By Juliana Taiwo-Obalonye
The Minister of Budget and Economic Planning, Atiku Bagudu in this interview, spoke about what led to the early passage of the 2024 budget, why the government settled for N800 to dollar exchange rate and why President Bola Tinubu opted for Yuletide palliatives for Nigerians.
Government expects to have low borrowing this year, how does the government handle the huge deficit in terms of funding?
I think there are two elements to the question; one, is the issue of size of borrowing. In 2023, the budget anticipated a borrowing of close to N14 trillion, this year’s budget is N9.1. So we think that it is significant because 2023 took us to about 6.11 percent of our GDP as borrowing; this one is 3.88 percent. So, the quantum had decreased.
Secondly, the Coordinating Minister of the Economy was stressing that we will not go outside the law and borrow from Ways and Means. What is outside the law? The law says in every one year, the Central Bank can lend the government up to 5 percent of its budget for the year. So if you go out of that, you’re going outside the lawful limit and that’s what the minister was very clear we are not going to do. We are not going to resort to borrowing outside the law.
Secondly, as much as possible, we will even borrow away from the Central Bank because sometimes it’s even cheaper to borrow there. Those are the two elements; the quantum has decreased, then we will go by the book. The President, in his steadfastness, has brought a Central Bank Governor who will not even allow that and we’re also determined, the Coordinating Minister and I.
Then three, our revenue projections are designed to ensure that everyone earns his job. This is a country that once produced more than 2 million barrels a day, so why are we behaving as if we can’t achieve that again? So the first thing is to task people and ensure that people begin to run around to earn their job; the President has said as much. So that’s the basis of the confidence and optimism.
We have seen the reforms, so far, have been yielding more revenues, but we are not stopping there. We believe that our objective to achieve at least 1.8 million barrels per day production is something that has been done before and with security gains that are increasing, with mobilizing of all stakeholders. For example, just yesterday (Wednesday January 10th), maybe you will have seen, even the governors have re-energized the National Economic Council Committee on Crude Oil Theft and Prevention, so that governors will say to the extent that if it’s happening in their states, they will take personal responsibility and lead. So, if all governors can control their states, we are sure that these things can be done. So because of that we are confident that the revenue projections are achievable and with budget efficiency and discipline we are putting, we believe that we won’t recourse to additional borrowing; maybe, we will even borrow less.
There is this concern about the foreign exchange rate projection for the 2024 Budget, it’s believed N800 to dollar is very high, like the government is not anticipating a better naira to dollar rate?
For budgeting purposes, you don’t use the spot rate of anything. Oil price can go to $120 today, maybe there is a shortage, maybe there is a collision between two ships that will block a channel. It would be foolish to use that as a reference price. I should take a period, maybe six months to one year, and say let me observe this average behaviour, so you don’t use spot prices. It’s also like that with exchange rates.
Much as we are hoping that it should come below, but at the time you are doing the budget, you will take a view based on average performance and that’s what we took. In fact, we took an average performance of N750 on the executive side and we proposed it to the National Assembly and the National Assembly, in its wisdom, and mind you this is democracy and President Tinubu is a lifelong advocate of institutional separation of powers. So, he respected democracy that even though it’s higher than what he submitted but the institution that says so has the authority to say so and even at the time they said 100 because it’s not an official rate, it’s guidance, because with the deregulated market, you no longer have an official rate, it’s much lower than even the way the markets are bidding and with the measures that are being taken, which we believe will increase the supply of foreign exchange into the system because, to borrow from Soludo, the President inherited a dead economy, dead in the sense that FOREX is not coming in. He explained what the concept of death means. So we believe that it’s not an unrealistic position to take by the National Assembly.
The governor of Imo State said recently that if Nigeria can achieve just 50 percnt implementation of these budgets, that all these economic issues we’re having will be sufficiently mended. How is that possible?
President Tinubu, even in the short time, did a number of things that are remarkable. When he was sworn in, he inherited a Supplementary Budget of N819 billion that was passed by the National Assembly but was not signed into law. He quickly renegotiated with the National Assembly and said look, because we are removing fuel subsidy, I want N500 billion of this N819 billion to be used to fund palliatives; CNG buses, MSMEs, Nano credit, agricultural intervention. I think that is the first hallmark of a successful financial management and the National Assembly agreed with him. Even when he said we should imagine we are drawing water from dry wells, he quickly found N500 billion to intervene.
