Budget proposals under Nigeria’s 2024 budget

President Muhammadu Buhari presented the Federal Government’s 2023 budget proposal to the joint session of the National Assembly on October 7, 2022. The budget marks an end to the eight-year tenure of the president, which began in May 2015.

The federal government’s budget proposal for 2023 is dubbed “a budget of fiscal sustainability and transition.” This budget is created to meet the targeted National Development Plan 2021 to 2025. The budget is also believed to foster an easy transition of power from the present administration to the next.

The likelihood that the proposed budget will relieve Nigerians from their current situation is falling due to the Naira’s depreciating value, rising inflation, the nation’s declining educational system, and the nearly complete devastation of all states by flooding.

This article examines Nigeria’s proposed budget for 2023 and how it will impact the populace’s overall well-being.

The Proposed Budget

The federal government proposed a budget of 20.51 trillion Naira, higher than the 2022 budget by 19% and the highest budget ever in the country’s history. Additionally, the budget adds 750 billion Naira to the 19.76 trillion Naira that was originally outlined in the Fiscal Strategy Paper and Medium-Term Expenditure Framework for 2023–2025.

With over 10% of the proposed budget, the defence sector is given the largest budgetary allocation. This is vital given the recent alarming threats against extremists in the Northeast that have now extended to Abuja.

Recurring expenses make up the majority of the proposed budget’s spending, with a staggering 8.27 trillion Naira (40.32%) in total. With 6.31 trillion Naira (30.76%), debt servicing is in second place, followed by capital expenditure and government-owned enterprises, which spend 5.35 trillion Naira (26.08%) and 2.42 trillion Naira (11.79%), respectively, at the third and fifth highest expenditure levels.

The risks of allocating more than 70% of the proposed budget to debt service and recurrent expenditure are concerning. Recurrent expenditure budgets are expenses that are directed toward operating costs, such as salaries and wages, whereas debt service budgets are set aside to pay up interest and principal sum on loans borrowed. According to the definitions of recurrent expenditure and debt service, neither expenditure when paid for in the future will advance the nation’s overall development.

What is most frightening is that debt service alone claims one-third of the entire proposed budget.

Contrarily, capital expenditures are costs aimed at acquiring assets that benefit the nation and generate income, such as military hardware, the building of roads, schools, and hospitals. The country’s development goals are a mirage if less than 30% of the proposed budget is allocated to capital expenditure.

The proposed budget also includes expenditures for sinking funds of 247.73 billion Naira, 4.99 trillion Naira in personnel costs, 1.1 trillion Naira in overheads, and 744 billion Naira in statutory deductions. According to the aforementioned figures, debt service represents more than 100% of all personnel and overhead expenses combined and more than 121% of all capital expenditures.

How will the budget be funded?

Many Nigerians and members of the international community are curious about how the federal government plans to finance the proposed budget, which would be Nigeria’s largest since its founding in 1914 and a total of 20.51 trillion Naira.

9.73 trillion Naira will be funded, according to the federal government, from the revenue it intends to generate from the economy. The budget deficit in the proposed budget stands at 10.78 trillion Naira. The 9.73 trillion Naira in revenue would be paid for by non-oil revenue totalling 2.43 trillion Naira, retained revenue from state-owned enterprises totalling 2.42 trillion Naira, independent revenue amounting to 2.21 trillion Naira, oil revenue amounting to 1.92 trillion Naira, and other revenue amounting to 762 billion Naira.

The 10.78 trillion Naira deficit in the proposed budget is a goal that many believe will be hard to attain. The government could not cover the projected deficit funding under the 2022 budget, which had a budget deficit of 6.39 trillion Naira. 52.5% of the total amount proposed is the budget proposal’s deficit. The federal government will raise the proposed budget deficit through new loans totalling 8.8 trillion Naira, the privatization and sale of government assets for 206 billion Naira, and the withdrawal of concessionary loans totalling 1.77 trillion Naira.

Additionally, debt service claims represent more than 66% of the projected revenue of 9.73 trillion Naira for the proposed budget funding. This means that for every Naira earned, the federal government earns more than 660 Naira in revenue, leaving it with 440 Naira in spending money.

Comparison between the Proposed 2023 budget and the 2022 Budget

Budget Assumption2022 Budget as of November 20212023 Proposed Budget as of November 2022
Inflation Rate16.43% 20.77% 
GDP growth Rate3.77%3.65%
Exchange Rate (CBN)₦ 404/ $1₦440.63
Oil Benchmark Price (per barrel)$62$70
Volume of oil production (barrels)1.78 million 1.67 million
Recurrent Expenditure₦6.91 trillion₦8.27 trillion
Capital Expenditure₦5.47 trillion₦5.35 trillion
Debt Service₦3.61 trillion₦6.31 trillion
Statutory Transfer₦669.67 billion₦744.11 billion
Revenue₦10.74 trillion ₦9.73 trillion
Budget₦17.13 trillion₦20.51 trillion
Deficit₦6.39 trillion₦10.76 trillion

Conclusion and Recommendation

The general public has closely scrutinized the budget, and it is evident that a larger budget is required to lay out a clear path for Nigeria’s success. Nigerians are concerned about several things, including the nation’s escalating annual debt service payments. The federal government normally should have used this money to advance the country’s development, but more than 30% of the proposed budget is set aside for debt servicing.

Additionally, the intention to collect more loans is an action that would undoubtedly come back to haunt the nation. With increased debt service funding proposed in the 2023 budget, the number would be on the rise in the coming years.

How would the proposed budget affect my business?

With the proposed revenue set at over 9 trillion Naira, there is bound to be a series of tax collection techniques employed by the federal government to meet this target.

Don't miss a thing. Follow us on Telegram and Follow us on WhatsApp. If you love videos then also Subscribe to our YouTube ChannelWe are on Twitter as MakeMoneyDotNG.

Richard Okoroafor

Richard Okoroafor

Richard is a brilliant legal content writer who doubles as a finance lawyer. He brings his wealth of legal knowledge in corporate commercial transactions to bear, offering the best value that exceeds expectations.

Articles: 431

Leave a Reply

Your email address will not be published. Required fields are marked *