January 9, 2023/Coronation Research
The 2023 FGN Budget titled ‘’Budget of Fiscal Consolidation and Transition’’ was signed by President Buhari on 03 January ‘23. This is the last full-year budget to be presented by the present administration. The aggregate expenditure is estimated at N21.8trn which is 20% higher than the 2022 FGN aggregate expenditure of N18.1trn.
The aggregate amount allocated for capital expenditure in the 2023 budget is N6.5trn. This represents 30% of total expenditure and is 4.8% higher than the 2022 provision of N6.2trn.
The budget has an estimated deficit of N11.1trn, which is approximately 6.5% of 2021 nominal GDP and is above the 3% ceiling set by the fiscal responsibility Act 2007 (FRA).
The projected fiscal expenditure also comprises of statutory transfer of N967.4bn, debt service of N6.3trn (includes interest payment of N1.2trn for ways and means) and sinking fund of N247.7bn as well as non-recurrent debt expenditure of N8.3trn.
The assumptions for the 2023 national budget include an oil price benchmark of USD75.0/b, 1.69mbpd in oil production, an exchange rate of N 435.57/USD, GDP growth rate of 3.75% y/y and an inflation rate of 17.16%.
The projected revenue available to fund the 2023 budget is N10.5trn. this is 6.1% higher than the 2022 provision of N9.9trn and comprises of a projected oil revenue of N2.3trn (22% of total revenue), non-oil taxes of N2.4trn, FGN independent revenues of N2.6trn, retained revenues of GOEs of N3.9trn and other revenues totaling N762bn.
Given the relative stability of non-oil revenue compared with oil revenue, the FGN as part of its strategic revenue growth initiatives and the 2022 Finance bill, plans to improve tax administrative efforts, and further enhance independent revenue generation and collection, especially from GOEs. We expect strategic use of technology tools which should support automation of tax collection processes and by extension, improve collection efficiency and
enhance compliance.
The budget deficit is expected to be financed by new borrowings totaling N8.8trn(domestic: N7.04trn, external: N1.76trn), privatization proceeds of N206.2bn, and drawdowns on bilateral/multi-lateral projects/programs of N1.8trn.
Regarding debt sustainability, Nigeria’s debt-to-GDP ratio stood at 25.4% at end-September ‘22. This is relatively low when compared with other African economies such as Egypt (87%), Ghana (82%), South Africa (69%), and Kenya (68%). However, the country’s debt service-torevenue ratio stood at 80.6% as at November ’22, one of the highest in Africa.
We expect the FGN to continue to utilize the ways and means advances from the CBN. We note that the Senate is still considering the President’s request to securitize the ways and means advances, currently estimated at N23trn (as a 40-year bond at 9% interest). It is important to highlight that the inclusion of the CBN’s ways and means would raise the total public debt stock to c. N66.7trn, equivalent to 38.4% of 2021 nominal GDP.
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