 We're back with the breakfast and plus TV Africa. Let's take a look at the budget this morning has been passed by the National Assembly. The National Assembly has passed an aggregate expenditure of 21.82 trillion Nair as the budget for 2023 fiscal year. The figure represented an increase of 1.3 trillion Nair from the 20.51 trillion Nair estimate presented by President Mohammad Abu Hari to the parliament in October 2022. The 1.3 trillion increase in the budget size rose from additional funding and marked fourth in national population commission as the NPC ahead of the plan 2023 censors, 173 billion for the independent national electoral commission INEC ahead of the 2023 general elections, the Nigerian army, navy, Nigerian police, ministers of agriculture, health, aviation and science and technology. The National Assembly also increased the oil price benchmark proposed for the budget from 70 to 75 dollar per barrel. They however retained all the parameters as earlier proposed by the president like 1.69 million barrels of oil production per day at 435.57 Nair to the dollar, 3.75% GDP growth rate and 17.16% inflation rate. These are all assumptions. Now out of the 21.827 trillion Nair, 967.486 billion is for 33 transfer, 8.329 trillion is for non-debt recurrent costs, 5.972 trillion is for capital expenditure and 6.557 trillion is for deficit servicing. Under the 967.48 billion statutory transfer, the National Assembly office has 30.492 billion Nair, 73.267 billion, the House of Representatives, 51.994 billion National Assembly Service Commission has 10.55 billion Nair, the legislative 8.16.2520 billion, a generic services, you have 11.370 billion Nair. Now the list is almost endless but this is the point where we bring in our guest this morning, Shegou Shropiton. Thank you so much for being part of the show. I am sure that you have seen the budget as it were to the critical part of this budget. First of all, I would like to share your thoughts on this increase by 1.3 trillion. What do you make of it? Thanks for having me. Good morning viewers. This is, it is now as I am sure all the national devils know and all the national devils know. It is a ritual, it is an annual ritual, it basically starts off with the National Assembly, the federal executive sending their budget proposes to the National Assembly, the various ministries, going there to defend the figures as it relates to their own MDAs and then the National Assembly going through a process with their committees, harmonization and then final passage and every single year for as long as I can remember, the National Assembly changes the budget and usually those changes are increments. So a 1.3 trillion increase is in keeping with this tradition, a change in some of the budget benchmarks, especially the benchmark for the CODAL crisis is also an annual ritual. Why the National Assembly feels that they need to do this year in, year out to be perfectly honest with you? I am not sure. But this is what they do every year. And for me, it is really neither here nor there. And I say this because, look, at the end of the day, this is the project. It is a policy instrument. The federal government knows exactly what they want to do, they know the project and the program that they want to pursue and the policy direction from a fiscal perspective for this coming year and they put a document together to reflect that. The National Assembly makes as long as it is not material, should not impact that negatively. The only time that this would be a problem is if they reduce some of these figures, especially significant projects and we have seen that happen in the past. We remember a time when Mr. Rajipashula complained about the National Assembly reducing the cost, the amount provided for the legacy background, express projects, express records. I think that was about 34 years ago. So things like that has happened in the past and those types of things can impact budget implementation. But in this case, I don't see any significant problem and I think that the federal government will go ahead and do what they had intended to do, have been shown. Well, if you say you don't see any problem, some have spotted it and it's also there. It's the fact that the National Assembly for 2023, let's not forget that we're very constrained, we're talking about a country with stressed public finance and debt profile. The National Assembly has increased her own budget by 59 billion, appropriating 228.1 billion there for themselves. A budget where you have a deficit exceeding, you know, budget for capital expenditure. So is there still not a problem with this budget? The deficit, you know, this is a different event. Whether the National Assembly had increased the budget or not, the issue you speak about now is a problem. Has been a problem for a while and I think until the government begins to be more creative with the entire budgeting process and with its revenue generation strategies will continue to be a problem. So having a budget deficit of 10.7 trillion as against the capital expenditure, for example of 5.35 trillion, says a lot because what this then said was that we are borrowing a significant chunk of our borrowing to form this project is not even going to be spent on developmental projects in terms of capital expenditure, in terms of, you know, infrastructure, development, roads, rail networks and all of that. The chunk of that to be spent on recording non-debt purposes, you know, so that is a significant problem. It can't be wished away. It needs to be dealt with but, you know, it's going to take some doing and whoever is going to fix this problem has got to be very courageous and will have some very difficult decisions to make down the line. It certainly won't be this government and I think that if we don't witness any change in government, for example, then, you know, this ritual is going to continue into the possible future and it's a path where the end of this road is not going to be pleasant. It's something that needs to be addressed and needs to be urgently fixed. But I'd like to ask you, why is it that over time we have actually spent so much money on the economy and the economy is being allocated? It seemed like a pattern for us as a country. I look at it so much, you know, to a current cost than what we, you know, allocate to capital expenditure and when we understand that the country that's keen about development will pay more attention to capital expenditure rather than, you know, recurrence. So why is it? Like for 2023, I beg your pardon, yes, of course it's 2023. 