Economy, Featured
The preparation of annual budgets and securing approvals from the National Assembly are no mean tasks for any administration, especially in this period of worsening security and economic challenges. Perhaps, the speed with which the lawmakers passed the budget after “watching everything and focusing on nothing” and increasing their allocation is indeed worrisome.
By Goddy Ikeh
ALTHOUGH Nigeria’s annual federal budget contains itemised estimates or projections of government revenues and expenditures for a fiscal year, which is statutorily prepared by the executive and approved by the National Assembly. But this aspect of government’s function is often perceived if not abused by politicians and officials of government. Perhaps that explains why mixed reactions trail any annual budget and Nigeria’s Budget 2024 is not an exception.
While assenting to the 2024 Budget Bill early in January, President Bola Tinubu said that national defence and internal security, local job creation, macro-economic stability, investment environment optimisation, human capital development, poverty reduction, and social security were some of the top priorities of the N27.5trn 2024 budget themed ‘Budget of Renewed Hope’.
He also said that the nation’s internal security architecture would be overhauled to enhance law enforcement capabilities, with a view to safeguarding life, property, and investments across the country.
According to him, the budget prioritises human capital development, with particular attention given to children, because human capital remains the most critical resource for national development.
“To improve the effectiveness of our budget performance, the government will focus on ensuring value for money, greater transparency, and accountability. In this regard, we will work more closely with development partners and the private sector.
“To address long-standing issues in the education sector, a more sustainable model of funding tertiary education will be implemented, including the Student Loan Scheme scheduled to become operational by January 2024,” he said.
Speaking on the economy, Tinubu said a stable macro-economic environment is crucial in his administration’s bid to catalyse private investment and accelerate economic growth; hence, his government should continue to implement business and investment friendly measures for sustainable growth.
“We expect the economy to grow by a minimum of 3.76 per cent, above the forecasted world average. Inflation is expected to moderate to 21.4 per cent in 2024. In preparing the 2024 budget, our primary objective has been to sustain our robust foundation for sustainable economic development. A critical focus of this budget and the medium-term expenditure framework is Nigeria’s commitment to a greener future,” he said.
The President also said a conservative oil price benchmark of $77.96 per barrel and a daily oil production estimate of 1.78 million barrels per day were adopted after a careful review of global oil market trends, and that a naira to dollar exchange rate of N750 per dollar was adopted for 2024 as well.
Giving a breakdown of the 2024 Appropriation Bill, the President said: “An aggregate expenditure of 27.5 trillion naira is proposed for the Federal Government in 2024, of which the non-debt recurrent expenditure is N9.92 trillion, while debt service is projected to be N8.25 trillion, and capital expenditure is N8.7 trillion. Nigeria remains committed to meeting its debt obligations. Projected debt service is 45 per cent of the expected total revenue.
“The budget deficit is projected at N9.18 trillion in 2024 or 3.88 per cent of GDP. This is lower than the N13.78 trillion deficit recorded in 2023, which represented 6.11 per cent of GDP. The deficit will be financed by new borrowings totaling N7.83 trillion, N298.49 billion from privatisation proceeds, and N1.05 trillion draw down on multilateral and bilateral loans secured for specific development projects.”
The President said that his administration was committed to broad-based and shared economic prosperity, adding: “We are reviewing social investment programmes to enhance their implementation and effectiveness. In particular, the National Social Safety Net project will be expanded to provide targeted cash transfers to poor and vulnerable households.”
But the budget proposals and the provisions made for new debts and debt servicing attracted mixed reactions from economists and stakeholders in the country. Reacting to the budget, an associate professor of Taxation and Finance, Dr. Vincent Olusegun, said that the exchange rate of N750 to a dollar contained in the 2024 budget could not be achieved unless the corruption in government was tackled. Olusegun said in an interview with ARISE NEWS recently that the major driver of foreign exchange was corruption, alleging that about 50% of the budget was used for “padding,” that is, the ‘settlement’ of people who would want a cut of the budgetary allocation,
“Looking at the assumptions underlying the budget, from my own perspective, some of the assumptions, there are actually apt, while certain assumptions are really skeptical, I’m skeptical about achievements of those assumptions.
