How Nigeria can get 2024 budget right – Economists


Experts discussed President Bola Ahmed Tinubu’s 2024 budget estimates before the National Assembly on Thursday. They came to the conclusion that although the budget is ambitious, there may be issues with its execution.

They said the government needs to put up its thinking cap to implement the budget.

President Tinubu in his first budget after inauguration presented N27.5 trillion estimates for the 2024 fiscal year to a joint session of the National Assembly for consideration and approval.

The estimate is N2.7 trillion, which is higher than the 2023 budget of N24.82 trillion.

The budget proposal is predicated on N750 per dollar exchange rate; an oil benchmark of $77.96 barrel per day; an oil production volume of 1.78 million per day; a GDP growth rate of 3.76 per cent; and an inflation rate of 21.4 per cent.

It has a total aggregate revenue projection of N18.32 trillion and a deficit of N9.18 trillion (3.88 per cent of GDP).

N27.5trn aggregate expenditure, N8.7trn would be spent on capital projects.

From N18.51 trillion recurrent expenditure, N10.26 trillion would be on non-debt recurrent expenditure; while N8.25 tr would go to debt servicing and N234bn on sinking funds for maturing bonds.

Tinubu said the 2024 budget deficit will be financed by new borrowings totalling N7.83 trillion, N298.49 billion from privatisation proceeds and N1.05 trillion drawdown on multilateral and bilateral loans secured for specific development projects.

With the rising debt profile standing at N87 trillion, inflation at 27.6 per cent and the rising foreign exchange at N831.47/$ as of yesterday, analysts say the projections and the parameters might be difficult to work with.

This is just as the Lagos Chamber of Commerce and Industry (LCCI), said relative to Nigeria’s GDP size, the proposed budget, which is 12.2% is very low compared to its African peers like South Africa, with a government expenditure to GDP (Gross domestic product) ratio of 32.5%, Egypt (24.7%), Kenya (23.0%) and Ghana (27.1%).

Professor Adeola Adenikinju of the Department of Economics, University of Ibadan and Vice-President of the Nigerian Economic Society (NES) said the budget is not “Too ambitious”.

“The budget is not too ambitious, because last year, the budget was around N24 trillion and this year 27.5. Now if you look at it in dollar terms or in real terms, with the rate of inflation, it is not different from what it was last year.

“But it takes a lot of commitment and dedication from a government to be able to effectively realise the objectives of the budget it announced, because there are a lot of factors that affect the realisation of the assumptions of the budget. Oil price is assumed to be $77.9 there about per barrel, that may look realistic now, but nobody knows what will happen tomorrow. Oil is the most difficult variable to predict, anything could happen.

“So, the government has to continue to monitor development and ensure that there is a plan B if that target is not met.

“Now with respect to the volume, where we are now to what the budget estimates of 1.78 million barrels per day, that also depends on how much the government is able to do to keep the peace in the Niger Delta…”

How to fund the budget 

The don, however, said funding the budget would require a deliberate measure to block leakages and cut down on governance.

According to him, given the rising debt profile, it might be difficult to achieve much in terms of generating enough revenue to fund the budget.

In addition, he stated that there should be collaboration between monetary and fiscal sides to ensure that inflation is brought down from the current level of 27% to 21 per cent.

He also called for the involvement of the private sector, especially the manufacturers, in a bid to create an enabling environment that would ramp up activities of manufacturing.

He said, “Now, in respect to the capital expenditure, the size is about the 3rd of the budget, that is also because we have to pay our debts, you know we are owing so much and you can’t afford to not service your debts, because that will bring the economy to total collapse, the international community will punish us.

“So, we have to pay our debts, because we have mismanaged our economy in the past. So, the recurrent expenditure, which means we have to be very efficient and effective and look at cutting waste.

“We need to find a way to cut waste in government, the government should target objectives that are productive, that can help to increase productivity in the economy, so all the waste and luxurious life of politicians have to be brought under control, so that we can spend where necessary and ensure that we are able to get value for the money Nigerians spent.

“Basically, we need to grow our revenue, the revenue GDP is one of the lowest in the world, our revenue per capita is one of the lowest in the world. So, we need to find a way to increase revenue.

“Those who have not been paying, the rich and wealthy people, we need to ensure that they pay, we need to look at various ways of generating revenue by government that we have not been looking at, there are many options that people have raised and government has to really explore those options and I’m sure the government also set up a committee on fiscal reforms and tax policy.

“So that committee hopefully will be able to come up with recommendations that will help us to grow our revenue base from what it is now.

“Again, we need to create an environment for the private sector to also get more involved in providing services, especially infrastructure like roads like railway, water supply, energy. So there are many areas where we need to bring in more of the private sector.”

