Editorial
Due to the depreciation of the naira and the rising national debt stock, there are concerns that the 2024 budget will be very difficult to implement. Arising from this, a review of the budget benchmarks and other financial assumptions upon which the budget was made is imminent.
The budget, which was signed into law by President Bola Tinubu after it was passed by the Senate in December, was anchored on a benchmark of N750/$, a daily oil production estimate of 1.75million barrel, oil price of N77.96 per barrel. However, the forex crisis has altered all the critical components by over 60 per cent, and the naira value has gone down by over 100 per cent. The development will likely affect the implementation of the budget.
It will be recalled that the Senate increased the budget estimate to N28.7trillion from the N27.5trillion presented by President Tinubu before the joint session of the National Assembly. The approved budget included N1.7trillion for statutory transfers, N8.7trillion for recurrent expenditure, N9.9 trillion for capital expenditure and N8.25trillion for debt servicing.
The Debt Management Office (DMO) has said that the economy needs an injection of huge revenues for the 2024 budget to stay on course. This requires more prudent fiscal measures that will lessen the high cost of living. At present, debt servicing gulps over 96 per cent of revenue, according to figures from the Ministry of Finance, Budget and National planning.
With the volatility in the forex market, the amount for debt services could skyrocket to about N17trillion at the current forex rate of N1,950/$, as at last weekend. The uncertainty could also be compounded by pressures from organised labour for a realistic new minimum wage for workers, which will further drive up personnel cost component of the 2024 budget.
In all, this will lead to rising capital and recurrent expenditures, and possibly wipe out the gains Nigeria could make from rising oil prices. The net effect will be a budget deficit of N20trillion. With inflation rate still soaring, the economy may be heading to stormy weather that could provoke protests across the country. Inflation rate for the month of January was 29.9 per cent, a record high in over three years.
This is the time to intensify the diversification of the economy through huge investment in non-oil sector. The diversification effort should be export-oriented, with much emphasis on production rather than consumption that has increased the nation’s import bill, and increased the cost of essential food items. Government should be mindful of the experts’ prediction of a looming bankruptcy that could make the effective implementation of the budget hard to achieve. The experts’ recent forecast is that government needs to borrow N21trillion to avert bankruptcy.
With a debt profile of N87.9trillion, any turnaround of the economy will require extraordinary political will and effective management of resources. Besides, government must put measures in place to attract foreign investors. Foreign portfolio investors have complained of unfriendly business climate as well as insecurity. These factors will hamper foreign direct investment, despite recent foreign trips by the President to woo foreign investors. Let there be remarkable improvement in the ease of doing business.
Whatever will hamper the implementation of the budget must be addressed quickly, especially the forex crisis. The economy is already in a tailspin and further inaction will lead to more problems that could lead to another economic recession. Recently, the Chairman of the Independent Corrupt Practices and Other Related Offences Commission (ICPC), Dr. Adamu Aliyu, said that corruption in the country has drastically affected the economic challenges of the country. Government should be sincere in tackling all cases of corruption. There should be no sacred cows.
There is no doubt that the budget of Renewed Hope may be difficult to implement due to forex volatility. Nigeria’s bleak economic situation must be addressed head-on. Poor implementation remains a major challenge of our budgets. There is much work to be done to revamp the economy and position it on the path of growth.
It is depressing that figures from the National Bureau of Statistics (NBS) show that Nigeria’s Gross Domestic Product (GDP) has fallen to 2.74 per cent.
However, despite the forex crisis, we believe that the government can urgently address the challenges confronting the economy. There is need for a pragmatic rescue plan for the economy.