FG moves forward with less ambitious budget, proposing N27.5 trillion next year

FG moves forward with less ambitious budget, proposing N27.5 trillion next year

Tinubu will submit spending bill to NASS tomorrow
Culture of debt financing, benchmarking of false profit parameters continues
Government constrained by depletion of debt provisions
Growth projections do not match Tinubu’s economic ambitions
Nigeria needs to spend 10 times more to reach its full potential, says Adi.

The Federal Executive Council (FEC) yesterday approved spending totaling N27.5 trillion for next year, approving the continuation of bogus spending standards and ambitious public spending.

Details of the spending could be tabled in parliament tomorrow. The Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) for 2024-2026, a three-year rolling plan, was already passed by Parliament last week and getting MPs to approve the estimates could be an easy task. do not have. Executive.

Under close scrutiny, members of Congress will contest provisions that contradict the administration’s previous promises, positions, and public statements.

For example, Finance Minister Wale Edun has pledged that the administration will not indulge in debt financing and will utilize creative options for public financing, but the MTEF is the first step the administration will take to finance next year’s budget. This is a tall order, as the country has said it plans to borrow over 9 trillion naira. Given the current restrictive international bond market, the Central Bank of Nigeria (CBN)’s determination to end reckless and cheap budgetary support and high domestic borrowing costs.

Estimated spending for 2024 is also a far cry from the level of spending needed to grow the economy to $1 trillion, President Bola Tinubu’s ambition.

Nigeria’s output peaked at $570 billion in 2014, but has consistently declined in recent years to $390 billion last year. Tinubu has reiterated his determination to grow the economy to a target of $1 trillion over the next seven years.

Experts said this suggests average double-digit growth. But the MTEF, the template that guides next year’s spending preparations, caps its growth forecast at 4.78%, which is considered uninspiring and inconsistent with the president’s aspirations.

During his election campaign, Tinubu promised an average growth rate of 6% during his administration. His campaign promises are also far more advanced than the MTEF document prepared by his appointees envisages.

The 27.5 trillion naira budget translates into a per capita (national) spending plan of 127,000 naira and approximately $150 in dollars (using official exchange rates). This figure is just a fraction of South Africa’s $2,400 per capita budget and Egypt’s $1,500 per capita budget two years ago.

Economist Professor Bongo Adi said it was unfortunate that even Ghana, with over $400, was far ahead of Nigeria in terms of per capita budget. Prime Minister Adi is not concerned about next year’s new 9 trillion naira-plus debt financing included in the MTEF, but if the government actually wants to grow the economy to $1 trillion, the government will have to pay for the proposed 27 He said 10 times the 500 billion naira should be spent. mark.

Adi dismissed the proposed spending as a joke considering the country’s current economic size and near-term economic situation. He said more spending on critical infrastructure would be needed to bring gross domestic product (GDP) back to the pre-Muhammad Buhari era.

“If we consider the essential part of GDP, the budget will be 10 times the current budget. We should be talking about 270 trillion naira, not 27.5 trillion naira,” he said.

He added: “Getting our economy back to $5 trillion will require significant spending in the right places, with appropriate and efficient allocation of resources. To raise the money, we need to achieve the scale of the economy we need. We need adequate funding to do so.”

He said the current budget cannot revitalize the economy.

He pointed out that one of the ways to finance the country’s budget is through borrowing, saying, “Even if we borrow $500 billion, it’s not a big deal compared to the size of the economy.The debt-to-GDP ratio is a big deal.” No. It’s trivial. If we invest in the right places, we can grow the economy to $10 trillion even before the end of this administration’s first term.”

The 2024 budget is likely to continue false revenue benchmarks that in some cases suppress performance levels to less than 70% of previous budgets.

For example, the controversial oil production benchmark has a lofty average target of 1.8 million barrels per day (mbpd) over the next three years, but this may not be firmly based on market or historical data. There is a gender.

Average production over the past three years was 1.57 million barrels per day. Sadly, while the oil majors continue to withdraw capital from the country, local companies have not shown sufficient ability to stand their ground.

Additionally, changing geopolitical tensions have increased global supply, currently pegged at 1.8 MB per day, even though global demand is projected to reach 106.3 MB per day in 2026. Nigeria’s daily quota may be reduced.

Delivering the results of the FEC meeting held at the Presidential Villa yesterday, Atiku Bagudu, Minister of Budget and Economic Planning, said the benchmark crude oil price has been increased from $73 to $77 to meet the N18 trillion revenue. This may have also exposed drives that were notified of the “padding” of benchmark numbers seen in MTEF.

Bugudu said the exchange rate was also adjusted upward from 700 Naira/$ to 750 Naira/$ to improve the government’s revenue outlook.

According to information available at the time of going to press, Tinubu may table the proposal in a joint session of the National Assembly tomorrow.

This information was confirmed to journalists by the National Director of Research and Intelligence, Dr. Ali Balde Umolu, who visited the Senate on Monday regarding the protocol arrangement.

It was summarized that the number and categories of people allowed to enter the Capitol building will be limited due to space constraints and security considerations.

The President is said to have written to both Senate President Godswill Akpabio and House of Representatives Speaker Tajudeen Abbas informing them of his intention to address the joint session.

The two leaders are scheduled to read their letters to senators and representatives in today’s plenary session.

President Tinubu has submitted the 2024-2026 MTEF/FSP proposing an expenditure of N26.1 trillion in 2024. The proposed 2024 budget of N26.1 trillion and other parameters was approved last week after two weeks of deliberations and consultations with heads of Ministries and Agencies (MDAs) on revenue and expenditure projections.

Lawmakers approved new borrowing of 7.8 trillion naira while pegging the 2024 oil price threshold at $73.96 and oil production at 1.78 million barrels per day.

Other parameters approved were GDP growth rate of 3.76%, inflation rate of 21.4%, exchange rate of 700 Naira/USD, and projected fiscal deficit of 9.04 trillion Naira.

Source: guardian.ng

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