A Professor of Finance, Mufutau Ijaiya urged the government to look at the service sector in order to generate money and reduce the cost of governance.

“There are other non-oil products that can move the nation forward. We have a lot of mineral resources that the government can key into. We should get our parameters right, if we are able to get it right.

“We may be thinking that our debt profile is still very high, other countries have bigger debt sizes and they are still managing their economies. We cannot say because our debt profile is high, the government should not provide what we need. So we will continue to have a deficit until the government is able to break even.”

Ijaiya of the University of Ilorin, however, reiterated that the government should find a way of reducing recurrent expenditure.

According to him, the government cannot be asking people to make sacrifices and at the same time engage in frivolous spending.

Pattison Boleigha, a financial analyst, said there was the need to institutionalise budget tracking to monitor implementation of the budget.

Professor of Accounting and Financial Development at Lead City University, Ibadan, Prof Godwin Oyedokun, who lamented the pegging of the dollar at N750/$, urged the government to boost its crude oil production in order to meet its quotas by the Organisation of Petroleum Exporting Countries (OPEC) and achieve its target revenue.

While noting that oil still remains Nigeria’s main source of revenue, Oyedokun counselled the government to also consider cutting down its expenditure.

Noting that a budget deficit is not entirely a bad decision, he said loans should be spent on capital projects.

“Borrowing is not a problem, especially if it is used for infrastructural development and amenities, not for recurrent expenditure. Once the loans are judiciously used, we are good,” he said

2024 budget low compared to S/Africa, Ghana, others – LCCI

The Lagos Chamber of Commerce and Industry (LCCI), yesterday, said relative to Nigeria’s GDP size, the proposed budget which is 12.2% is very low compared to its African peers like South Africa, with a government expenditure to GDP (Gross domestic product) ratio of 32.5%, Egypt (24.7%), Kenya (23.0%) and Ghana (27.1%).

While calling on the government to urgently address it in light of its renewed hope agenda, the Chamber said that the assumptions in the budget are conservative, particularly in terms of oil prices and exchange rates.

The Chamber in a statement by its Director General, Dr Chinyere Almona, said while it is commendable that the strategic objective of the expenditure policy of the 2024 Appropriation Bill is expected to tackle macro-economic stability, investment environment optimisation, human capital development, poverty reduction and social security, it, however, said daily oil production remains a major concern due to persistent underinvestment, vandalism, oil theft, and rising production costs in the oil sector.

The proposed 2024 budget of N27.5 trillion ($33.4 billion) is the biggest in the country’s history, representing a 21.4% increase compared to N22.65 trillion in the previous year with strong focus on defence, internal security and job creation.

“Government must improve its budget performance in terms of capital expenditure in 2024. Over the years, the performance of the capital expenditure has been very low relative to the recurrent expenditure, with implications for the country’s infrastructure sector. The situation is worrisome and calls for urgent solutions.

“Particular attention must be paid to investing more in transport infrastructure in order to mitigate the high cost of fuel and resolve the many logistical challenges that have impacted the movement of goods across the nation,” it said.

Calling on the government to build investors’ confidence and enhance forex earnings through non-oil exports, it said efforts must be made to scale up revenue collection by the Federal Inland Revenue Service (FIRS) through consistent tax administrative measures, digitalisation and policy reforms.

Meanwhile, Managing Director and Chief Executive Officer of Financial Derivatives Company Limited, Bismarck Rewane, said many Nigerians are less interested in the details of the 2024 budget but they are more worried that the rising food prices are making life difficult for them.

Speaking on Channels Television’s ‘Business Morning’ show, on Thursday, Rewane said, “In the end, budgetary arithmetic, budgetary mathematics in economics is of no use to anybody except when by this time, six months, if we are buying rice at N40, 000 a bag rather than N60, 000 a bag, if we are buying bread N900 a big loaf instead of N1,300, which we are doing today.”

On his part, the 2nd Deputy President, Kano Chamber of Commerce, Industry Mines and Agriculture (KACCIMA), Dr Nuruddeen Abba Abdullahi, said, “Budget is a proposal and actualising a proposal is another issue because it requires willingness to actualize it. How effective the machinery of government is mobilised to implement the budget also matters.

“Clearly, the proposal has shown that the budget is going to be a deficit budget and it has shown that the government has to borrow money either external, internal or both depending on the needs adopted by the government.

“You cannot at once say it is good or bad but every government has to come up with a proposal. The position is that to have an effectively deficient budget, the government should focus on ensuring that the cost of government is reduced. Even the deficit can be reduced based on reduction in the cost of maintaining the government. As long as the government will try as much as possible to block leakages in the system, it is likely that the budget deficit will be reduced.”