By Marcel Okeke
President Muhammadu Buhari on Tuesday, January 3, 2023, signed the Federal Republic of Nigeria Appropriation Bill 2023 into law with a lot of loose ends, provisos and even reservations to the extent of mandating the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed on the occasion to “engage with the Legislature to revisit some of the changes made to the (budget) proposal by the lawmakers.” Indeed, Mr. President expressed serious worries and reservations about the discrepancies between the Executive (budget) proposal he submitted to the National Assembly on October 7, 2022 and the ‘final’ Appropriation Bill which he grudgingly signed into law. These, at best, leave the 2023 Appropriation Act as a work-in-progress (WIP) piece of legislation—which, for sure, will be shrouded in controversy for an indeterminate length of time in 2023.
Specifically, while Mr. President proposed an annual budget of N20.51 trillion for 2023, (a 19.8 per cent increase over the N17.13 trillion approved for 2022, including the supplementary budget), he ended up signing a 2023 Appropriation Act of N21.83 trillion. The president however deferred the signing of the Finance Bill, which is still being reviewed because of some contentious contents, especially parts that conflict with the fiscal term of the Petroleum Industry Act (PIA). The (proposed) Finance Bill is said to have taken away all concessions given by the PIA; for instance, it dis-incentivises investments in the petroleum sector, leading to massive protest by the international oil companies (IOCs), especially in the area of gas flaring—a development that in part, accounts for the exodus of some IOCs from Nigeria in recent times. Yet, the Finance Bill forms the backdrop that spells out the sources of funding for the annual budget already signed into law. How soon the ‘review’ of the Finance Bill will be completed is a matter for conjecture given the several loose ends in the Budget itself that urgently need to be tied up.
In reality, at every stage of the 2023 Budget signing event, Mr. President expressed his hesitation to assent to the Appropriation Bill, arguing for instance, that his decision to sign the 2023 appropriation bill into law, as passed by the National Assembly, was to enable its implementation commence without delay, “considering the imminent transition process to another democratically elected government.” With this product of ‘exigency’ (the budget) in place, the President expressed the hope that “the National Assembly would cooperate with the executive” in the much work that still needed to be done on the budget. He said “We have examined the changes made by the National Assembly to the 2023 executive budget proposal”, adding that “the amended fiscal framework for 2023, as approved by the National Assembly, shows additional revenues of N765.79 billion, and an unfunded deficit of N553.46 billion.
“It is clear that the National Assembly and the executive need to capture some of the proposed additional revenue sources in the fiscal framework. This must be rectified.
“I have also noted that the National Assembly introduced new projects into the 2023 budget proposal for which it has appropriated N770.72 billion. The National Assembly also increased the provisions made by Ministries, Departments and Agencies (MDAs) by N58.55 billion,” the President pointed out.
Therefore, but for “the imminent transition process to another democratically elected government,” Mr. President wouldn’t have assented to the Bill that contains, among other issues “an unfunded deficit of N553.46 billion.” Obviously, this ‘unfunded deficit’ bizarre phenomenon must be befuddling to the fiscal authorities, especially at a time they are yet contending with lightening the nation’s huge debt burden through securitization of outstanding loans from the apex bank. By end-2022, the Central Bank of Nigeria’s outstanding loans (Ways and Means facilities) to the Federal Government stood at N23 trillion. The Federal Government’s proposal to the National Assembly requesting for an approval to securitize this huge sum for a life span of forty years is yet with the lawmakers.
In fact, the lawmakers have remained on the verge of rejecting the securitization proposal before the matter of Presidential assent on the 2023 Appropriation Bill came up. Expectedly, Mr. President at the budget signing event, “urged the National Assembly to reconsider its position on the proposal to securitise the federal government’s outstanding Ways and Means balance at the Central Bank of Nigeria (CBN).” According to the President: “As I stated, the balance has accumulated over several years and represents funding provided by the CBN as lender of last resort to the government to enable it to meet obligations to lenders, as well as cover budgetary shortfalls in projected revenues and/or borrowings.
“I have no intention to fetter the right of the National Assembly to interrogate the composition of this balance, which can still be done even after granting the requested approval.
Further attempting to coerce the Legislators, President Buhari said: “Failure to grant the securitisation approval will, however, cost the government about N1.8 trillion in additional interest in 2023 given the differential between the applicable interest rates, which is currently MPR plus three per cent and the negotiated interest rate of nine per cent and a 40-year repayment period on the securitised debt of the ways and means.” This tone of desperation is underpinned by the prospect of Nigeria’s public debt hitting about N77 trillion by the end of Mr. President’s tenure on May 29, 2023. Already, the Director-General of the Debt Management Office (DMO) has warned that the projected debt sum would become a reality if the CBN’s Ways and Means outstanding were not securitized, coupled with the N44.06 trillion total debt stock as at end-September 2022 and the N8 trillion ‘new borrowings.’
The DMO Chief Executive, Ms Patience Oniha had on her part explained that securitization was the best option because “at the current interest rate charge of 18.5 per cent, additional N1.8 trillion to N2 trillion may be incurred as interest, if the Government fails to securitize the CBN Ways and Means.” But whether the securitization effort would yield the desired result is yet uncertain, given the fact that most lawmakers are opposed to it—the more reason why the proposal has been undergoing legislative consideration for quite some time now. This uncertainty will be heightened by the fact that most parliamentarians would largely be engaged in the electioneering for their (re)elections in the imminent national elections in February/March, 2023. It is therefore most likely that the run-up to and aftermath of the elections would take up the attention of the legislators; and this would leave the securitization issue together with the debt debacle in the cooler for the next Government to inherit.
The revenue side of the 2023 Budget does not also inspire hope for the next Government come May 29, 2023. This is because the nation yet precariously depends very much on inflow from oil and gas sales. Which is why Mr. President posited that for achievement of the objectives of the 2023 budget, “relevant agencies must sustain current efforts towards the realisation of crude oil production and export targets.” But in point of fact, the oil and gas sector in the past couple of years has been under the worst of challenges, including unprecedented level of oil theft—a queer phenomenon that has caused the loss of trillions of dollars to Nigeria. There is also the implication of the Petroleum Industry Act (PIA), which is yet a scare to IOCs and other operators—resulting in reduced/no fresh investments in the industry. Even with all these, the fuel subsidy incubus is still on the card; in fact, the outgoing Government of President Muhammadu Buhari is leaving it for the next Administration to ‘determine’ in June 2023. It has set aside a whooping N36. 36 trillion for the subsidy for the remaining months of its existence.
It must also be pointed out that one of the booby traps in the 2023 Budget for the next Government is the exchange rate assumption (of N435.57/$) on which the Appropriation Act is based. For close to one year that the Russia-Ukraine war has lasted, the price of crude oil had practically hit the roof at over US$100 per barrel—and yet Nigeria has kept experiencing much pressure on Naira exchange rate. This situation has seen the exchange rate officially hitting about N448/$ and ‘unofficially’ N747/$ at the dawn of 2023. So, whether Nigeria’s oil production/sales will go up in 2023 (meaning more revenue) and favourable exchange rate for the Naira attained remains indeterminate. It is another ‘headache’ for the next Government?
- Okeke, an economist, sustainability expert and consultant on business strategy is a Columnist with National Daily. He can be reached at: obioraokeke2000@yahoo.com