Economic experts yesterday expressed mixed reactions as the Federal Executive Council (FEC) approved a proposal of N26.01tn as expenses for the 2024 fiscal year.
The Minister of Budget and Economic Planning, Atiku Bagudu, who spoke after the FEC meeting presided over by President Bola Ahmed Tinubu at the Council Chambers of the Presidential Villa, Abuja said the council also approved the Medium-Term Expenditure Framework / Fiscal Strategy Paper for 2024 – 2026.
According to him, the Council benchmarked dollar at N700; projected crude price at $73.96 per barrel and estimated the production of 1.7 million barrels of crude per day in the proposed appropriation bill.
“The aggregate expenditure is estimated at N26.01tn for the 2024 budget, which includes statutory transfers of N1.3tn non-debt recurrent expenditure of N10.26tn. Debt service estimated at N8.25tn as well as N7.78tn being provided for personnel pension cost,” he said.
Explaining the increased debt service, Bagudu said it was “Because N22.7tn Ways and Means was securitised, meaning it became a federal government debt at 9 per cent.”
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The minister said the administration would maintain the January – December budget implementation cycle as President Bola Tinubu would soon present the 2024 appropriation bill to the National Assembly to ensure its ratification before December 31, 2023.
It would be recalled that former President Muhammadu Buhari presented N21.83tr for the current fiscal year while Tinubu is expected to present his first budget as the President and Commander-in-Chief.
He explained that the perceived delays would not truncate the January – December implementation cycle because the President is engaging with the National Assembly long before presentation day.
“Mr. President is mindful of those and is assessing them. But he is also committed to the budget process and its integrity. He wants to ensure that monies that are appropriated will be spent in the period for which they are appropriated.
“And then in terms of presentation of the budget, Mr. President has been engaging with the National Assembly leadership, even ahead of the presentation to say ‘these are our assumptions, these are our thought processes,’ so that it can reduce the lead time for which the budget has to go through such considerations.
“We believe that this budget will be presented in good time, particularly the 2024 budget to be passed and signed before December 31, 2023,” he explained.
Bagudu also said the federal government would present a supplementary budget given its growing obligations since the removal of petroleum subsidy.
“Yes, there would be a supplementary budget because there are continuing obligations and there are responses to security, which can be immediate,” he said.
Proposal ambitious but… – Experts
Director of the Centre for Economic Policy Analysis and Research (CEPAR), University of Lagos, Prof. Ndubisi Nwokoma said with more money in the hands of the government following the subsidy removal, there was the need to raise the budget.
He said the oil benchmark of $73.96 per barrel as well as the forex projection are realistic.
“At face value, the benchmark is realistic because with what is happening in Gaza, which may not end immediately because Hezbollah might also join, I don’t know and as such, there is volatility in the oil market and definitely it would be in favour of oil exporting countries just like it happened in 1973 during the Arab/Israeli war.
“Currently, it is about $90 per barrel. With what is happening in the Middle East, one expects that $73 is realistic. I think the benchmark is realistic. The increase in the total budget is also realistic because the government is now going to get more naira because the exchange rate that was about N461 before is now about N700.
“So definitely, the government will have more money. Money that used to be in the hands of people would now be in the hands of the government by virtue of the fuel subsidy removal and also harmonisation of the exchange rate. With more money, the government can handle the extra debt service obligations whether for ways and means as well as the capital and recurrent expenditure. So it makes sense because if they don’t increase the budget when they have more money, it would raise some questions.”
Another economist, Dr. Austin Nweze said the N26 trillion proposal is quite ambitious but he is a bit conservative with the parameters.
According to him, the oil production target of 1.7mpd falls short of the 2.1mpd to 2.2mpd quota by the Organisation of the Petroleum Exporting Countries (OPEC).
He expressed concerns over increasing debt service, saying the implication is that the government would not be able to achieve much in terms of capital projects.
“If we increase debt servicing, that means you want to pay more for debt. What would be left for the budget? What can you achieve? I think not much thinking is going on,” he said.
He added that there should be a deliberate plan to cut spending of recurrent expenditure, advising that cutting down on the cost of governance at all levels would free more money to the budget. Government is so expensive. It is too over-bloated.
“What could also affect the budget is funding of the budget. What are the sources of the revenue? What if distortions happen?
“Economic planners don’t expand their analysis beyond their own circles. They should look at the scenarios and see how it could affect the budget.”
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