Despite the signing into law of the 2023 Budget, the fate of the Nigerian economy in the transition year still hangs in the balance until all the grey areas in the financial document are addressed before the February polls, writes Festus Akanbi
Last week, President Muhammadu Buhari signed the N21.83 trillion 2023 appropriation bill as well as the 2022 supplementary appropriation bill into law, the last of such assignments as Nigeria’s president. Unfortunately, he couldn’t append his signature to the Finance Bill which is already mired in controversy, especially over its conflicts with the fiscal term of the Petroleum Industry Act (PIA).
The budget also showed that the Senate had increased the 2023 budget by 6.4% to N21.83 trillion ($49 billion) and delayed a decision to the president’s request to convert the Central Bank of Nigeria’s overdrafts to his administration to long-term bonds after some lawmakers questioned the plan.
In a letter to parliament dated December 20, Buhari sought approval to turn over N20 trillion worth of central bank loans to government to 40-year bonds at nine per cent interest including an extra N1 trillion loan to the government from the bank.
Economists say that Nigeria’s government is spending more money on debt repayments than on education and health, but Buhari has said his government had no choice but to borrow its way out of two recessions in the past seven years.
The Central Bank of Nigeria’s advances to the federal government rose 2,900 per cent in the last seven years to N23.8 trillion, an unprecedented rise that violated the law, stoked inflation and worsened the country’s debt burden.
Some lawmakers in a rowdy session argued that the loan conversion was unconstitutional, prompting the Senate President, Ahmad Lawan, to suspend a vote on the proposal until a later date.
The IMF has asked Nigeria to phase out central bank financing of the government to reduce double-digit inflation. In May 2015 when the Buhari administration came to office, the CBN’s loans to the federal government stood at N789.7 billion cumulatively. Since then, the government has drawn central bank loans each year at an unprecedented level.
2023 Budget
Buhari in October presented N20.51 trillion budget for 2023 but the lawmakers passed N21.83 trillion, an increase of N1.32 trillion over the initial Executive Proposal after they raised the oil price assumption to $75 a barrel from $70. The president will need to sign the revised budget for it to become law.
Controversies
However, unlike the previous budgets, the 2023 document appears to be drawing flak from economists and other players in the nation’s economy. While the blame for the ‘unbalanced’ budget is being directed at the executive arm, the legislators are at the receiving end of the blame for the hasty passage of the Finance Bill and the decision of President Buhari to put it on hold for now.
Reacting to the budget as signed into law by the President, a former Minister of Education, Obiageli Ezekwesili, last week stated that the 2023 national budget has a deficit larger than revenue by almost N12 trillion.
Ezekwesili in a post via her verified Twitter handle on Wednesday, described the national budget as “hopeless” noting that she foresaw the historical mess-up for the country’s public finance.
“This is the summary of the hopeless budget ”MBuhari signed into law yesterday. Total expenditure is N21.83 trillion. Total revenue is N9.73 trillion. The budget has a deficit larger than revenue by almost N12 trillion! she stated in her Twitter message.
Analysts who expressed similar disappointment said the fear is being kindled by the realisation that there was no precedent or guarantees that revenues will be achieved whereas it is certain that expenditure will be exceeded significantly.
Another commentator, Mr. Dare Awoyemi, expressed disappointment at the level of the nation’s debt saying, “I still wonder how people say that PMB is the best President, this man has pushed equivalent of $53billion debt as ways and means on future generations…”
Legislative Gang-up
However, members of the National Assembly have come under serious criticism for what has been described as a legislative gang-up to hurriedly pass the Finance Bill without allowing members of the public to make input.
The Finance Bill, which is still being reviewed, especially over its conflicts with the fiscal term of the Petroleum Industry Act (PIA) was said to have taken away all concessions given by the PIA. Critics noted that it disincentivises investments in the petroleum sector, leading to massive protests by international oil companies (IOCs), especially in the area of gas flaring.
In its reaction, the Centre for the Promotion of Public Enterprise (CPPE) chided members of the National Assembly for the undue haste with which it passed the Finance Bill of 2022.