232 trillion era for the non-debt recurrent cost. And for capital expenditure, like I rightly mentioned, 5.972 trillion. Why don't we, or why haven't we, why have we always been, you know, in this pattern of, you know, budgeting? Well, there are two issues, you know, involved in this. The first one is that the budget itself is too small. It's too small. For a population of 200 million people, a budget of 220 trillion in era is pretty good for it. If you cut down to dollars, this budget is about 30, 30 something billion dollars. And if you reduce that per capita, we're talking of something the range about 200 dollars or thereabouts per capita. It's simply too small. If you benchmark that against our contemporaries, whether you want to talk about countries like Ghana or South Africa, you know, of course can't even go to develop economies. So the best thing to note in this is that the budget size itself is too small. The government is simply not generating enough revenues and is simply not spending enough to drag Nigeria out of its poverty trap, out of its heavy infrastructure deficit, you know, and all of that. The second part of that usually raised is, of course, the size of government itself. For a government that is budgeting 20 trillion, the budget for the current expenditure is almost 70 percent. In fact, over 70 percent of the entire expenditure profile for the year. And that simply is unacceptable. What it means is that we're spending more money, paying salaries, paying allowances, paying things like per diem for travel, paying travel expenses, you know, and all of that as against building roads, as against building schools, as against, you know, providing water, you know, irrigation, damning, and so many other projects. Let's not even go into the issue of power. You know, so the government needs to look at the size of the civil service, even though some would argue that the problem is not in the size of the civil service, but in the productivity of the civil service. Again, it's a completely different question. So we want to reduce the size of the civil service, or we want to better deploy the people that are working for this government so that they can generate more, generate more revenue, and then we can, you know, spread more development. So you can approach it from either angle, but whichever way you look at it, obviously, you know, this skewed percentage of about 30 or capital and 70 percent for the current expenditure is extremely unhealthy. It's something that needs to be fixed, like you said. This is not a new problem. We've been on this for a long time, and again, it will take some very, very bold, really tough decision making to fix this problem of the ratio, the capital to reference expenditure, the ratio of our budgets. I don't think our politicians have what it takes to do what is necessary. All right, then. So still looking at, you know, this issue, especially in comparison now, debt servicing will go up 6.55 trillion, which is more than, you know, the capital expenditure, of course, we know that it's 5.35 trillion Naira. So why are we, is this economically wise? What's the rationality behind all of this kind of budgeting pattern? At the end of the day, still boils down to the fact that the government is not generating revenue, so they have to find a way to point their budgets. The capital expenditure of 5.32 trillion, I mean, when you weigh that against the share volume of money that needs to be spent on infrastructure development is a drop, is a pin, is a pin in an ocean basically, it's nothing. And then to then finance that with debt exclusively is unconscionable. Now, let us not put debt, and I think we need to keep an eye on this as well, because it's having a direct bearing and a direct impact on everyday Nigerians. It's the fact that this budget deficit financing is being done in two ways. It's being done by an actual hard-tried debt for in loans, and we all know where we are with that, where we're right back to where we were before the administration of the president of God's House debt to retrieve in the early 2000s. We're right back there with our debt profile now exceeding 30 billion dollars. But apart from that, it's also the fact that ways and means is a major part of financing this deficit. Ways and means for the layman is simply that the CBN will print money, will print currency. So the government needs funds to finance this budget. The CBN will simply issue funds and then pack it up by printing money to give to the government. And that is a big problem because it has continued. As of last count, I think we're talking about well over 20 trillion Naira as the overall outstanding ways and means account of the CBN. This needs to be paid down. And this has a direct bearing on things like inflation. So when the CBN, for example, says that there is a lot of cash in circulation and they're trying to mop that up through the currency redesign, for example, that they are currently implementing, well, they started this, you know, they created this monster, they started this problem. Maybe not the CBN per se, but the federal government itself and the quality CBN is a part of the federal government. So this budget deficit financing strategy needs to be seriously explored and seriously addressed before it pushes us over the break. Because as of last count, we're well over 20% in inflation rate. It's our worst inflation rate, I think, in about 20 years or thereabouts. And there is nothing that suggests that it's going to get better very, very clearly. So with all indications, this is going to get worse. And we run the risk of running into some sort of galloping around the way inflation, you know, go for beach. You don't want to see a situation where there is food on the shelves or there is no food on the shelves and people have money. And they just simply come back, you know, so prices kind of get... So I think the fiscal authorities need to be very, very, very careful with how they go about this. I've always maintained that the government needs to be more creative with it, especially with capital expenditure of the nursing strategy. We need to leverage more on private capital and, you know, the private sector to help governments out instead of this boring strategy that we just seem to be fixated on. Okay. If, although it's also been reported that the National Assembly had rejected the president's request for ways and means for, of course, 2023 or thereabouts or 2022 that has been rejected. Fast forward, let's take a look at the assumptions of the 2023 budget or proposed budget, hoping that the president would have sent which you have said, you know, there's nothing wrong the president would, you know, just give a nod to all of that. Now, looking at these assumptions, crude oil price is at $75 per barrel and crude production, 1.6 billion... 