Then secondly, three months later, he submitted to the National Assembly a Supplementary Appropriation that was very clear in its objective, consistent with the 8-points agenda. Without security, you can’t achieve agriculture and food security or job creation or employment or poverty eradication.
So, he submitted a Supplementary Appropriation where close to N600 billion of the N2.17 trillion goes to the Defense and National Security sector, meaning let us give the security as much money as we can find so that we challenge them to give us the results. Equally, the promises that were made to Labour; N400 billion additional money for cash and wage awards was also provided for in the Supplementary Appropriation. Then infrastructure; Works, Housing, Federal Capital Territory and then some money for INEC to do elections.
So I think that again, it is a very smart and transformational way of budgeting where you just convince everyone who matters and say everyone needs money at all times but let us concentrate our energy and sort some sectors out and already, we are implementing 50 percent of the capital for that; N2.17 trillion has been released.
Now again you have the 2024 Budget, which followed through. We have three ministries that are either above one trillion or close to one trillion. In fact, if you add personnel and capital, just on capital, agriculture and works are both close to N900 billion each and that’s quite significant that we’re able to prioritize and there is a linkage that if you solve infrastructure, you are helping even the security. If you solve security, you are helping production, you are helping poverty eradication and so on and so forth.
We have provided, in that budget, money for additional spending like more than has ever been done before in education and health, social sectors that are very important to us, that we have demonstrated that they are priorities; Water Resources, Infrastructure, and all the Creative Economy, Digital Economy, those things that will help innovation.
Coming back to your question, if we’re able to achieve all these, because we have got our priorities right, you see Agriculture is a low hanging fruit. If we can mobilize domestic production, inflation will come down and more people will be employed, they will be able to take care of their families, they’ll be able to contribute to health outcomes because they have now used additional money for healthcare, for some educational services.
So that’s the thought process and because of the quantum increase and efficiency gains, I’m sure somebody can say even if we’re able to achieve 50 percent, this will generate economic activity and lower inflation and plus confidence that we are already seeing, even with just the measures taken because three rating agencies have improved their outlook for Nigeria, based on the measures that have been taken to date.
What are the institutional things you are going to put on ground so that we get all the sectors that are supposed to contribute to the economy contribute to the budget, so that we can fully fund this budget?
First is the budget efficiency, particularly for a leader who has done it before in a state. We have seen how he was able to mobilize private sector into the Lagos economy, even though he was a state governor, so that the budget is not burdened by things that can be done by the private sector, because that’s part of the failure that we have been… if I don’t have enough money, why don’t I incentivize the private sector to do those things that I will have done, and we have examples; many of us grew up in the Nigeria where there were no private universities or even where they were very few. Today, universities are commonplace, hospitals, airports, so that means the private sector can be incentivized to relieve the burden and even generate more money by contributing to taxes for the public sector.
So, he did that in Lagos and we are doing that because he has challenged ministers to imagine they are drawing water from a dry well. That means think out of the box, see what part of your job can be done by the private sector and there’s money out there in the private sector, so that we’re just not all stuck with waiting for budgetary allocations.
Second element in addition to budget efficiency is financial engineering. We have energized the Ministry of Finance Incorporated (MOFI) because we have a lot of assets lying idle that are underutilized. You will be surprised about the trillions of dollars that the Federal Government is sitting on. It can be landed property, it can be companies that are not working. So, the challenge is to make these things work for you.
In the world we are now seeing people moving to ‘what I own’ rather than ‘what I owe’. If I have a land I can’t develop, I can invite somebody to come let us develop it together. You can build a hotel, you can build a house and it will generate income rather than holding a dead asset. So we are bringing more consciousness to it and even with the challenge in the economy, we are already seeing prospects. There’s a private sector person that has announced over 700 kilometers of coastal road. Siemens of Germany, impressed by our reforms, has expanded the support to our power sector that will see us generate more and distribute more. To someone, these are the kinds of transformational processes that the new reality is bringing in.
Third is that you’re a leader who means what he says, so when he tells ministers that better believe it or if you can’t support us, if you can’t help us, maybe you can leave. He’s not mincing words. So we are all very clear about that. So it has been done elsewhere. He has the experience, he has the team leadership and he has a team and I believe it can be done.