“Firstly, the exchange rate at N750, I am not too sure if the exchange rate at N750 is really achievable, because the real fundamentals that are determining the exchange rate and the fluctuations have not been addressed. And for me, if corruption has not been tackled in government circles, that exchange rate of N750 is not achievable. I will go into it briefly.
“Looking at the way the government operates and the way the government both at federal and sub-national, the way they’re structured, and the bind behaviour and the procurement procedure, you will discover that over time, about 50% of the budget, they really go into what we call padding. And what is padding? Padding is just adding money for the boys as part of the budget, and the currency for the negotiation of that is in dollars. Whatever that is being procured, just assume that 50% of that money is lost to corruption, is lost to settlement, and the currency for settlement is always in dollars.
“In whichever form, if the currency for settlement is dollar, this will impact highly on foreign exchange rate at the market because whoever is dealing with government will be looking for dollar here and there at sub-national and at the federal level.”
He, however, addressed other parts of the budget, saying, “The oil price benchmark, that is reasonable as far as I am concerned, considering the current price of the dollar at the international market. I believe that is quite attainable. And in terms of quantity, if government is continuing with the way it’s going now, trying to ensure that we wrap up production level, we clear up the bandits, and we are able to actually take charge of the production and chase the bad guys away, we can actually attain the production expectation.”
But renowned economist, Bismarck Rewane, managing director of Financial Derivatives Company Limited, believes that millions of Nigerians are uninterested in budgetary arithmetic if the prices of bread, rice, garri and other essential commodities remain high and beyond their reach.
Reacting to the 2024 budget, the economist stated that Nigerians are under intense economic pressure and that the rate of poverty in the country is increasing mental health cases across the country..
Speaking on Channels Television’s Business Morning show after the budged was approved and signed into law, Rewane said: “In the end, budgetary arithmetic, budgetary mathematics in economics is of no use to anybody except when by this time, six months’ time, if we are buying rice at N40,000 a bag rather than N60,000 a bag, if we are buying bread N900 for a big loaf instead of N1,300 which we are doing today. If we are buying garri at lower prices.
“The people are not interested in whether the budget is balanced and what the debt is. How does it (the budget) affect their day-to-day livelihood? That is the key thing.”
In addition, some other economists have expressed worry that the federal government’s reliance on borrowing to fund the annual budget is pushing the cost of funds higher for businesses and crowding out the private sector. For instance, in the proposed N27.5 trillion federal government’s 2024 budget, 45 per cent of the projected revenue of N18.3 trillion would be utilised to service debts.
According to some analysts, this development has consequences for the rising cost of funds for businesses, while also crowding out the private sector.
“The budget would rely heavily on borrowing from domestic and multi-lateral agencies. Foreign borrowings have an exchange rate risks and would keep ballooning the cost of funds for private sector funding and SMEs,” a professor of Macro-Economics at the Pan-Atlantic University in Lagos, Perekunah Eregha, in reaction to Nigeria’s 2024 budget.
“The rise in borrowings would put pressure on interest rates and has consequences on rate hikes. When this happens, there would be a decline in investments and a shift of interest by investors,” he added. More borrowings, he explained further, would also create further problems for Nigeria’s foreign reserve while putting more pressure on the volatile exchange rate.
He suggested that the federal government should have a proper financing strategy and not crowd out the private sector because the nation needs them.
While reacting to the budget, another Professor of Economics at Lagos Business School, Bongo Adi, said more borrowings would expose the private sector and businesses to high risks and compound Nigeria’s currency problems.
For the Socio-Economic Rights and Accountability Project, SERAP, the Senate President, Godswill Akpabio, and the Speaker of the House of Representatives, Tajudeen Abbas, have been dragged to court by SERAP for increasing the National Assembly’s 2024 budget by N147 billion.
According to SERAP, which also joined 20 other Nigerians in the suit, accused Akpabio and Abbas of arbitrarily raising the budget for the federal lawmakers from N197 billion to N344 billion, the highest since 1999. The duo were sued for themselves and on behalf of all members of the National Assembly.
