By Daniel Kanu
The Federal Executive Council (FEC) on Monday, November 27, approved a total expenditure of N27.5 trillion for 2024. Details of the appropriation was laid before the National Assembly on Wednesday, November 29, by President Bola Tinubu.
President Tinubu had forwarded the 2024 – 2026 MTEF/FSP proposing an expenditure of N26.1 trillion for the 2024 fiscal year.
After two weeks of deliberations and interface with heads of Ministries, Departments and Agencies (MDAs) on revenue and expenditure projections made for them, N26.1 trillion proposed as the 2024 budget and other parameters were approved last week.
The Minister of Budget and Economic Planning, Atiku Bagudu, who recently unveiled the government’s budgetary proposals for the fiscal year disclosed that it is based on the assumptions that the average price of crude oil in the international market for the year would stand at $73.96 per barrel (pb) and that Nigeria’s oil production would average 1.78 million barrels per day (mbpd).
The exchange rate of the naira to the US dollar is estimated at ₦700/$1. The gross domestic product (GDP) is expected to grow by 3.76 per cent after adjustment for inflation, and the inflation rate is projected to average 21 per cent. Other projections, or assumptions, of the budgetary proposal, include salaries and pensions outlay of ₦7.78 trillion in total, and debt-service cost estimated at ₦8.25 trillion (approximately $10.8 billion).
A close analysis of some of the estimates throws up some urgent questions and concerns that made some commentators, who are proficient in economic matters believe the budget is unrealistic.
First, the daily oil production target of 1.78 million barrels in 2024, experts say appears rather ambitious. This is because since 2022, Nigeria’s daily oil production has averaged 1.2 mbpd. Achieving a daily average increase of more than 500,000 barrels per day in one year is a substantial challenge, given the recent decline in oil production, activities of illegal refineries, oil theft, and weak market confidence in the government’s ability to reverse these and other unsavoury economic trends, they pointed out.
The sad truth is that oil majors have continued to divest from the country, while local companies have not demonstrated sufficient capacity to step into their shoes, the others maintained.
Cheta Nwanze, a partner at SBM Intelligence, told Sunday Sun that the International Monetary Fund (IMF) has expressed doubts about the feasibility of the oil production target, describing it as challenging in a recent report.
The reservation expressed by the IMF, he noted, underlined the scepticism within the international community regarding the prospects of Nigeria’s economic turnaround in the short term.
Nwanze observed: “Also potentially impractical is the projection on the exchange rate. As of November 20, the naira was already trading at above ₦1,160 to $1 in the parallel market (which conforms more to demand-supply interplay), down from ₦1,200/$ when Senator Bagudu made his presentation.
“There is no way we are going to get to ₦700/$ that the budget is assuming by year’s end. In practical terms, this gap between the proposed exchange rate and the current market rate is more than 40 per cent.
“With the recent lifting of the restriction of access to the official exchange rate market for sourcing dollars for the importation of some 43 items, demand pressure on the Investor and Exporter (I&E) window of the foreign exchange (FX) market is bound to increase and drive up the rate. Should the current supply crisis in the official FX market persists, demand will cycle back to the parallel market. The 2024 budget proposal is unrealistic and a recipe for failure”.
The estimated spending for 2024 is believed to be a far cry from the level of expenditure outlay required to grow the economy to President Tinubu’s ambitious $1 trillion. The growth projection is believed to be inconsistent with the government’s economic goal.
Nigeria’s output hit a peak of $570 billion in 2014, but fell consistently in recent years to $390 billion last year. Tinubu has repeatedly expressed his commitment to growing the economy to a $1 trillion target in the next seven years, which experts say is more idealistic than practicable given the circumstances at play.
Lead Director, Centre for Social Justice, Eze Onyekpere, said that he is not excited about the budget proposal of President Tinubu for the 2024 fiscal year, stressing that it’s an annual ritual that most times fail to translate projections to practical reality.
Onyekpere expressed worry concerning the huge percentage needed for servicing debt, explaining that it would require magic to achieve the realization of full implementation.
But he added that if security of the country is achieved, it would positively rub off on the areas of poverty reduction and job creation.
“If the government is able to restore security it will improve ease of doing business, it will positively affect food production and make stakeholders become more productive.
“I am not usually excited by the figures that are put out on the first day of the budget because some of the figures may not be realistic. It is only when you get into the implementation stage and you have the full details that you can now get better interpretation.
“Looking at the revenue profile it will take some magic or miracle with 45 per cent of the revenue going into paying back debts. It’s just the usual rhythm, but the detail is what matters in terms of whether they are realistic.
“For instance, if you look at the budget breakdown by the Hon. Minister on the 2024 budget you find a troubling situation where for 2024 despite the figures of about 23 trillion only 25 per cent capital expenditure has been released and we may not get more than 35 per cent capital expenditure that will be released.
“It is the implementation and how realistic the figures are that will determine the outcome and way forward.
“Poverty reduction cannot stand on its own, it is a product of activities and interventions in a lot of sectors so by the time you talk about interventions in education, health, creating more jobs through industrialization, improving electricity from the power sector, so you can begin to talk of poverty reduction and creating new jobs.
“The fear that I have is that the projection for revenue that will be able to help us realise this are overly ambitious; 1.7 million barrel a day is realistic if government can curb oil theft, and prevent pipeline vandalisation and if NNPC can begin to up their investment in the sector.
“If you get oil production of about 1.7 million barrel per day, you will have more money to share and more foreign exchange to defend the naira. Inflation rate of 21 per cent or there about is unrealistic, I do not see the magic that will be performed between now and next year for us to be able to get that, unless it’s just an aspiration for us to work with, but if you look at the way things are going, inflation may also likely increase beyond what we have now,” he said.
