Analysts raise concerns over ₦20.51trn proposed budget for 2023

Nigeria's fiscal landscape is under scrutiny as analysts raise concerns over the proposed ₦20.51 trillion budget for 2023. The budget, presented by the President, has sparked debates on its sustainability and ability to address the country's economic challenges. Tilewa Adebajo, CEO of CFG Advisory, shed light on the key points of contention surrounding the budget and its implications for Nigeria's financial future. Adebajo highlighted significant issues with the budget's fiscal assumptions, revenue generation, debt financing, and capital expenditure allocation. The proposed budget has stirred a mix of reactions from the business community and financial markets, with many expressing reservations about the plan's viability. Adebajo noted that the budget seemed more like a farewell address by the President, given that it is his final budget presentation. One of the critical issues highlighted was the budget's deviation from the Fiscal Responsibility Act, with the deficit exceeding the prescribed 3% threshold by reaching 4%. This deviation raises concerns about fiscal discipline and the government's ability to manage its finances prudently. Adebajo emphasized the pressing need for structural reforms to put Nigeria's debt on a sustainable trajectory. The budget's heavy reliance on borrowing, privatization proceeds, and specific loans for project financing has raised questions about the long-term implications for the country's debt profile. With current revenue generation insufficient to cover debt servicing, there are growing apprehensions about the government's financing strategy and its impact on inflation and overall economic stability. Regarding capital expenditure, Adebajo highlighted the recurring challenge of the recurring-to-capital expenditure ratio remaining stagnant over the years. This ratio imbalance poses a threat to economic growth and development, as inadequate capital investments hinder productivity and infrastructure development. The Finance Minister's acknowledgment of the difficulties in financing capital projects further underscores the urgency for a comprehensive debt restructuring and revenue optimization strategy. The budget's revenue projections from the oil sector, despite favorable oil prices, face uncertainties due to production challenges and foreign exchange issues. Adebajo expressed skepticism about the government's ability to meet revenue targets, citing historic underperformance in revenue collection. The reliance on oil revenue amidst global economic uncertainties and geopolitical tensions poses risks to revenue generation and fiscal stability. In light of tightening monetary policies, including increased CRR requirements, Adebajo outlined the potential repercussions for credit availability and economic growth. The challenges faced by banks in expanding credit amid rising inflation rates present a complex economic landscape. With inflationary pressures exacerbated by government borrowing, the delicate balance between curbing inflation and stimulating economic growth remains a critical policy dilemma. The ongoing global economic challenges, including the Russia-Ukraine crisis and inflationary trends, further complicate Nigeria's economic outlook. Adebajo emphasized the need for a coordinated monetary and fiscal policy response to navigate the complexities of external shocks and domestic economic imbalances. The potential for prolonged high inflation and looming recession necessitates proactive policy measures to stabilize the economy and mitigate adverse effects. As Nigeria grapples with multifaceted economic challenges and uncertainties, the scrutiny over the proposed budget reflects broader concerns about the country's financial resilience and long-term sustainability. Addressing structural deficiencies, enhancing revenue mobilization, and fostering a conducive business environment are critical components of navigating the current economic crisis and charting a path towards sustainable growth.