LCCI Statement on the Supplementary 2023 FGN Budget
With few days to the end of 2022, the Federal Government plans to add ₦819.5 billion supplementary budget for critical infrastructure projects, to be financed from domestic borrowing sources, to the ₦20.5 trillion initially proposed by the President to bring the total budget to ₦21.32 trillion.
The unprecedented damage inflicted on some of our infrastructures due to flooding in most parts of the country requires urgent financing action by the government. We expect the supplementary budget to be used totally on repairing damaged infrastructure, but also very important is that we expect the government to invest more in building infrastructure to prevent future disasters.
A deeper look at the figures showed that the supplementary budget if approved, will raise the budget deficit for 2022 from ₦10.78 trillion to ₦11.6 trillion and about 4.43% deficit to GDP ratio. The most critical issue, though, is not about the level of spending but the cost of borrowing. The implications of this massive borrowing by the government to the economy are enormous, including crowding out credit to the private sector, increasing the cost of debt servicing, and making the economy more vulnerable to unforeseeable shocks in an election year.
At the end of the first half of 2022, Total Debt Service stood at ₦2.597 trillion, higher than the prorated sum of ₦1.978 trillion, by ₦619.81 billion (31.33 percent). Also, the interest payments on Ways and Means collected from the Central Bank of Nigeria amounted to ₦714.74 billion. According to data from the Budget Office of the Federation, the sum of ₦1.333 trillion was used for domestic debt servicing, a difference of ₦52.34 billion (4.09 percent) from the prorated half-year projection. In contrast, ₦549.70 billion was spent on external debt servicing during the period under review. And with the plan of the Federal Government to restructure its Ways and Means loans of N23 trillion, Nigeria’s total debt would effectively be at N67.7 trillion by the end of 2022. We must watch the cost implications of our borrowing and spending.
On the revenue side, the economy has not performed to expectations. At the end of the first half of 2022, the Gross Oil Revenue amounted to ₦2.17 trillion against ₦4.7 trillion prorated budget projection for the period. This is lower by ₦2.5 trillion (about 53.63 percent) compared with the 2022 half-year budget estimate. The government must arrest the rising costs and dwindling revenue profile of the economy to boost growth and resolve the many economic ills in the country at this time.
In the face of current realities, we urge the government at all levels to be more proactive rather than reactive to nature-induced casualties, climate change impacts, and damages caused by human activities. In August this year, the Nigerian Meteorological Agency (NiMet) warned of possible flooding in about 20 states, but unfortunately, both citizens and the governments paid no significant attention to it. This brings to question what support is given through the utilization of ecological funds shared among the three tiers of government to finance projects aimed at both adaptation and mitigation activities against natural disasters. We must also ask the states and local governments to account for the utilization of ecological funds allocated to them. There is an urgent need for a better management and evaluation model to utilize the ecological funds.
Dr. Chinyere Almona, FCA
Lagos Chamber of Commerce & Industry
Friday 23rd December 2022