Following the approval of the Federal Government’s proposed budget estimates totaling N19.76tn, Nigeria raised its domestic and foreign borrowing requirement by 15 percent to fund a record budget deficit in the 2023 budget.
The House approved N8.4tn borrowing and N6.3tn meant for debt service (up from 3.7 trillion naira this year) on Wednesday. According to Bloomberg, the 8.4 trillion naira ($19 billion) new loan for 2023 will help in funding the estimated budget shortfall.
President Muhammadu Buhari will today, Friday 7 October 2022, lay the 2023 Appropriation Bill before a joint session of the National Assembly in Abuja. Meanwhile, according to a post by Punch, the Minister of Finance Zainab Ahmed had stressed that the government might be incapable of financing the treasury-funded capital projects next year, particularly due to the shrinking revenue and costly payment of subsidy on Premium Motor Spirit, popularly known as petrol.
A crash in crude oil production to a record low due to severe oil theft has made Nigeria unable to meet its revenue targets over the years. Additionally, High fuel-subsidy costs, which the Budget Office estimates at 6.7 trillion naira next year if fully provided for, are squeezing the government coffers. According to the budget office, the government achieved only 39% of its targeted oil income in the four months through April.
Nigeria’s debt has been rising and the cost of debt service is taking a significant portion of the government’s revenue. New loans will only compound the rising debt-service costs in Nigeria. According to the World Bank, debt servicing could reach 102% of government income by end of 2022.
Based on the recommendation of the Committee on Finance on the 2023–2025 Medium Term Expenditure Framework and Fiscal Strategy Paper MTEF/FSP, Nigeria is projected to earn revenue of 9.4 trillion naira. A projected benchmark oil price of $73 per barrel was made as a result of the favorable oil market outlook–elevated oil prices and other situations such as a sustained war in Ukraine. The committee also recommended an exchange rate of 437.57 to the dollar.
There is an urgency of doing business unusual in Nigeria. Removing the fuel subsidies and other relevant policies are requisite to ensuring Nigeria’s fiscal sustainability,
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