillion naira from domestic and foreign lenders. That’s 76% more than the 5 trillion naira approved for this year.