In a statement released on Sunday, January 21, 2024, SERAP stated that in December 2023, the lawmakers increased their allocation from N197 billion – the amount President Bola Tinubu had proposed – to N344 billion.
From the 2024 budget, the legislators would receive N514 billion in total. In 2023, the legislators arbitrarily raised their budget from N169 billion to N228 billion.
In the suit numbered FHC/ABJ/CS/68/2024 filed on Friday, January 19 2024, at the Federal High Court, Abuja, SERAP is seeking whether the lawmakers, in the exercise of their powers over appropriation/money bills, can unilaterally increase their budget without the re-presentation of the budget by the executive in line with section 81 of the Nigerian Constitution 1999 as amended.
The organisation argued that the National Assembly’s action was a breach of the democratic principles of separation of powers and checks and balances.
As expected, the opposition parties also lent their voice to the criticisms that have trailed the 2024 budget. The leading opposition party, the Peoples Democratic Party, PDP, described the budget as a huge disservice. It, therefore, called for the rejection of the budget by the National Assembly. The PDP warned that the budget would further asphyxiate citizens and plunge the nation into more economic depression and hopelessness. The PDP said that the ‘Budget of Renewed Hope’ was “conjured, unfounded and deceptive”. “The budget is completely devoid of concrete mechanisms to revive the economy, create jobs, address the comatose manufacturing and productive sectors, human capital development deficiencies and depleting life expectancy of Nigeria citizens,” the PDP said.
Meanwhile, President Tinubu and the relevant ministers had at different occasions addressed the concerns raised by Nigerians over the flaws identified in the budget. Speaking recently at the opening of the Bank Directors’ Summit in Abuja, Tinubu said that funding of liquidity in the Forex market, even though a short-term solution, remained critical for the economy at the moment.
Tinubu, who was represented at the summit by Minister of Finance and Coordinating Minister of the Economy, Wale Edun, stressed that there was “no reason to feel that the indications that were made earlier had changed” and that “It just takes time.”
In his defence of the budget proposals, Abubakar Bagudu, minister of Budget and Economic Planning, said that women would benefit more from the 2024 budget since everything about the budget was “women-centric”.
According to him, women have cause to smile as far as Budget 2024 is concerned. Unlike in the past when little attention was paid to how the budget would benefit women, Bagudu told journalists in Lagos, on Friday, January 12, 2024.
The budget, he explained, contained priority areas all of which will benefit women because everything is about women – education, health, infrastructure. So women should be mainstreamed in everything we do. “In Agriculture, poverty alleviation, and inclusivity are measures taken to ensure everyone has a pride of place in the budget, particularly women. There are women-specific programmes that Mr. President has just approved the expansion of the World Bank poverty alleviation programme for women to 550 million dollars, which has taken place in some pilot States of the federation. Now it is being expanded and in terms of beneficiaries, more women are emphasised,” he said.
That notwithstanding, the government has budgeted 39 per cent of the budget for capital expenditure, the highest by the government in recent years, which will benefit women if the infrastructures are fixed.
In sectors where women are dominant like in Agriculture, the federal government has budgeted N100 billion and also slated N550 billion in anticipation of a negotiated wage increase which women will benefit from as they are part of the workforce, Bagudu said.
Apart from these, the budget is geared towards achieving the Agenda 2050 of the federal to grow the economy faster, which will in turn benefit women, once Budget 2024 is implemented to provide macro-economic stability and increase spending in all the priority areas.
Apart from specific programmes that will benefit women, Bagudu assured that the federal government will obey the law on ways and means in borrowing.
Although the economists and other stakeholders, who criticized the budget, warned that the provisions made in the budget could only worsen the hardship Nigerians are facing now and predicted more difficult times for the economy, the people and even the women the budget is expected to favour. However, it is believed that the coming on stream of the Dangote Refinery and the Port Harcourt Refinery can bring some form of succor to Nigerians since their products may address the high fuel prices that have been responsible for high transportation costs and high food prices across the country.
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-January 22, 2023 @ 16:30 GMT|
Tags: Bismarck Rewane Dr. Vincent Olusegun Goddy Ikeh Godswill Akpabio President Bola Tinubu SER