The CPPE also appealed to President Muhammadu Buhari not to leave a legacy of an unbearable tax burden for investors in the Nigerian economy.
The Founder of the CPPE, Dr. Muda Yusuf, who frowned at what he called the “Hasty Passage of the 2022 Financial Bill,” said it was regrettable that the National Assembly hurriedly passed the bill without the benefit of input from citizens whom they were elected to represent.
Yusuf said: “This is a major letdown by the National Assembly in its representation role in our democracy. The action is not consistent with the ideals and principles of our democracy because sovereignty belongs ultimately to the people. What the National Assembly has done is tantamount to disrespect, disregard and contempt of the Nigerian people and the business community.”
He added: “The CPPE is disturbed by the rushed passage of the 2022 Finance Bill by the National Assembly. It calls to question the representation role of the assembly. There was practically no room for public hearing and engagement with stakeholders in the consideration of the bill.”
Tax Amendments
Yusuf further stated that the bill effected wide-ranging amendments on the following legislations: Companies Income Tax Act, Customs, Excise Tariff Act, Personal Income Tax Act, Petroleum Profits Tax Act, Stamp Duties Act, Value Added Tax Act, Capital Gains Tax Act, Corrupt Practices and Other Related Offences Act and Public Procurement Act.
He noted that the finance bill contained the following provisions, among others: the imposition of excise duties on all services with rates to be determined by a presidential order; imposition of 0.5 per cent tax on all eligible imports from non-African countries to fund Nigeria’s obligations to international organisations and an increase in Tertiary Education Tax from 2.5 per cent to 3.0 per cent of company profit.
“All of these have far-reaching implications for investors and citizens. It will affect the cost of production; it will affect the operating cost and would undermine investors’ confidence. It has profound inflationary implications. It will effectively move corporate tax to almost 35 per cent which is one of the highest globally.
“Currently, corporate tax is 30 per cent; there is tertiary education tax of 2.5 per cent; NITDA tax of 1.0 per cent; NASENI Levy of 0.25 per cent; Police Trust Fund tax 0.005 per cent.
Yusuf described the Finance Bill as, “a piece of legislation, which has profound implications for investment, citizens’ welfare and the Nigeria economy.
“It is curious and puzzling that the Senate gave just 24 hours’ notice for stakeholders to attend a public hearing on the bill. The public notice was published on December 21, 2022, for a public hearing scheduled for December 22, 2022. It is an expression of deliberate exclusion of stakeholders from this important legislative process.”
He observed that the House of Representatives gave a more generous notice of about three weeks.
“But in a sudden and baffling twist of events, the House passed the bill before the date of the advertised public hearing, which is January 13, 2023,” he said, adding that “the bill has since been forwarded to the President for assent. This haste is incomprehensible.”
Budget of Fiscal Consolidation
According to a document released by the Federal Ministry of Finance last week, the principal thrust of the 2023 Appropriation, christened “Budget of Fiscal Consolidation and Transition’’ is to maintain financial viability and ensure a smooth transition to the incoming administration. The projected fiscal outcome in the 2023 Budget is based on the petrol subsidy reform scenario.
In the 2023 budget framework, it is assumed that the petrol subsidy will remain up until mid-2023 based on the 18-month extension announced in early 2022. The document said that in this regard, only N3.36 trillion has been provided for PMS subsidy.
The government also envisages tighter enforcement of the performance management framework for Government Owned Entities that will significantly increase operating surplus/dividend remittances in 2023.
A breakdown showed that the total revenue available to fund the 2023 Budget is estimated at N9.73 trillion. This includes the gross revenues of 63 Government-Owned Enterprises (GOEs) totalling N3.48 trillion. Of this, FGN Oil revenue share is projected at N1.92 trillion, Non-oil taxes are estimated at N2.43 trillion, and FGN Independent revenues are projected to be N2.21 trillion. Other revenues total N762 billion. The GOEs will remit N1.06 trillion to FGN’s Consolidated Revenue Fund, and retain N2.42 trillion for their expenditures and reserves.
In aggregate, 20% of projected revenues is expected from oil-related sources, while 80% is to be earned from non-oil sources.
