Last week, Nigeria’s President, Muhammadu Buhari presented the 2023 fiscal budget to the joint session of the National Assembly. Buhari proposed an annual budget of N20.51 trillion for the year 2023, a 19.8% increase when compared to the N17.13 trillion approved for 2022 including the supplementary budget.
This is the eighth and final budget presented by Buhari over his two tenures as the president of the federation. The highlight of the presented budget is given below:
- A sum of N744.11 billion was earmarked for statutory transfers.
- Non-debt recurrent costs stood at N8.27 trillion
- Personnel costs at N4.99 trillion
- Pensions, Gratuities, and Retirees’ benefits of N854.8 billion
- Overheads of N1.11 trillion
- Capital Expenditure of N5.35 trillion, including the capital component of statutory transfers.
- Sinking fund of N247.73 billion to retire certain maturing bonds.
- Debt service cost stood at N6.31 trillion.
According to the 2023 appropriation bill, which was themed ‘Budget of Fiscal Sustainability and Transition’, total revenue available to fund the budget for the year was estimated at N9.73 trillion, leaving a deficit of N10.78 trillion, representing 4.78% of the nation’s GDP and higher than the 3% threshold set by the Fiscal Responsibility Act 2007.
Further disaggregation of the bill showed that N1.24 trillion was budgeted for the ministry of defense, N239.5 billion for power, N1.07 trillion for education, N1.069 trillion for health, while N10.1 trillion goes to the ministry of finance, budget, and national planning.
Comparative analysis of the previous year showed declines in capital expenditure from N5.96 trillion to N5.35 trillion, and statutory transfers from N869.67 billion to N744.1 billion.
- On the other hand, recurrent expenditure increased by 19.68% from N6.91 trillion to N8.27 trillion, while debt service cost surged by 74.83% from N3.61 trillion to N6.31 trillion in the proposed budget.
- While the aggregate budget proposal increased compared to the previous year, it appears to be the same when an inflation rate of 20.52% is accounted for. A grimmer picture is even painted when converted to dollars and compared to other African countries.
- Using the prevailing exchange rate of N439.2/$ at the official market, the 2023 budget stood at $46.7 billion, a huge variance when compared to the likes of Egypt ($111 billion – 2022 budget), South Africa ($119.1 billion), and India ($478.6 billion).
Interestingly, Nigeria’s 2023 budget stood at N92,209 on a per capita basis. Further dissecting these numbers means that for every month of the year, a token of N7,684 is budgeted for each individual in the country. This is significantly lower than the country’s minimum wage of N30,000.
Meanwhile, from an economic perspective, a fiscal budget should aim to achieve the following; human capital development (education, health), and capital expenditure for growth, security, and power. A look at the per capita average for the key sectoral allocation and in contrast to the standard practice gives an idea that the budget as proposed is enough to meet Nigeria’s infrastructural and developmental needs.
Education budget
- The federal government budgeted a total of N1.08 trillion for the ministry of education for the 2023 fiscal year, crossing the N1 trillion mark for the first time, and accounting for 5.3% of the total budget allocation for the year.
- This is significantly lower than the United Nations Educational Scientific and Cultural Organization’s benchmark for the funding of the educational sector. Specifically, UNESCO’s benchmark for funding education is 26% of the national budget and 6% of the gross domestic product (GDP).
- A peer comparison with South Africa shows that the second-largest African economy spends 20.4% of its total consolidated government expenditure on education (learning and culture).
- Also, on a per capita basis, Nigeria’s educational budget stood at N4,848, a marginal increase compared to the N4,153 recorded in the 2022 signed budget. This is following the over seven months’ lecturer union trike
Health budget
- A sum of N1.09 trillion was allocated for the health sector, an improvement from the N714 billion recorded in the previous year. This accounts for 5.4% of the total budget allocation for the year, which is lower compared to South Africa’s 11.9% expenditure on the health sector.
- This is also significantly lesser than the benchmark of the World Health Organization (WHO) to allocate at least 15% of annual national budgets to health
- On a per capita basis, the health budget stood at N4,935, an improvement from N3,295 recorded in the previous year.
Budget on security
- The security of lives and properties cannot be overemphasized in any country or region. This is important as the safety of lives and belongings in the country could help attract foreign investors into a country, which could translate into economic growth.
- The federal government budgeted a sum of N1.25 trillion for the ministry of defense in the 2023 annual budget, a slight improvement compared to the N1.19 trillion recorded in the previous year. Security spending accounted for 6.1% of the total budget.
It is worth adding that, despite a huge infrastructural gap in the country, bad roads, and inadequate rail networks amongst others, the federal government reduced the total capital expenditure from N5.96 trillion recorded in 2022 to N5.35 trillion..
Expert view
In a conversation with Ezekiel Gomos, a professor at Jos Business School, he raised concerns about the rising budget deficit and crunch in revenue generation by the federal government.
“The projections are very troubling and there are very dark days ahead. A spending plan of nearly N21 trillion resting on a revenue projection of only N9.73 trillion is a cause for serious concern considering that the N9.73 trillion may not be realized going by 2022 actual revenue performance and the weak outlook of the oil sector.”
Also, I expect that in 2023, public debt and deficit will spiral out of control because of the likely low performance of revenues.
Furthermore, in actual terms, the 2023 budget is lower than the previous year when the current inflation rate is factored into the equation. So, in effect, we have budgeted less in the face of growing needs particularly the need to reduce the infrastructure deficit,” he added.
In terms of solution, Ezekiel Gomos noted that government needs to address the current expenditure which has become a bottomless pit and addresses the area of FX management, with special attention to the continued funding of Invisibles and demand for more revenue from SOEs.
Upshots: Despite the increase in the aggregate budget, Nigeria’s N20.51 trillion is still largely low compared to other emerging countries and standard practices, and would need to restructure its spending to meet the country’s infrastructural needs and spur significant growth in the economy