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President Bola Tinubu, last week, presented N27.5 trillion expenditure plan for 2024 fiscal year to a joint session of the National Assembly. The budget contains N9.92 trillion for non-debt recurrent, N8.25 trillion for debt-servicing and N8.7 trillion for capital spending. According to the President, the ‘Budget of Renewed Hope’, will complete critical infrastructure projects that will stimulate economic growth and improve the living standard of Nigerians. The expenditure plan will create more jobs, a better investment environment, enhanced human capital development, poverty reduction and greater access to social security.
The key components of the budget estimates are as follows: oil benchmarks of $77.96 per barrel, daily oil production of 1.78 million barrels per day, and an exchange rate of N750/$. Others include a projected GDP growth of 3.76 per cent and inflation rate of 21.4 per cent. The budget deficit of N9.18 trillion is 3.88 per cent of the GDP, and lower than the N13.78 trillion deficit recorded in 2023 financial year. It represents 6.11 per cent of the Nigeria’s GDP.
The huge deficit, Minister of Budget Atiku Bagudu hinted, would be financed by new borrowing, totalling N7.83 trillion, while N298.49 billion is expected from privatisation proceeds, and N1.05 trillion drawdown on multilateral and bilateral loans.
Sectoral breakdown of the budget shows that defence and security devices got the lion’s share of N3.25 trillion. This represents 46.39 per cent above what was allocated to the sector in the 2023 Appropriation Act. Education got N2.18trn, 101.85 per cent more than what it received in the 2023 budget. Of this amount, N1.23 billion is voted for the Federal Ministry of Education and its agencies, N251.47 billion for the Universal Basic Education Commission (UBEC), and N700 billion as transfers to Tertiary Education Trust Fund (TEFUND), while the Students Loan scheme received N50 billion.
Other sectoral allocations are: Health N1.33 trillion, of which N1.07 trillion has been provisioned for the Federal Ministry of Health and its agencies, N137.21 billion for GAVI/immunisation funds, including counterpart funding for donor-support programmes, and N125.74 billion as transfers to basic healthcare provision fund. N1.32 billion is earmarked for the provision of infrastructure in the power sector, transportation, water resources, aviation, works and housing, while N534 billion is budgeted for social investments and poverty reduction programmes.
The government also plans for Internally Generated Revenue of N10.4 trillion in 2024 from taxes and is targeting public-private partnership (PPP) to finance critical sectors such as roads.
The 2024 budget has generated diverse reactions from Nigerians. Economic experts have faulted some of the assumptions of the budget proposal. For instance, the $77.96 oil price per barrel and a projected oil production of 1.78 mbpd appear unrealistic. For the greater part of 2023, Nigeria only managed oil output of 1.35mbpd. For 2024, the OPEC estimate for Nigeria is put at 1.58mbpd. With oil theft still on the rise, meeting the projected oil production quota may be a tall order. The size of the budget notwithstanding, what matters to Nigerians is its implementation and impact on Nigerians.
The 2024 budget must address the needs of suffering Nigerians. It must improve the welfare of the citizens who are grappling with bad policies of the government. A lot of concerns are obvious in the budget. One that may hamper its effective implementation is the volatility in the forex market. We are also worried that the exchange rate may be a major cause of wide difference in the budget on account of Nigerian Forex Market (NAFEM) operations. This concerns the dollar-denominated component of the budget. In that respect, a high exchange rate is bound to increase the cost of servicing external loans and further widen the budget deficit.
Another challenge is financing the N9.18 trillion deficit and its likely impact on cost of capital for companies and the stock market. Unlike past budgets, where the amounts voted for new borrowings were evenly split, in the 2024 expenditure plan, domestic borrowing will take a bigger vote of N6.1 trillion out of N7.8 trillion, representing about 78 per cent of expected new borrowings. Another concern is the possibility of crowding out the private sector and increasing interest rates and high cost of funds, which has the effect of depressing the equities market. The net effect could be weakening of the productive base without which economic recovery will be difficult to achieve.
We advise the government and its policymakers to explore more opportunities for concessional projects capable of repaying the huge loans from multilateral financial institutions. This will help boost forex reserves and stabilize the exchange rate. The budget must be fully and transparently implemented.
Unfortunately, past federal budgets had not achieved more than 40 per cent implementation, either due to paucity of funds or lack of proper monitoring or both. Let the government put in place strong and effective mechanisms that will track the level of implementation of the budget at the Ministries, Departments and Agencies (MDAs). Without adequate supervision, the budget will not achieve much.
