BREAKING: FG proposes N26trn as 2024 budget
2024: FG plans N26tn budget, debt servicing to gulp N8.25tn
The federal government intends to spend 61.63 percent of its projected 2024 budget on employees and debt servicing.
Personnel and pension costs of N7.78tn and debt service costs of N8.25tn total N16.03tn of the N26.01tn budget for 2024.
The government would spend more on debt servicing than it would on employee salaries and pensions.
In addition, the sum planned for personnel and pension costs is estimated to rise from N5.87 trillion in 2023 to N7.78 trillion in 2024.
This increased by N1.91 trillion, or 32.54 percent, despite worries about lowering the cost of governance.
According to PUNCH, debt payment costs will rise by 30.74 percent from N6.31 trillion in 2023 to N8.25 trillion by 2024.
In June 2023, the World Bank reported that the Federal Government’s spending on personnel and debt payments exceeded total revenues in 2022.
According to the Washington-based bank, this is the first time that the Federal Government’s personnel and debt servicing costs have exceeded its entire earnings.
The bank also stated that, as a result of this, capital expenditures have weakened.
Personnel costs and loan interest payments accounted for 59% of the government’s overall expenditures in 2022, according to the bank.
During the evaluation period, the federal government also spent 102% of its revenue on staff costs and interest payments.
Increasing budget spending
In addition, the Federal Government announced on Monday that it expects N26.01 trillion in expenses for the fiscal year 2024.
This represents a 19.15 percent increase above the N21.83tn allowed in 2023.
This comes as the Medium-Term Expenditure Framework for 2024–2026 was approved.
The FG confirmed that the administration will stick to the January-December budget implementation cycle, stating that President Bola Tinubu will soon bring the 2024 appropriation bill to the National Assembly in order for it to be ratified before December 31, 2023.
“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,” Abubakar Bagudu, Minister of Budget and National Planning, briefed State House correspondents after the Federal Executive Council meeting at the Presidential Villa in Abuja.
Bagudu explained the increased debt service, stating it was “because N22.7tn Ways and Means was securitized, meaning it became a Federal Government debt at nine percent.”
Personnel costs also increased dramatically as a result of transfers from the agreement between the federal government and organized labor.
The Federal Government may incur an additional N315 billion in wage bills in the next six months as a result of the newly implemented allowance for federal employees.
During the signing of a Memorandum of Understanding with the Federal Government during a lengthy meeting, organized labor agreed to delay its scheduled statewide strike for 30 days.
The Punch also reported that the Federal Government’s total spending on palliatives and loans to mitigate the effects of the gasoline subsidy reduction might reach N3.27 trillion.
These palliatives included N100 billion for the purchase of 3,000 20-seater CNG-fueled buses, N200 billion for agricultural production, N75 billion for manufacturers, N125 billion for micro, small, and medium-sized enterprises, and the informal sector, N185 billion for state palliatives, and N1 trillion for student loans and other programs.
Others include N315 billion to pay federal workers’ N35,000 allowance for six months, N1.13 trillion to 15 million households at N25,000 per month for three months from October to December 2023, N70 billion for parliamentarians’ relief, and N75 billion for a lending facility to 1.5 million market women.
Budget supplement
The FG also stated that it would offer a supplementary budget due to its increasing liabilities after the elimination of petroleum subsidies.
“Yes, there would be a supplementary budget because there are continuing obligations and responses to security which can be immediate,” Bagudu confirmed.
He clarified that the reported delays would not shorten the implementation schedule from January to December because the President met with the National Assembly well 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 will be passed and signed before December 31, 2023,” the minister stated.
The Federal Government had previously stated that it had begun the development of the 2024 budget, which it planned to submit in October 2023 through the Ministry of Budget and Economic Planning.
FG targets N700/$
Reading from the Council’s discussion of the 2024 budget, the former Kebbi State Governor stated that the Federal Government made informed assumptions about the reference price for crude oil, pegged at $73.96 per barrel, an exchange rate of $700/N1, oil production of 1.78 million barrels per day, and debt service of N8.25 trillion.
The federal government estimated a 21% inflation rate and a 3.76 percent annual GDP growth rate.
“The council members acknowledge the medium-term expenditure framework and agreed that we can proceed to the next step of consultation and presentation to the National Assembly.
“The Medium-Term Expenditure Framework is a requirement of the Fiscal Responsibility Act. This Fiscal Responsibility Act is for the years 2024 to 2026. The several hundred-dollar reference price assumes optimism that investment flows will continue. Given all the engagements, given all the positive tractions.
“We are seeing from investors from the engagement led by Mr President personally, two different countries, in particular India, UAE and France, the engagements led by the Coordinating Minister of the Economy, the trade and investment minister and other ministers. We believe that these inflows will help us to clear the backlog, and the exchange rate will begin to reflect a stronger value than the current weakness.
“The assumptions include the oil price benchmark, which I said for 2024 we are assuming $73.96 per barrel, oil production of 1.78 million barrels a day, the exchange rate of $700. Then, the inflation of 21 per cent and GDP growth rate of 3.76 per cent. 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 and as well as N7.78tn being provided for personnel and pension cost.” Bagudu stated.
Meanwhile, FEC meetings will henceforth be held on Mondays rather than Wednesdays, as they were in Muhammadu Buhari’s government and prior. Mohammed Idris, Minister of Information, told journalists after Monday’s FEC meeting that the sessions will be held only when required and not every week.
Idris said, “The President has approved that Federal Executive Council meetings will now be happening on Mondays as against the traditional Wednesdays that we are used to.
“So FEC meetings have been moved to Mondays. Of course, that does not mean that it has to happen every week. If there are no issues to discuss, it will be shifted to the following week.”
In response to the 2024 budget proposal, Professor Akpan Ekpo, Chairman of the Foundation for Economic Research and Training, voiced concern that the government was becoming more indebted.
“My own is that I hope they have the resources to manage that type of expenditure. Because we were told that we were still looking for over $1bn World Bank loan for project support, we are getting more indebted. That is my worry. And the medium-term expenditure framework is about time we abandoned it because there is an economic development plan.” He said.
“And once the House approves that plan, the medium-term expenditure plan would stop because that is a measure that was designed when there was no planning. So, since we have a development plan, which the minister said we would adopt, the medium-term plans become super flawed. I have not checked whether the capital component of the medium-term development plans is consistent with the budget.
“Because normally the capital component of the budget is derived from the medium-term expenditure framework. Otherwise, if we say we have revenue challenges, we have to be careful of the resources we need for the budget. I think one way of solving the problem is that it is not a revenue problem; it is an expenditure problem; we need to cut down the expenditure. They need to cut down drastically on the cost of governance. That is the way I see it.” he added.
Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, also stated, “It is in order, it is not too much, and the budget is not too much for the size of our economy. Even the steps they are already taking to improve our economy, I don’t think it is too ambitious; I think it is realistic. I also hope there won’t be too much of a deficit.”
Additionally, Sheriffdeen Tella, an economics lecturer at Olabisi Onabanjo University, stated, “They have to explain where they are going to be getting the money from because if it is from that loan, it’s unfortunate because I think that what the government should be doing is to cut its coat according to the size of its cloth rather than be looking for loans here and there.
“I want to believe that the projection will be an adjustment for inflation rather than just getting an additional loan because a loan that they have put forward that they want to collect, I must confess that I’m against it, but if they are going to get a loan again to finance that budget, it’s unrealistic and not good for the economy. They have to project whether we will have more income from our output or if it is expected from our output growth but if it is because they are relying on loans, it is not tidy enough.”
