- Measures will crash shortfall from 6.11% to 3.88% of GDP
- Senate, House begin debate on N27.6 trillion estimates
- Budget brilliant, says Sen. Jimoh Ibrahim
Anumber of measures have been adopted by the Federal Government to reduce the budget deficit by nearly half.
This action, which will involve a combination of fiscal, economic and accounting strategies, is expected to lead to the blocking of leakages and the redirecting of financing to long-term economic growth.
Nigeria’s budget deficit stands at 6.11 per cent of the Gross Domestic Product (GDP).
A new comprehensive revenue generation and management strategy is expected to cut the budget deficit to 3.88 per cent.
The new strategy is a major anchor of the N27.5 trillion budget proposal, which debates started yesterday at the two chambers of the National Assembly.
President Bola Tinubu had on Wednesday presented the first full budget of his administration.
The target is to close the deficit gap to within the threshold of three per cent set by the Fiscal Responsibility Act 2007.
With declining revenues and stubbornly high expenditures, especially recurrent expenditures, Nigeria’s budget deficit had widened over the years, significantly above the guide set by extant laws.
The budget deficit in 2024 is projected at N9.18 trillion or 3.88 per cent of GDP. In 2023, the budget deficit was N13.78 trillion, some 6.11 per cent of GDP.
Minister of Finance and Coordinating Minister for the Economy Mr Wale Edun outlined the comprehensive strategy that will underpin the implementation of the 2024 budget, with the overall objectives of reducing deficit, enhancing revenue and locking in significant values into expenditures.
To achieve these objectives, the government will be implementing a variety of strategies, including a thorough review of recurrent expenditure, prioritising essential spending and eliminating wasteful or unproductive expenditures.
These may include streamlining administrative processes, reducing travel costs, and consolidating certain functions.
Also, there will be an efficient allocation of capital expenditure which is crucial for driving economic growth.
The government will prioritise capital projects that have a high impact on productivity, job creation, and infrastructure development. These include investing in energy, transportation, and other critical sectors.
In the area of revenue generation, the government will expand the tax base by identifying and incorporating new sources of revenue, such as the informal sector and digital transactions.
These may involve simplifying tax laws, improving tax administration, and implementing targeted compliance measures.
The government will also improve tax collection efficiency to maximise revenue generation while investing in technology, strengthening tax administration systems, and enhancing taxpayer education to improve compliance and reduce tax evasion.
Also, the government will explore alternative revenue sources beyond traditional taxation, such as asset monetisation and privatisation, public-private partnerships, and targeted fees for specific services.
The government will incentivise investment and economic growth by implementing tax breaks or other incentives for priority sectors.
These strategies are expected to attract domestic and foreign investments, thus fostering job creation and economic expansion.
The government plans to collaborate with state and local governments to enhance tax administration coordination, reduce tax leakages and eliminate multiple taxation. This collaboration will streamline tax collection, improve compliance, and optimise revenue generation.
Edun, highlighting the breakdown and major underlining principles of the 2024 budget, said the new budget proposal marked a pivotal shift from a trend of excessive borrowing to a focus on prudent financial management.
He said with careful strategic implementation, the government will achieve the key budget proposals, noting that they are all realistic and practicable.
According to him, there is a need to realign revenue and expenditure management to deliver optimal value for money.
He noted that by prioritising effective financial management, the government aims to instil confidence among investors and citizens in its fiscal policies.
“The 2024 budget focus will be on value for money and raising the economy. The budget deficit is being brought down from about 6.11 per cent of GDP to 3.88 per cent of GDP.
“That is a huge change in direction from unlimited and limitless borrowing to re-focussing on revenue and expenditure management to give value for money,” Edun said.
The target, he said, is to increase Tax-to-GDP from roughly under 10 per cent to 18 per cent in a couple of years.
“That target is a hugely ambitious one which we need to meet to reduce reliance on borrowing,” Edun said.
According to him, the government’s commitment to fiscal prudence and responsibility is underscored by the multifaceted plan aimed at steering the nation towards a more balanced and robust economic future.
He noted that the new budget implementation and philosophy would position the economy for foreign investors to come into the country through private partnerships.
“There is privatisation in the budget. That is the direction of travel to create a stable macroeconomic environment in which investors can come in.
“The government is yielding grounds to them and allowing them to come in and invest and provide goods and services to Nigerians,” Edun said.
National Assembly begins debate
The National Assembly yesterday began a debate on the general principles of the 2024 Appropriations Bill.
