October 12, 2022/United Capital Research

Last week, the President, Muhammadu Buhari, presented the 2023 Appropriation Bill before the two chambers of the National Assembly. According to the bill, aggregate national expenditure for the period totals N20.5tn, up 19.9% from the N17.1tn proposed in 2022. Correspondingly, the oil benchmark was raised by 12.9% to $70.0/bbl with a daily oil production estimate of 1.7mn barrels (inclusive of Condensates of 300,000 to 400,000 barrels per day) and with a proposed exchange rate of N435.57/$ (from N410.15/$ in the 2022 Appropriation bill). The proposed bill projected a GDP growth rate of 3.75% and a 17.16% inflation rate.  Also, the total revenue available to fund the 2023 Federal Budget is estimated at N9.7tn (one trillion less than the 2022 figure)

Disaggregating the components of the aggregate national expenditure, N744.11bn (-14.4% y/y) is earmarked for statutory transfers, N6.31tn set aside for debt servicing 61.7% higher than N3.9tn in 2022, while Recurrent (Non-debt) and Capital Expenditure were both ascribed N8.3tn from N6.9tn budgeted in 2022 and N5.4tn from N5.5tn approved in 2022 respectively. On the revenue side, the estimated 9.7tn revenues would comprise oil revenue projected at N1.9tn; non-oil taxes assessed at N2.4tn, FGN Independent revenues projected to be N2.2tn and other revenues totalling N762.0bn, while the retained revenues of the GOEs which is estimated to amount to N2.4tn Naira.

The Proposed budget implies a budget deficit of N10.8tn (+68.4% y/y), representing 4.8% of the estimated GDP and above the 3.0% threshold set by the Fiscal Responsibility Act 2007. The presidency highlighted the need to exceed this threshold, considering the need to continue tackling the country’s existential security challenges. The bill proposes to finance the deficit mainly by new borrowings totalling N8.80tn, N206.2bn from privatisation proceeds and N1.8tn drawdowns on bilateral/multilateral loans secured for specific development projects/programmes.