The federal government is proposing a N19.49 trillion budget for the year 2023. More than half of the money is to be borrowed.
To finance the budget, the federal government plans to borrow N11.03 trillion and privatize several assets to raise the capital.
The government plans to generate only N8.5 trillion, out of the N19.47 trillion budget.
Buhari’s administration plans to finance the huge budget by borrowing N7.4 trillion from the domestic market and N1.8 trillion from foreign entities. In addition, FG is expecting N206.1 billion from privatization proceeds and N1.7 trillion multilateral project-tied loans.
This borrowing plan is far above the recommended threshold stipulated by the fiscal responsibility Act. The law provides that the deficit should not exceed 3% of GDP. However, this plan is 5.01% of the GDP.
Section 12 (1) of the FRA states: “Aggregate expenditure and the aggregate amount appropriated by the National Assembly for each financial year shall not be more than the estimated aggregate revenue plus a deficit, not exceeding three per cent of the estimated Gross Domestic Product or any sustainable percentage as may be determined by the National Assembly for each financial year.”
However, the law gives the President power to cross the threshold based on the approval of the National Assembly if the president believes that there is a reason to cross.
But the president has steadily crossed the deficit with different justifications. In 2021, it was 3.5% with the argument that there is a need to finance COVID-19 recovery. In the past, the administration premised its argument on funding the defence sector due to insecurity.
This time, the government is making petroleum subsidy the central argument for the huge deficit. However, it’s worth noting that, in this current proposal, subsidy will only be paid for 6 months.
While the government is using subsidy as an excuse, there is a part of being unable to generate revenue. In 2014, government daily oil production was 2.33 barrels per day, but the government is projecting to produce 1.69 BPD in 2023.