Nigeria will surpass its debt ceiling in 2023; needs a new loan of N11 trillion

The minister added that if the fuel subsidy is maintained for the full 2023 fiscal cycle, the government’s budget deficit is anticipated to exceed N12.42 trillion.
According to Zainab Ahmed, Minister of Finance and National Planning, the federal government will sell national assets and borrow more than N11 trillion to cover the budget deficit in 2023.
She added that if the gasoline subsidy is maintained until the full 2023 fiscal cycle, the government’s budget deficit is predicted to be greater than N12.42 trillion.
While defending the Fiscal Strategy Paper and Medium Term Expenditure Framework (MTEF) for 2023–2025 before the House of Representatives Committee on Finance on Monday, Mrs. Ahmed made this disclosure (FSP).
The first alternative calls for keeping the gasoline subsidy in place for the entire fiscal year 2023, the minister explained two possible scenarios for the budget deficit to the committee.
She claims that in the first scenario, the deficit is anticipated to increase to N12.41 trillion in 2023 from the planned N7.35 trillion in 2022, or 196% of total revenue or 5.50% of the projected GDP. The government will spend N6.72 trillion on subsidies under this alternative, she continued.
According to Mrs. Ahmed, the second option would maintain subsidies in place until June 2023, bringing the deficit to N11.30 trillion, or 5.01 percent of the projected GDP. The expected cost of the PMS subsidy in this scenario is N3.3 trillion.
S According to the current trend, he pointed out that the first option is unlikely to be feasible, while the second option would call for stricter enforcement of the performance management framework for government-owned enterprises, which would result in a significant increase in operating surplus in 2023.
According to the minister, increased borrowing from domestic and foreign sources is anticipated to pay the projected deficit under the second option. This will include fresh borrowings totaling N9.32 trillion, of which N7.4 trillion will come from local sources and N1.8 trillion from international sources. The government anticipates earning N206.1 billion from privatization earnings and N1.7 trillion in loans connected to international projects.
The federal government would spend N18.6 billion each day on PMS, according to PREMIUM TIMES.
Budget deficits under the two proposals are much higher than the limit set by the Fiscal Responsibility Act.
The current Act states that the deficit cannot be greater than 3% of GDP. The National Assembly must first provide its assent for the President to cross the line, according to the legislation.
Section 12 (1and2) of the Fiscal Responsibility Act reads, “The estimate of:
1). Aggregate expenditure and the aggregate amount appropriated by the National Assembly for each financial year shall not be more than the estimated aggregate revenue plus a deficit, not exceeding three per cent of the estimated Gross Domestic Product or any sustainable percentage as may be determined by the National Assembly for each financial year.
2). Aggregate expenditure for a financial year may exceed the ceiling imposed by the provisions of subsection (1) of this section if in the opinion of the President there is a clear and present threat to national security or sovereignty of the Federal Republic of Nigeria.
Option two’s planned total expenditure by the government is N19.76 trillion, with the projected daily oil production set at 1.69 million barrels at a price of $70 per barrel. The current currency rate is N435.57 to $1, and the inflation rate is 17.16%.
According to Mrs. Ahmed, issues with crude oil output and NNPC Limited’s withholding of PMS subsidies pose a serious threat to reaching our goals, as evidenced by the performance of 2022 through April.
She mentioned that the ongoing worldwide issues brought on by the COVID-19 pandemic’s residual impacts, as well as increasing food and fuel prices as a result of the Russia/Ukraine war, were taken into consideration when creating the draft MTEF/FSP.

GOGAN Media.