Dr Ossai Ossai, a university teacher, told Sunday Sun, that the budget approval amounts to endorsing the continuation of spurious appropriation benchmarks and unambitious public spending.
He said that there is a contradiction between what the government is saying and promising with the reality on the ground.
For instance, he pointed out, whereas the Finance Minister, Wale Edun, had promised that the administration would not indulge in debt financing, but would leverage on creative options for public financing, MTEF (Medium-Term Expenditure Framework) said that the administration intends to borrow over N9 trillion to fund next year’s budget.
This, according to him, is a tall order considering the current restrictive international debt market, the Central Bank of Nigeria’s (CBN) determination to end reckless and cheap budget supports and the high cost of local borrowing.
Ossai said that during Tinubu’s campaign, he promised an average growth rate of six per cent during his administration, submitting that his electoral promise is also far ahead of what the MTEF document prepared by his appointees envisages.
An economist, Prof Bongo Adi, said that it was unfortunate that even Ghana, at over $400, is far ahead of Nigeria in terms of per capita budget.
Adi, who is not bothered about the fresh provision for over N9 trillion fresh debt funding next year as contained in the MTEF, said that the government should be spending 10 times the proposed N27.5 trillion if it actually wants to grow the economy to $1 trillion mark.
Adi dismissed the proposed expenditure as a joke considering the country’s current size of the economy and where it hopes to be shortly.
He observed that the country would need to spend much more on critical infrastructure to return the GDP to the pre-Mohammadu Buhari era.
“If we consider the essential of the GDP we will have a budget 10 times of what we have. Instead of N27.5 trillion, we should be talking about N270 trillion.
“To get the economy back to half a trillion dollars, we need a lot of spending in the right places, in a proper and efficient allocation of resources. In raising the funds, we need the right financing to get the size of the economy we require to take off,” he said.
The budget we have now, he said, cannot kick-start the economy.
Noting that borrowing is one of the ways the country could finance its budget, he said: “Even if we are borrowing $500 billion, it is nothing compared to the size of the economy. Debt-to-GDP ratio is nothing; it is a trivial matter. We can build the economy to $10 trillion even before the end of the administration’s first tenure if we invest in the right places.”
Former, Commissioner for Finance, Dr Philiips Nto told Sunday Sun that it is unacceptable to fund a national budget with over 30 per cent borrowing.
“How can the budget revive the economy when you are borrowing money to fund your budget?” he queried.
Nto, also a former provost, Abia State College of Education, Technical, Arochukwu (ASCETA), said: “I will not be party to such budget of borrowing to fund. I believe that we have enormous resources in Nigeria to generate the revenue that can fund our budget.
“Whatever we generate in Nigeria should be able to fund our budget. Budget is income and expenditure, let us generate the income from within to fund our expenditure.
“Just like I always say, I can never borrow money from outside to fund family expenditure, so we must abide with such motive and not to borrow to fund our budget.
“Personally, I am not particularly happy to see people talk about external borrowing. where are you borrowing from? What are the conditions? Who is paying?
“The last administration borrowed a lot to fund the same budget and we are continuing in the same manner. That is my anger with the budget. We should be funding with what we generate. Where is the money realised from the subsidy removal? We will continue to walk in circles with what we are doing with the budget.
“If out of necessity one must borrow it must be channeled to production. In our case, we are borrowing to consume, borrowing to pay salaries, borrowing to pay palliatives, borrowing to fund consumption. I will never support such budget.
“We should live within our resources, let’s live within our means and forget all this external borrowing. That is why the naira will continue to crash. We don’t consider how to generate money from within, we don’t consider how to strengthen our currency.
“We have so many resources in this country that if we properly harness them we will have more than enough and even lend to other countries. I feel sad talking about the Nigerian economy every year and talking about it in a negative way.
“Nothing good will come out of this budget because it is unrealistic, founded on deceit, funded on borrowing. This is a government budget that will be constrained by exhausted debt allowance”.
Former presidential candidate of National Conscience Party (NCP) in the 2015 presidential election, Martins Onovo, an engineer, said that the 2024 budget proposal by Tinubu is unrealistic, strangulating, hopeless, and a debt trap that would drive Nigeria into more poverty and national slavery.
He told Sunday Sun that “the 2024 budget proposal can be called, ‘A budget of ‘Emi lo kan’ prodigality and national slavery. The budget proposal of N27.5 trillion has a very wasteful N9.9 trillion for recurrent expenditure.
“The revenue estimate is based on unrealistic averages of 1.78million barrels/day production and $77/barrel price. It has a deficit over N9.1 trillion to be financed from reckless and unpatriotic borrowing. It has N8.25 trillion for debt servicing.
“We are not surprised. A bad tree bears bad fruits. This is the type of budget that the Tinubu tyranny can propose. It is consistent with the prodigal 2023 supplementary budget that was previously proposed.
“Please remember that Jagaban Tinubu as the emperor of Lagos State, drove the richest state in Nigeria to become the most indebted state in Nigeria. Now, he has unrepentantly proposed more reckless and unpatriotic borrowing for our Nigeria that is suffocating under a terrible debt burden.
“In 2022, we used over 96 per cent of total revenue for debt servicing and yet the Tinubu tyranny has proposed more reckless and unpatriotic borrowing.
“The budget can only move the country deeper into the debt trap, more poverty and national slavery.”
It is worrisome that the Tinubu administration has so far followed many of the established negative patterns of its predecessors, while experts believe that it is expedient the administration adheres to budgetary discipline and upholds fiscal responsibility.