About the interventions during the yuletide, like the free train rides and subsidized road transportation, the question has been where did the money come from? This is for the sake of accountability and investors’ confidence.
That’s a moral judgment you know. Once a leader is elected, particularly our Constitution, does not allow you to take office until a critical step is taken. That critical step is you have to swear to an oath and that oath, in addition to being elected by the people, you can’t take office without it and it imposes on you the obligation to use the best of your capacity, your best of judgments, to deliver on the mandate. Those are very lonely moments for any leader because best of capacity, best of judgment are equitable issues, only you can know sometimes why you make some decisions. They reflect your humanity, they reflect your belief about the future, they reflect your past.
So he is a magnanimous person, by nature, because one of the things I’ve always said is maybe we have not paid attention to; I worked in Lagos prior to him being governor and I know that commuting from Surulere, where I lived, to Victoria Island where the bank I worked for have their offices, was a nightmare because on Apongbon Bridge, what were known then as Area Boys, or people who are angry at society or who felt society has wronged them, would knock on motor vehicles and take money or something; very aggressive, very threatening and nobody could help the other.
But starting with Marwa, God bless him, more importantly, when he (Tinubu) became governor, he recognized the humanity in these people and incorporated them to have a sense of belonging, to have a sense of self-worth and today that problem has subsided. There might be some behaviours irritating in other ways, but not in Lagos where people are threatened.
Again, on the national level, even the example of the palliatives and then this gesture during Christmas, that’s because he reads, he listens, people were complaining about transport fares and his utmost aim was what could he do to reduce the burden. Mind you, there is a saying by one of India’s former leaders, who says society has enough to meet human needs, what it doesn’t have enough for is human greed. So whenever we make the sacrifice, we’ll find that we have enough time to help others.
Some are saying the 60 percent reduction in cost of travels cannot work. As the Minister of Budget, what impact will it have on the economy?
What the President is saying is ‘I am not unmindful to the sacrifices Nigerians have been making, which we have been calling them to make, so anything that we can do, without sacrificing security of public officials, I will do to ensure that we save more money to make it available’, and we did. This budget has a 39 percent capital component because we cut back on many areas and he didn’t stop there, he’s still interrogating what more can be done. So this reflects respect for Nigerians.
Before President Tinubu was elected, he lived literally in the three bedroom house provided by Lagos State and he’s comfortable, this is not somebody who comfort matters to. What does he take, coffee? That’s the most expensive thing, apart from amala or tuwo or something. So what behooves on us is to reciprocate, interrogate, draw his attention, ‘oh, Mr. President, your intention which you demonstrated here, we can do more, maybe you didn’t notice’. That’s how citizenry should respond. If a leader says ‘I want to do it’, every person should mobilize and say let me help him, let me tease out more places in which wastages are taking place. Let us not be presumptuous that it means nothing.
There is a question people asked about why National Assembly members nominate projects. Do you have an answer?
Democracy is not necessarily the best form of government but that’s what we’ve adopted and in democracy, power is distributed. We have seen budget shutdowns in the United States of America, where a member or a senator feels ‘in his budget, there is nothing for my constituency’. You’ll appeal to him or her but if you say ‘I won’t vote for it’, and there’s a critical mass that will not vote for it, that budget will not go through.
So President Bola Ahmed Tinubu, in his experience, both as a senator, as a state governor, as a democrat, now said okay people who have been elected by their constituencies have the right to nominate things that can be done in those constituencies, subject to availability of funding. But let us encourage them that we have a programme, we have priority areas, so that as much as possible, they nominate projects that are supportive of the priority areas of the administration.
That is a recognition that institutions matter, institutions ought to be respected and then democracy thrives. You can get it better the next year and you can encourage it so that each arm of government will work together. I think it has been on display here because when the President presented the budget on November 29, people felt it was too close to the end of the year. But because National Assembly members had been given a maximum respect and they had been sensitized that look, we want a budget that can work for our country, we want a budget in which all constituencies can be mobilized, so that we move together and less acrimony, because they respect the government, they know that the government has been truthful and transparent; MDAs and ministers have been warned to respect institutions.
Lo and behold, we had the budget on December 31 and like I said, with significant increase in spending in all the three areas of government, including the judiciary, because a key to justice reform, to accountability, to anti-corruption fight, is getting the judiciary right.