Business
Budget 2024 threatened over NASS N1.2 trn hike
BY EMEKA EJERE
Assurances of satisfactory implementation of the 2024 Budget seem to be fading in the face of spiking debt obligations, which was further compounded by the unwarranted increase by the National Assembly leaving the Federal Government in a dilemma.
President Bola Tinubu had last week assented to the N28.7 trillion 2024 Appropriation Bill, with a deficit of N9.178tn, after a combined session of the National Assembly raised the figure from the President’s proposed N27.5 trillion by N1.2 trillion.
In the bill passed, the sum of N1.74 trillion was earmarked for statutory transfers, N8.27 trillion for debt servicing, N8.76 for recurrent expenditure and N9.99 trillion for capital expenditure.
The President noted that the world oil market and domestic conditions informed the government’s adoption of a conservative oil price benchmark of $77.96 per barrel and a daily oil production estimate of 1.78 million barrels per day. “We have also adopted a naira to US dollar exchange rate of N750 per US dollar for 2024,” he said. He stressed that the economy was expected to grow by a minimum of 3.76 per cent, above the forecast world average. “Inflation is expected to moderate to 21.4 per cent in 2024,” he added.
Analysts are of the view that the high cost of governance and pockets of inefficient spending within government continue to widen the budget deficit, wiping some of the gains of the petrol subsidy removal. For them, the implication of the increased budget deficit in 2024 is that the government may end up spending less on capital projects and human capital, which are critical in spurring economic growth and job creation.
Business Hallmark recalls that President Tinubu has already secured the National Assembly’s approval to borrow $7 billion and 100 million Euro, which will add over N7 trillion to the national debt, which stood at N87.38 trillion as of June 2023, according to the Debt Management Office (DMO). The $8,699,168,559 at the prevailing exchange rate is equal to N7, 009,268,074,728.66; while €100m equals N88, 470,654,870.00. When added to the existing total public debt of N87.37trn, the debt profile will rise to over N94 trillion.
But the Minister of Finance and Coordinating Minister for the Economy, Wale Edun, in his remarks, said the budget projections were based on realistic assumptions and can be implemented to stabilise the Nigerian economy for rapid inclusive growth.
Tinubu campaigned on a promise to revive the country’s struggling economy but Nigerians have endured increased hardships this year after the president removed decades-old petrol subsidy and scrapped currency controls, contributing to push inflation to its highest level in two decades.
At the budget-signing ceremony, the President assured Nigerians that the implementation of the budget would be efficiently pursued and vigorously monitored, adding that all the institutional mechanisms would be deployed in ensuring diligent implementation
Tinubu, in a statement by presidential spokesman, Ajuri Ngelale, said, “All MDAs have been directed to take responsibility and provide monthly Budget Performance Reports to the Ministry of Budget and Economic Planning, which in turn shall ensure the veracity of such.
“The Minister of Finance and Coordinating Minister of the Economy shall hold regular reviews with the Economic Management Team and, in addition, I shall chair periodic Economic Coordination Council meetings,” he said.
The top priorities of the 2024 budget of N28.7 trillion are defence and internal security, job creation, macro-economic stability, improved investment environment, human capital development, poverty reduction, and social security.
Beating the odds
Analysts say debt levels can be a challenge for developing economies like Nigeria as they can create economic instability and affect the ability of governments to provide essential public services. They noted that to navigate the debt trap, the Federal Government must ensure fiscal discipline; roll out growth-oriented policies; restructure its debt, and improve its revenue collection amongst several others.
They opine that government must address the issue of tax generation and administration to ease the urge to dive into borrowing. Incidentally, commenting on reforms, Tinubu said tax and fiscal policies would be reviewed to meet Nigeria’s revenue targets. “Our target is to increase the ratio of revenue to GDP from less than 10 per cent currently to 18 percent within the term of this administration,” he said.
For Managing Director of SD&D Management Limited, Gabriel Idakolo, increasing the tax to GDP ratio from its current less than 10 percent to about 18 percent would be a move in the right direction.
“The implementation of the social safety net programme and sincerity in blocking financial leakages will strengthen economic development and reduce poverty.
“The overall implementation of the budget will determine if it will capture the realities before Nigerians because most of the budget heads that funds have been earmarked are historically not always fully implemented due to revenue constraints and other inhibitory factors,” Idakolo said.
An economist Olamilekan Adefolarin urged the government to show greater concern towards capital expenditure funding as this is leeway out of the nation’s infrastructure deficit.
He insisted that the Tinubu administration must not over rely on tax as the only measure to improve government revenue, noting that government owned enterprises must show commitment to be accountable in all their ventures.
“Similarly, we must address our profligacy for borrowing that led the country into a huge debt profile. And we believe the government can tackle this by reviewing the sectors these borrowed money goes into and rethink it. Also, long term security bills are also adding to our debt. What we are saying is that all channels of borrowing by the government need a rethink of domestic, foreign, multilateral or bilateral as well as treasury bills,” Adefolarin cautioned.
According to a senior public finance analyst, who prefers anonymity, “All the government programmes to increase revenue have failed except for growing ‘independent revenue’ from Federal Government-owned agencies”.
“Even if the new tax reform committee is relatively successful, I expect it will take a few years to really show results,” he added.
According to him, prior to 2014, the Federal Government’s revenue shortfall – the variance between actual and budgeted retained revenues – was in the billion-naira range but with the collapse in oil prices, the difference has stayed within the trillion-naira range. “In 2014, the government’s actual retained revenues stood at N3.727 trillion, based on data obtained from the Central Bank of Nigeria’s quarterly reports. This led to a shortfall of N3.5 billion when compared to the N3.731 trillion projected in the 2014 budget. “In 2015, when the country started feeling the heat from the fall in crude oil prices, the difference between actual and projected revenues ballooned 19.58 per cent to about N675.89 billion. In that year, Nigeria realised N2.776 trillion, compared to a target of N3.452 trillion.”
Recently, Bismarck Rewane, the Chief Executive Officer of Financial Derivatives Company Limited, reportedly noted that old unrelenting challenges may conspire to hamper the workability of the budget.
“Nigerians care more about food prices stability than the budget figures. The proposed budget hopes to achieve job-rich economic growth (3.76%), price stability (inflation: 21.4 per cent, exchange rate: N750/$ per cent), a better investment environment, and poverty reduction”, Rewane had said.
“However, these ambitious budget numbers are anything but close to the reality of the average Nigerian, who cares less about budgetary arithmetic if the prices of major staples like bread and rice don’t decrease.”
