The 2023 budget call document proposed an estimated total expenditure of N19.76 trillion. Of this figure the government is expected to generate N8.46 trillion as revenue. This creates a budget deficit of N11.3 trillion for the 2023 fiscal year and at 57.19% of the total budget for expenditure in 2023 of N19.76 trillion, it is the highest since 2010.
Also, based on projected macroeconomic parameters, the government estimated a nominal gross domestic product (GDP) of N225.507 trillion in 2023. This gives a budget deficit to GDP of 5.01%, violating the fiscal responsibility requirements of the country.
Section 12 (1) of the fiscal responsibility act of 2007 provided details for the budget deficit to GDP rate. It states that:
‘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 percent of the Estimated Gross Domestic Product or any sustainable percentage as may be determined by the National Assembly for each financial year.’
The budget call document is a guide for the 2023 budget and as it stands, with a deficit as a percentage of the GDP of 5.01%, it exceeds the stipulated requirement of 3% by 2.1%. Also, this represents an increase of 1.8% over the 3.21% of the 2022 revised budget.
The budget deficit to the GDP shot over 3% of the GDP in 2020 when it was 3.03%. Before this, it was less than 2%, 1.32% in 2019, and 1.51% in 2018.
In 2021, it was 3.66% of the GDP, 3.47% of the GDP in the 2022 approved budget and 3.7% in the 2022 revised budget.
Between 2010 and 2019, the budget deficit was less than 37% of the total expenditure. The highest budget deficit to total expenditure recorded within that period was a deficit at 36.38% in 2016.
It shot to over 40% in 2020, taking up 42.66% of the entire budget as approved for the year. The following year saw it increase to 43.93% in 2021, then dropping to 36.87% in the 2022 revised budget from the 37.3% figure in the approved budget for 2022.
Now according to the budget call circular for the 2023 budget, the deficit exceeds half of the budget taking up 57.19% of the total budget.
A high budget deficit has detrimental effects on the economy, it will likely compound the country’s national debt issues and increase debt interests. Other possible challenges are rise in taxes, spending cuts, high inflation rate, and potential crowding out of the private sector because of government borrowing as increased government borrowing leaves little funds left for private sector investments.