The Minister of Finance and Budget, Zainab Ahmed on Monday said the country will not default in its debt service obligation as it proposed an aggregate expenditure of N19.76 trillion for the 2023 fiscal year.
The minister, who spoke at the interaction with made this known at the 2023-2025 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) interaction with the House of Representatives Committee on Finance, noted that government may not be able to make provision for treasury funded capital projects in the 2023 fiscal year due to paucity of funds.
Ahmed projects budget deficit for the 2023 fiscal year at between N11.30 trillion and N12.41 trillion depending on the choice that will be made by the federal government on fuel subsidy payment.
She stated that the government is projecting total revenue of N8.46 trillion, out of which N1.9 trillion is expected to come from oil-related sources, while the remaining balance is to come from non-oil sources.
The minister said that crude oil price is pegged at $70 per barrel at the exchange rate of N435.57 per dollar, oil production is put at 1.69 million barrels per day, and real Gross Domestic Product (GDP) growth is projected at 3.7 per cent, while inflation is put at 17.16 per cent in 2023.
She said that the petrol subsidy will remain up till mid-2023 based on the 18-month extension announced in early 2021, in which case only N3.36 trillion will be provided for it in the next fiscal year.
The minister further said Nigeria has been able to consistently without fail, service her debt and the country do not have any projections even in the near future, to fail in that obligation.
Ahmed said although the amount currently used in servicing debt in the country has overshot what was appropriated for in the budget, measures have been put in place to manage the situation.
While lamenting that revenue generation remains the major fiscal constraint of the federation, she said efforts will however focus on improving tax administration and collection efficiency.
She added that there will be tighter enforcement of the performance management framework for Government Owed Enterprises (GOEs) that will significantly increase operating surplus/dividend remittances in 2023.
“The budget deficit is projected to be N11.30 trillion in 2023, up from N7.35 trillion in 2022. This represents 5.01% of the estimated GDP above the 3% threshold stipulated in the Fiscal Responsibility Act (FRA), 2007.
“This deficit level assumes that petrol subsidy reform will be implemented from mid-2023 in line with the timeline for suspension thereof. The draft 2023-2025 MTEF/FSP has been prepared against the backdrop of continuing global challenges occasioned by lingering Covid-19 pandemic effects, as well as higher food and fuel prices due to the war in Ukraine.
“Overall, fiscal risks are somewhat elevated, following weaker-than-expected domestic economic performance and structural issues in the domestic economy.
“Crude oil production challenges and PMS subsidy deductions by NNPC constitute a significant threat to the achievement of our revenue growth targets; as seen in the 2022 performance up to April. Bold, decisive and urgent action is urgently required to address issues of revenue underperformance and expenditure efficiency at national & sub-national levels.
“The Nigerian economy has, despite these challenges, sustained its recovery from recession for the 6th quotas. While Q1 2022 was 3.11 per cent, this has appreciated to 3.54 per cent in the second quarter of 2022. Most sectors of the economy record positive growth.”
Responding to questions by members of the committee chaired by James Faleke on oil theft and its effects, the minister said from what has happened in 2022, its clearly shows the country is not getting value from spending on oil as production continues to decline, hence the need to do something differently.