1.69 million barrels per day. That's it. FX is at $435.57 as against the dollar. And then, of course, growth rate, that's the GDP is at 3.75%. Inflation is at 17.16%. What do you make of this assumption? Do you think it's poor? And specifically when you look at the oil output and also the FX, does it also seem unrealistic and the inflation, is it weak or strong? Your thoughts? Okay, so I think that as usual, the minister of finance, the budgeting office have been optimistic with the budget assumptions that they're using because, you know, apart from the benchmark crude oil price, which is well below current international crude prices, all the other assumptions are very aggressively optimistic. Inflation in the benchmark at 17.6%, or thereabouts in the budget, as again, the 22% thereabouts that we have now is at 5% difference. A 5% difference is extremely unlikely to be made up in the course of one year. So to see a drop from 22% where it is now to 17% before the end of next year is extremely unlikely. If anything, it will probably go higher before it comes down, if it will come down at all. Of course, inflation coming down will be a result of very clear monetary policy initiatives and possibly fiscal policy initiatives. And I really don't think that that budget benchmark will be achieved. The GDP growth, for example, quite is neither end of that. GDP growth has been, you know, it's probably going to trend around that area. So I don't have any problem with that. But the other one that I think needs to also be looked into carefully is the exchange rate benchmark at 4.35 Naira to the dollar or thereabouts is, you know, that's slightly below the official rate. The challenge of course is that we know that the official rate is running at almost half of the parallel market rates. And this is creating a significant structural imbalance in the entire economy. And, you know, it's about time that the government really begins to look at these things and decide on how to fix some of these wide gaps between the parallel rate and the official rate, not forgetting that even the official rate is multiple. So the 435 or the 437 that they've used in this budget is not the only official rate. We have some people buying at way lower than that and some buying at slightly higher than that. You know, so there's a lot of confusion and mixed signaling even in the exchange rate policy that needs to be addressed. So ultimately, the other thing that I should address is also the production, our production benchmark. And I think as of the last count, yes, production had started going up but we're still around 1.3, 1.4 million per day budgeting 1.69. Well, it's in the hand of government. I think if they do the right things... I thought you were good to say it's in the hand of God. No. We have to leave God out of this. I mean, even God is watching us and saying, guys, you know, you have everything you need. You know, and we all know why the production, food production is so low. The oil is being studied. It's no longer news. You know, so it's really, really up to government. If government wants that production bench actual production to go back to the 2.2 million barrels per day that we used to have or at least to the 1.8 million barrels per day OPEC quoted that we have, they can do it, you know, within a matter of months. So that is something that they really need to look at because obviously they have the major bearing on the revenue profile of the government. You know, so the assumptions are fairly okay. Some are a bit off the mark but all in all, I think that's, majorly they're achievable. Okay. As we course this down down quickly, for a country that has always, or is grappling with the issue of revenue and we have always talked about diversification of the economy, we're still looking at, you know, all taxes estimated at 2.43 trillion Naira for non-oil, I mean, revenue. That's what we hope to, you know, gain, however. There's a lot of attention, you know, on the oil sector at 1.92 trillion Naira. Do you think that we're ever going to get to a point where we shift the focus from, you know, oil to all the sectors of the economy? Well, you know, the irony of this is that our economy is actually extremely highly diversified. The economy. So the GDP, if you look at the GDP and you look at the components of the GDP, all contribute to less than 10%. You know, you have things like agricultural, things like manufacturing and of recent, in the last 10 years, even the creative industry are really, really contributing significantly to output, you know, to economic output within the country. The challenge that the government has is that the output is not being translated to revenues. This is the problem. So our economy is diversified. It's revenue sources that are not diversified. And the reason for this is that government is simply not doing the basic stuff that needs to be done. So things like identity database, you know, the fact that till today, national NIN, yes, the government has been better in terms of bringing more people into that net, but we're still very far off being able to save precisely who is who and where they are. And until you can't do that, then you can't actually, the government can't tax those people. We need to bring more people into the tax net. We need to bring more sectors into the tax net so that the government can generate revenues for the productive activity that is going on. A health of our economic activity is still in the informal sector, but the government can't access. So these are the things that government needs to be addressing in a very methodical and strategic manner to ensure that revenues can increase significantly. If government focuses enough effort in these areas of identity management, the tax net, the size of the tax net, you can easily double or even triple the revenue profile of the government. But again, all those things require a lot of political will and the desire to do the right thing. And unfortunately, over the years in this country, that has not been apparent in the activities of our government. So we pray that all the hope or the Nigerians should do something about ensuring that whoever comes in in the next election will have the desire to do the right thing. All right then. Shagu Shokpeton, we need to go now. But there are also still thoughts whether or not the president will probably have a delay. He would give his accent or accent to this budget before 2023. Well, fingers across and we see how all of that pans out. Thank you so much for being part of the show. Thanks for having me. Shagu Shokpeton is a chairman at Network Right End Lagos. We appreciate you. Have a Merry Christmas and a wonderful 2023. We take a break. When we return, we'll talk spots. Please stay with us.