Leading debate, Senate Leader Opeyemi Bamidele, said the bill was deemed to have been read the first time by virtue of its being laid before the Joint Session of the National Assembly on Wednesday.
He said the bill seeks to authorise issue out of the Consolidated Revenue Fund of the Federation total sum of N27.5 trillion for the year ending December 31, 2024.
Opeyemi listed major highlights of the budget, including an oil price benchmark of $77.96 per barrel, a daily oil production estimate of 1.78 million barrels per day, condensates of 300,000 to 400,000 barrels per day and an exchange rate of N750 to a dollar.
He said that based on the fiscal assumptions and parameters, total federally-collectible revenue was estimated at N16.87 trillion in 2024, while total federally-distributable revenue was estimated at N11.09 trillion in 2024.
Opeyemi said the total revenue available to fund the 2024 federal budget was estimated at N9.73 trillion.
This, he said, includes the revenues of 63 government-owned enterprises (GOEs), while oil revenue was projected at N1.92 trillion, and non-oil taxes estimated at N2.43 trillion.
He said the Federal Government’s independent revenue was projected to be N2.21 trillion while other revenues were N762 billion, while the retained revenues of the GOEs amount to N2.42 trillion.
He said from the total N27.5 trillion proposed for 2024, statutory transfers were N744.11 billion while non-debt recurrent costs were N10.26 trillion and personnel costs N4.99 trillion.
According to him, pensions, gratuities and retirees’ benefits were projected was N854.8 billion while overheads were projected at N1.11 trillion.
He said capital expenditure of N8.7 trillion, including the capital component of statutory transfers, debt service of N8.25 trillion and sinking fund of N243.73 billion, was proposed to retire certain maturing bonds.
Bamidele, however, lamented that recurrent expenditure was still too high constituting over 43 per cent of the total budget outlay.
He added that it was expected that the total fiscal operations of the Federal Government would result in a deficit of N9.8 trillion, representing 3.88 per cent of estimated GDP.
He said to finance the deficit was to engage in new borrowings totalling N7.83 trillion and N294.49 billion from privatisation proceeds.
He said the deficit would also be financed from N1.06 trillion drawn from bilateral, multilateral loans secured for specific development projects programmes.
He, however, said there was a growing concern over continued borrowing, but the administration resorted to it to finance fiscal gaps.
“But let me state here that the debt level of the Federal Government is still within sustainable limits.
“Very importantly, these loans are used to finance critical development projects and programmes aimed at improving our economic environment and ensuring effective delivery of public services to our people,” Opeyemi said.
He urged the lawmakers to approve the second reading of the Appropriation Bill, 2024 for consideration by the appropriation committee and its sub-committees.
Budget brilliant, says Jimoh Ibrahim
Senator representing Ondo South, Jimoh Ibrahim, described the 2024 budget as brilliant.
He said it was clear from the projections and estimates that a lot of thinking went into its preparation.
He was particularly impressed with the N8.7 trillion allocated for capital expenditure as against N9.92 trillion for recurrent expenditure.
According to him, for the first time in 20 years both estimates are close, an indication that President Tinubu wants to focus more on projects and infrastructural development, which would have a multiplier effect on job creation.
He also lauded the projection of a GDP-to-tax ratio of 1: 18 as against 1: 10, explaining that the eight per cent increase will go a long way to fund the anticipated borrowing.
He said he was thrilled by the 45 per cent expected revenue projected for debt servicing as against much higher estimates in previous budgets.
According to him, Nigeria, with a population of 200 million and a debt of less than $100 billion has not over-borrowed. Dubai, with a population of 12 million, has a debt of $168 billion.
Contributing, Senator Osita Ngwu (PDP-Enugu) said Tinubu has fulfilled his campaign promises with actions by inputting issues of food security, and poverty alleviation in the budget estimates.
He said there was a need to ensure a review of the Petroleum Industry Act (PIA) to ensure the continuous ramp-up of oil production to fund the deficit in the budget.
Other senators commended the President for the budget, saying it was indeed a budget of Renewed Hope.
They called for full implementation by the executive when approved.
The House of Representatives said only ministries, departments and agencies (MDAs) that made judicious use of their allocations in 2023 will receive funds from the 2024 budget.
Deputy Spokesperson of the House, Rep. Philip Agbase, said the development was in line with the legislative agenda of the 10th House of Representatives.
According to him, the 2024 Appropriation Bill will be looked into and the leadership of the House will thoroughly monitor the budget.