Business
President Tinubu breaks promise on more debt, reckless spending
BY EMEKA EJERE
Analysis of planned funding and expenditure details of the N2.18tn supplementary budget for the 2023 fiscal year passed by the National Assembly shows that President Bola Tinubu, may be taking Nigeria deeper into debt sustainability crisis, contrary to previous promises.
Barely 24 hours after seeking approval of the supplementary budget, Tinubu has approached the Senate for the approval of another $7.8bn and €100m loans, as part of his 2022-2024 borrowing plan.
Following the request, Nigeria’s foreign debt is expected to rise further to about $51 billion. The country’s foreign debt as at June 2023, was put at $43.2 billion, while domestic debt stood at N54.1 trillion, bringing public debt to N113.4 trillion. With the presidential request for new borrowing, coupled with the depreciation of the naira, the total public debt is forecast to reach N130 trillion.
The National Assembly had a few months ago approved N819.5bn presented by the President, which included a N500bn palliative package to cushion the effect of the recent economic policies of the Federal Government.
The President in a letter addressed to the Senate on Thursday, explained that the request was anchored on an approval given by President Muhammadu Buhari-led administration, after a Federal Executive Council (FEC), meeting early in May 2023.
The development places a big question mark on the President’s vow in August to end Nigeria’s dependence on borrowing for public expenditure. Inaugurating the Presidential Committee on Fiscal Policy and Tax Reforms, chaired by Mr. Taiwo Oyedele, the President charged the committee to improve the country’s revenue profile and business environment, as the Federal Government moves to achieve an 18% Tax-to-GDP ratio within three years.
Tinubu had expressed his unwavering commitment to breaking the vicious cycle of over-reliance on borrowing for public spending and the resultant burden of debt servicing it places on the management of Nigeria’s limited revenues.
Luxury or necessity
However, amid protest by Nigerians, there were remarkable differences in the final draft of the supplementary budget approved by both chambers of the National Assembly.
While the House of Representatives bowed to popular outcry generated over the controversial allocation of N5.095 billion for the purchase of presidential yacht, which it delisted, the Senate went ahead to pass it amid strident explanations by the Presidency.
The Senate approved a supplementary budget for the renovation in the presidency with a whooping sum of N13.5 billion. The approval also covered purchase of official vehicles for the First Lady’s office at a cost of N1.5 billion.
A breakdown analysis of the expenses for the Presidency included renovation of residential quarters for the President to gulp N4 billion, renovation of Aguda House to gulp N2.5 billion, renovation of Dodan Barracks, official residence of the President in Lagos to gulp N4 billion, renovation of official quarters of the vice president in Lagos to gulp N3 billion, all to be funded from the supplementary budget.
Other items for the State House include purchase of SUVs at N2.9 billion and replacement of operational pool vehicles at N2.9 billion. Computerisation and digitalisation of the State House was allocated N200 million.
The Senate had expeditiously passed the N2.176 trillion 2023 supplementary budget (N1.01 trillion for recurrent expenditure and N1.165 trillion for capital expenditure), transmitted by President Tinubu on Tuesday, following the adoption of a report by the Appropriations Committee, presented by the chairman, Senator Adeola Olamilekan (APC, Ogun West) during plenary.
The President, in his letter, said it had become necessary to make further provision for additional palliative measures, including the wage award for public servants and the enhanced Cash Transfer Programme, which is intended to benefit the most vulnerable members of society.
The breakdown of the allocations to sectors and agencies shows that Service Wide Vote takes the lion share of N615 billion followed by the Ministry of Defence with N476.5 billion while the Federal Ministry of Works gets N300 billion. The State House is to spend N28 billion; Federal Ministry of Agriculture and Food Security gets N200 billion; Ministry of Housing, N100 billion; Department of State Services, N49 billion; while the FCTA gets N100 billion.
Also, police formations and commands were allocated N50 billion; Office of the National Security Adviser (NSA), N29.7 billion; capital supplementation was allocated N210 billion while the Independent National Electoral Commission (INEC) got N18 billion.
More questions than answers
Reacting to the supplementary budget, Executive vice-President of HighCap Securities Limited, David Adonri, said the supplementary budget 2023 is contrary to expectations.
“We were expecting President Bola Tinubu to rationalize expenditure and then review the huge budget inherited from the previous government of Mohammodu Buhari,” he stated.
He explained that the 2023 budget was a big deficit budget, and adding N2.1trillion to the already overblown budget means that the deficit in the budget will escalate very severely.
Adonri, who cautioned that the escalation of the deficit has serious implications, said, “The deficit of the supplementary budget will have to be financed by additional borrowing as this will increase the debt profile of the country.”
“I don’t think the new borrowing is related to FG’s 2022-2024 borrowing plan. It is to bridge current FX deficit and keep external credit lines open. This panic measure will only give temporary relief. What is needed urgently is for FG to negotiate with creditors and reschedule outstanding trade and multilateral debts.”
In his intervention, Prof. Uche Uwaleke, said: “What is the purpose of the loan? What are the terms? What is the source of repayment? These are some relevant questions the lawmakers should ask Mr. President.
‘’The government should stick to its promise of relying more on non-debt financing sources given the fact that the country is already in debt crisis.”
However, Mallam Garba Kurfi, Managing Director/CEO, APT Securities and Fund, believes that the planned borrowing is good, as it will stabilise the exchange rate market and reduce further devaluation of the Naira. He said it is needed in order to meet the huge demand for U.S dollars.
“It is better late than never. This borrowing should have been done before the unification into single exchange rate. This will stabilise the exchange market and reduce the devaluation of naira. We have no choice than to borrow in foreign exchange to meet up the huge demand of FX.”
Meanwhile, the naira continued its rebound against the dollar on Friday, strengthening to N950/$ on the average in the parallel market. This represents a N170 gain or a 15.18 percent appreciation of the local currency compared to the N1,120 it traded for on Thursday. This is also the second day of recovery for the naira following a move by the Central Bank of Nigeria to clear some of its FX backlog on Thursday.
2024 Budget
Analysts have warned that the N26.01 trillion 2024 proposed Federal Government budget that was recently approved by the Federal Executive Council (FEC) should be taken with cautious hope and optimism. The proposed budget figure marks a substantial 19.15 per cent increase from the N21.83 trillion 2023 expenditure estimate.
Specifically, it is assumed that in 2024, the price of crude oil will average $73.96 per barrel, an increase from the $70 per barrel assumed in the 2023 budget. The 2024 budget is also predicated on an anticipated rise in oil production to 1.78 million barrels per day, up from 1.69 million barrels per day in 2023.
An exchange rate of N700/$ is also assumed for the 2024 budget; a major jump from N435.57/US$ assumed in the 2023 budget. Targeted also, is an inflation rate of 21 per cent for 2024 fiscal year as against 17.10 per cent for 2023.
While the surge in budget size is raising the critical question of where the funds to support this allocation will be derived, a human right lawyer and public affairs commentator, Olisa Agbakoba, SAN, believed that with strategic efforts, Nigeria can fund the 2024 budget without borrowing.
“Where do we get N26 trillion? Easy. We are a rich country,” Agbakoba said in an interview monitored by our correspondent.
“I wrote to the former Minister of Finance, pointing out something called ‘MOFINC’, Ministry of Finance Incorporated; it holds all the assets of the Federal Government. As a result of my letter, she made an inquiry and came up with preliminary findings that Nigeria had N33 trillion.
“So when you say N26 trillion, the problem is not that we don’t have money, but that we do not look for it. N26 trillion is a small number for a country of 210 million people. If I were in government, I would be pushing for a budget of about N100 trillion a year.”
