FG pegs FX rate at N700/$ as overhead costs spike N26tr 2024 budget
• To present supplementary budget, 2024-2026 MTEF, others to NASS
• Pegs crude oil at $73.96, approves $1.5b World Bank loan
• FEC meetings no longer weekly, to hold Mondays
• Tinubu swears-in Ibrahim-Bio, Lawal, Olawande as ministers
Notwithstanding the volatility of the foreign exchange market, the Federal Government yesterday, benchmarked its 2024 budget on a crude oil price of $73.96 per barrel and an exchange rate of N700 to the dollar, while projecting N26 trillion for the fiscal year, targeting to submit same to the National Assembly before December 31, 2023.
It also affirmed that 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 the end of the year.
The Minister of Planning and Budget, Atiku Bagudu, made the disclosure at the end of the Federal Executive Council (FEC), presided over by President Bola Tinubu.
Bagudu was joined in the briefing by his colleagues from the Minister of Information, Mohammed Idris; Minister of Finance and Coordinating Minister of Economy, Wale Edun; Works and Housing Minister, Dave Umahi; Industry, Trade and Investment Minister, Doris Uzoka-Anite; and Minister of Labour and Employment, Simon Lalong. He further announced that the Council has approved the 2024-2026 medium-term expenditure framework (MTEF) and fiscal strategy papers (FSP).
“The aggregate expenditure is estimated at N26.01 trillion for the 2024 budget, which includes statutory transfers of N1.3 trillion non-debt recurrent expenditure of N10.26 trillion. Debt service is estimated at N8.25 trillion as well as N7.78 trillion being provided for personnel pension cost.”
The Minister explained that the executive is required by the Fiscal Responsibility Act to present to the National Assembly ahead of a budget presentation, a document that will provide the medium-term economic outlook for the economy, adding that FEC made assumptions about reference price for the price of crude oil, which it pegged at $73.96, as well as an exchange rate of N700 to a dollar.
“This was presented on the background of the commendable measures that have been taken since June in order to restore macroeconomic stability by particularly the deregulation of petroleum prices and regulation of the foreign exchange market.
This is just as the Federal Government approved an application for $1.5 billion in financing from the World Bank and another $80 million financing from the African Development Bank (AfDB).
According to the Minister of Finance, Edun, the funding will be provided through the International Development Association, known for its virtually interest-free loans.
He explained that in a world grappling with high interest rates to combat inflation, Nigeria’s efforts to restore economic balance and prudent financial management have garnered support from multilateral development banks.
As a result, Edun noted that the World Bank was willing to provide $1.5 billion in concessional financing, which is not only affordable but also disbursed relatively quickly.
“Nigeria has been able to make the kind of macro-economic moves and take the tough decisions to restore balance in the economy that has garnered and elicited support from the multilateral development banks.
On the $80 million financing from AfDB, the minister said the financing was designated for the Ekiti Knowledge Zone project (EKZ) in Ekiti State, which aims to empower young individuals by facilitating their engagement in the knowledge economy and the technology sector.
“EKZ is basically to support young people and their quest to take on technology, to use it to be employed, to be trained and to benefit from being part of the knowledge economy and technological wave, which is becoming a bigger and bigger share of the economy. So, it’s $80 million to help the young people in the sector of knowledge economy technology and communications generally,” he added.
This fresh borrowing is in spite of several concerns raised by financial stakeholders and other stakeholders over the government’s continued borrowing and unsustainable debt burden.
Nigeria’s total public debt, according to the Debt Management Office (DMO), rose to N87.38 trillion at the end of the second quarter of this year. This represents an increase of 75.29 per cent or N37.53 trillion when compared to the N49.85 trillion recorded at the end of March 2023.
Data from the DMO further shows that Nigeria’s total domestic debt is N54.13 trillion, while its total external debt is N33.25 trillion.In its 2022 Debt Sustainability Analysis Report, the DMO warned that the Federal Government’s projected revenue of N10 trillion for 2023 could not support fresh borrowings.
According to the office, the projected government’s debt service-to-revenue ratio of 73.5 per cent for this year is high and a threat to debt sustainability. It noted that the government’s current revenue profile could not support higher levels of borrowing.
However, the International Monetary Fund (IMF) has said Nigeria’s N87.3 trillion ($113.4 billion) total public debt position is manageable and does not pose any urgent risks to the economy.
During the presentation of the Economic Outlook for Sub-Saharan Africa at the IMF/World Bank Annual Meetings in Marrakech, Morocco, at the weekend, Abebe Selassie, Director of IMF African Department, emphasised that Nigeria’s primary concern regarding its debt position is the escalating cost of debt servicing.
He pointed out that Nigeria struggles to generate sufficient tax revenue for debt servicing and essential infrastructure investments. Furthermore, he clarified that the IMF did not know about any ongoing debt discussions, debt profiling, or debt restructuring in Nigeria.
Bagudu yesterday also clarified the increased debt service saying it is “because N22.7 trillion Ways and Means (W&M) was securitised, meaning it became a Federal Government debt at nine per cent.
“This amounts to N2.1 trillion as debt service. Equally, personnel costs rose significantly due to transfers from the agreement between FG and the Organised Labour,” he said, adding that FG 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,” Bagudu affirmed, noting 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.
MEANWHILE, the Federal Government has changed the day of FEC meetings from the traditional Wednesday to Monday. Minister of Information and National Orientation, Mohammed Idris, disclosed this yesterday. He, however, revealed that the FEC meetings may not be held weekly in a remarkable departure from previous tradition until there are pressing issues to discuss.
At yesterday’s meeting, which was the second since the Cabinet was inaugurated in August, President Tinubu swore-in three newly appointed ministers. They are Dr Jamila Ibrahim-Bio Jummai, Balarabe Abbas Lawal, and Ayodele Olawande, after being recently screened and approved by the Senate.
The Council also observed a minute’s silence to mourn one-time Minister of the Federal Capital Territory (FCT), Mobolaji Ajose-Adeogun, who died recently. Ajose-Adeogun, who died at the age of 96 was appointed FCT Minister in 1976 by the Murtala Mohammed military regime and served in the position till 1979.
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