Federal Government on Monday presented N19.76 trillion budget expenditures for the 2023 fiscal year to the National Assembly for legislative scrutiny.
The Minister of Finance, Budget and National Planning, Dr Zainab Ahmed disclosed this while presenting the 2023-2025 Medium Term Expenditure Framework (MTEF) and Fiscal Policy Paper (FSP) to the House of Representatives Committee on Finance chaired by Hon. Abiodun Faleke.
According to her, the fiscal parameters for the year showed that oil production volume pegged at 1.69mbpd, oil benchmark – $70 per barrel, exchange rate – N435.57/$; N8.501 trillion as total oil and gas revenue; N1.105 trillion as Derivation; N7.396 trillion as total oil and gas revenue after Derivation; Deductions – N3.538 trillion while other federally funded upstream projects pegged at N3.432 trillion.
The Minister who presented two scenarios of budget parameters on fuel subsidy estimated at N6.72 trillion for the full year 2023 (Business-as-Usual scenario) as well as the possible provision of N3.36 trillion for midyear 2023 (Reform scenario).
The lawmakers however expressed grave concerns over the rationale behind the spike in the fiscal deficit pegged at N11.30 trillion for 2023 against an N7.35 trillion fiscal deficit for 2022.
While speaking on the overview of the Federal Government’s revenue for 2023-2025, the Minister said: “In the first scenario, the 2023 Federal Government revenue is projected at N6.34 trillion, out of which only N373.17 billion or 5.9% comes from oil-related sources. The balance of N5.97 trillion is to be earned from non-oil sources.
“In the second scenario, in addition to subsidy reform, this scenario assumes an aggressive implementation of cost-to-income limits of GOEs. With these, the 2023 Federal Government revenue is projected at N8.46 trillion (15.1% or N1.51 trillion less than the 2022 budget) but N2.12 trillion more than scenario 1.
“Of this N8.46 trillion, N1.99 trillion or 23.6% is projected to come from oil-related sources, while the balance is to be earned from non-oil sources,” she said.
Speaking further on the Federal Government’s expenditures for the years under review, she said: “In this (Business-as-usual) scenario, given the severely constrained fiscal space budget deficit is projected to be N12.41 trillion in 2023, up from N7.35 trillion budgeted in 2022, representing 196% of total Federal Government revenues or 5.50% of estimated GDP. This is significantly above the 3% threshold stipulated in the Fiscal Responsibility Act, 2007 and there will be no provision for treasury-funded MDAs’ capital projects in 2023,” she noted.
However, she observed that the second (reform) scenario recommended by the Executive, “Federal Government’s 2023 aggregate expenditure is estimated at N19.76 trillion (inclusive of GOEs). In this scenario, 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, 2007,” the Minister noted.
While responding to questions on the low revenue from the oil sector, the Minister said: “From what has happened in 2022, clearly what we are spending is not giving us much value because production continues to decline and what this means is whatever we are doing is not working and therefore we have to do something totally different.
“My understanding is that security agencies and the National oil company, as well as the regulators, have been working very hard to find solutions and what they tell us is that they are beginning to see improvement. From the performance in April at 1.3 million barrels per day and by July it was 1.4 million.
“We do hope that the increase will be very significant because it’s costing us not just N3.2 billion in terms of security cost. But it’s costing us the revenue we have earned. At 39 per cent the oil and gas revenue as at April is at very low performance. We need to move the oil and gas revenue threshold.
“On the issue of Morocco Nigeria gas pipeline. The Federal Executive Council a few weeks ago approved funding for the feasibility study, which means that it’s still in the feasibility study phase. The National oil company can provide the details.
“In the MTEF for 2023 to 2025, we had removed the federation spending on that, assuming that transition of NNPC to NNPC limited that they will be carrying that cost directly, not the federation. The Petroleum Industry Act has given the NNPC some independence from the federation. And also as a registered company now under CAMA they have to perform in line with the laws of the Company and Allied Matters Act.
“A lot of the expenditure the federation used to carry, will now be carried by NNPC limited. NPPC will be paying taxes and dividends and we believe in the medium term the federation will end up earning more revenue. It also means that the NPPC will need to go and borrow money on its own. That will improve efficiency on the company. They have paid dividends and royalties to the federation which they were not doing before.”
Also during the hearing, the Committee directed the Director General of the Federal Radio Corporation of Nigeria (FRCN) to remit 100% of its operating surplus to the government’s coffers as a fully funded agency.
To this end, the lawmakers directed the Fiscal Responsibility Commission to ensure compliance.
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