With the Federal Government’s unlikely to patronise the Eurobond market in 2023, economic experts say there is a high probability it will continue to increase its domestic borrowing and reliance on the Central Bank of Nigeria (CBN)’s ways and means window.
This is coming after the Finance ministry presented the 2023 full year approved budget to the public.
President Muhammadu Buhari had last week, signed the N21.83 trillion 2023 appropriation bill into law, marking the last time he would be performing such a task as Nigeria’s president.
A breakdown of the key sectors of the budget shows that Ministry of Works and Housing got the lion’s share of N398.2 billion, followed by Defence with N285 billion, Agriculture and Rural Development, N248.3 billion, Education, N153.7 billion and Health, N134.9 billion.
Domestic debt (including Ways & Means from CBN) got N4.49 trillion, foreign debt servicing N1.81 trillion while a Sinking fund to repay maturing loans was allocated, N247.72 billion.
Already, the ways and means are reported to have exceeded internationally acceptable threshold. This means that the rate of servicing Nigeria’s debts will increase if the binge borrowing continues.
Based on the finance ministry’s presentation, analysts at Cordros Securities, said the FG now expects aggregate revenue of N10.49 trillion in 2023FY – oil revenue (N2.23 trillion), non-oil revenue (N2.43 trillion), independent revenue (N2.62 trillion), GOEs revenue (N2.42 trillion), and other revenue (N794.13 billion).
Accordingly, the government expects a fiscal deficit of N11.34 trillion to be financed by the combination of domestic borrowing (N7.04 trillion), foreign borrowing (N1.76 trillion), multilateral/bilateral funding (N1.77 trillion), privatisation proceeds (N206.18 billion), and additional revenue from spectrum fees and tax on the maritime sector (N553.46 billion).
“Using historical performance and factoring current realities and risks, our revised estimates show the 2023 FY fiscal deficit could print between N12.35 – N14.53 trillion, with a base case scenario of N13.28 trillion. Consequently, considering that the government is unlikely to patronize the Eurobond market in 2023 FY, given foreign investors’ continued preference for safe-haven assets, we expect the FG to increase its domestic borrowing and reliance on the CBN’s ways & means advances”, they said.
SOURCE: THESUN
