The Federal government of Nigeria has announced a strategic shift in its approach, as it aims to diminish reliance on borrowing and prioritize revenue generation to fund the 2024 budget.
This was disclosed by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, who stated this after the signing of the 2024 budget by President Bola Tinubu at the state house, in Abuja.
Mr. Edun explained that the Tinubu-led administration is optimistic about the revenue generation forecast for the year 2024, adding that the government will leverage technology and digitization to ensure that revenues from diverse sources are polled to the consolidated revenue fund.
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In his words,
“As a percentage of GDP, the Nigerian 2024 budget deficit is down from 6.1% to 3.8%. So we’re relying less on borrowing and more on revenue and I think you have to take the two together. I think we’re very optimistic about the improvements in revenue that will take place.
“We bringing order to government borrowing, so Ways and Means are being eliminated by taking the funding that is required from the market, as opposed to from printing of money by Central Bank.”
He further noted that the budget is focused on growing the economy while adding that the increase in capital expenditure to around N10 trillion, signifies what the administration hopes to focus on to spur growth in the economy.
“But overall, the change in this budget is that it is focused on growing the economy. The capital expenditure is larger than the recurrent expenditure; over N10 trillion is going to be the capital expenditure, while recurrent is just about N8.8 trillion. I think that shows the direction of travel, it shows that we can expect an economy rejuvenated, re-galvanized, and set for growth”, he added.
The recent plan to rely less on borrowing and prioritize revenue generation to fund the 2024 budget, is a significant step, which is coming after President Bola Tinubu on January 1, 2024, signed the N28.7 trillion 2024 Budget into law.
The signed 2024 budget is N1.2 trillion higher than the budget the President proposed to a joint session of the National Assembly on November 29, 2023. Notably, on December 29, 2023, the Senate increased the 2024 budget by N1.2 trillion, from the initial sum of N27.5 trillion to N28.7 trillion.
According to the report submitted by the Appropriation Committee led by Senator Solomon Adeola, aggregate expenditure was pegged at N28,777,404.073.861; statutory transfers at N1,742,786,788,150; recurrent expenditure at N8,768.5330,852; capital expenditure at N9,995,143,298,028 and GDP at 3.88 percent.
It is understood that the Nigerian government has in recent years relied on loans from the CBN to shore up the budget deficit amid dwindling revenue.
Recall that in October 2023, the International Monetary Fund (IMF) cautioned about the CBN’s use of Ways and Means to finance the deficit, complicating inflation containment efforts.
The IMF warned against funding the nation’s budget with funds from the Central Bank of Nigeria (CBN), with the apex bank having funded the government with more than N22 trillion in Ways and Means.
According to the IMF, countries like Nigeria have a large untapped tax potential, hence the need to expand the tax base by reducing exemptions in value-added tax, rationalizing other types of taxes, and strengthening the quality of tax institutions.
All these steps according to the IMF can be taken to effectively mobilize revenues in a progressive manner, which can then be channelled for priority spending.
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