Senate approves MTEF/FSP 2023-2025, fixed exchange rate at N437/$

The Senate approved the Medium Term Expenditure Framework (MTEF) 2023-2025 and the Budget Strategy Paper (FSP).

The MTEF/FSP is a document that contains parameters on which the annual budget is prepared.

While approving the MTEF/FSP on Wednesday, he set the benchmark price for crude oil at $73 per barrel for 2023, higher than the corresponding benchmark price of $57 for 2022.

The Senate decided that the oil price of $73 per barrel of crude oil be approved due to the continuous increase in the price of oil in the world oil market and other special situations such as the invasion continuation of Ukraine by Russia, as this will result in savings of 155 billion naira.

Lawmakers also fixed the exchange rate at 437.57 naira with continued engagement between the Central Bank of Nigeria and the Federal Ministry of Finance, Budget and National Planning to bridge the gap between the market official and the parallel market.

The 2023-2025 MTEF/FSP was approved after lawmakers considered and adopted recommendations from the Joint Senate Committees on Finance and National Planning.

Earlier, Finance Minister Zainab Ahmed said the federal government will borrow over 11 trillion naira and sell national assets to finance the budget deficit in 2023.

She also said that the government's budget deficit is expected to exceed N12.4 trillion if it maintains the oil subsidy for the entire 2023 budget cycle.

She offered two options for lawmakers to consider for the 2023 budget.

First, the deficit is projected to reach N12.4 trillion in 2023 from the budgeted N7.35 trillion in 2022, representing 196% of total revenue or 5.50% of estimated GDP. Under this option, she said, the government would spend N6.72 trillion on subsidies.

The second option, she explained, is to maintain subsidies until June 2023 and this scenario will take the deficit to N11.3 trillion, or 5.01% of estimated GDP. In this option, the PMS subsidy is expected to gobble up N3.3 trillion.

Committee Chair Adeola Olamilekan, who presented the report, said the committee had recommended the second option suggested by Ms. Ahmed.

This means that the federal government will provide the subsidy until July 2023.

The Senate also approved daily crude oil production of 1.69 mbd, 1.83 mbd and 1.83 mbd for 2023, 2024 and 2025 respectively, while the projected GDP growth rate was 3. 75%.

An inflation rate of 17.16% was also approved.

Projected new borrowing of N8.4 trillion (including foreign and domestic borrowing) has been approved, subject to approval of the borrowing plan by the National Assembly.

Other approved parameters include:

* Retained revenue of N9,352 trillion due to increase in benchmark as oil subsidy cap for current year.

*Fiscal deficit of N11.3 trillion (including state-owned enterprises, FOE).

* Statutory transfers, totaling N722.11 billion.

*Estimated debt service at 6,310 billion naira.

* Sinking Fund of N247.7 billion.

* Total expenditure of 19,760,000,000,000,000 naira - made up of recurrent (non-debt related) total of 8,53,000,000,000,000 naira; Personnel costs (MDA) of N827.8 billion; capital expenditure (excluding transfers) N3.96 trillion; Special (recurring) intervention in the amount of N350 billion; and Special Intervention (Capital) of N7 billion.

The Committee also recommended that the cost of oil subsidies be capped at N3.6 trillion as a result.

In his presentation, Mr. Olamilekan said that all relevant government agencies will be required to take the necessary steps to keep the cost of oil subsidies to government within a cap of N1.7 trillion in 2023.

This, he said, will save about 737.3 trillion naira, which should be used to reduce the government's 11.3 trillion naira budget deficit, as shown in the MTEF/FSP.

The budget deficit of 11.3 trillion naira, he said, is expected to be reduced through savings from the subsidy scheme from 737.31 trillion naira to 10.5 trillion naira.

“The Committee recommends a significant reduction in exemptions and corporate tax exemptions to cushion the effect of the budget deficit,” he said. "And that all revenue-generating agencies should reconcile their accounts with the Fiscal Responsibility Commission and the Off...