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2024: FG plans N26tn budget, debt servicing to gulp N8.25tn

October 17, 2023

The Federal Government plans to spend 61.63 per cent of its planned 2024 on personnel and debt service costs, The PUNCH has learnt.

The personnel and pension costs of N7.78tn and the debt service cost of N8.25tn make up N16.03tn out of the N26.01tn 2024 budget.

The PUNCH also observed that the government would spend more on debt servicing than it would spend on paying the salaries and pensions of its workers.

Also, the amount budgeted for personnel and pension costs is expected to increase from N5.87tn in 2023 to N7.78tn in the 2024 budget.

This showed an increase of N1.91tn or 32.54 per cent amid concerns for a reduction in the cost of governance.

The PUNCH also observed a 30.74 per cent increase in debt service cost from N6.31tn in 2023 to N8.25tn by 2023.

The World Bank in June 2023 stated that the Federal Government’s spending on personnel costs and debt servicing exceeded total revenues in 2022.

According to the Washington-based bank, this was the first time the Federal Government’s personnel costs and debt servicing surpassed its total revenue.

The bank added that due to this, spending on capital expenditures weakened.

According to the bank, personnel costs and interest payments on loans comprised 59 per cent of the government’s 2022 total expenditures.

The Federal Government also spent 102 per cent of its revenues on personnel costs and interest payments during the period under review.

Increasing budget spending

Also, the Federal Government on Monday said it was projecting N26.01tn as expenses for the 2024 fiscal year.

This was an increase of 19.15 per cent from the N21.83tn approved in 2023.

This is as it approved the Medium-Term Expenditure Framework for 2024 – 2026.

The FG 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 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,” the Minister of Budget and National Planning, Abubakar Bagudu, told State House Correspondents after the Federal Executive Council meeting at the Presidential Villa, Abuja.

Bagudu clarified the increased debt service, saying it was “because N22.7tn Ways and Means was securitised, meaning it became a Federal Government debt at nine per cent.”

Equally, personnel costs rose significantly due to transfers from the agreement between the Federal Government and the Organised Labour.

The PUNCH earlier reported that the Federal Government might incur an additional N315bn in wage bills in the next six months for the newly introduced allowance for federal workers.

This came as the Organised Labour agreed to suspend its proposed nationwide strike for 30 days, following the signing of a Memorandum of Understanding with the Federal Government after a marathon meeting.

The PUNCH also reported that the total spending by the Federal Government on palliatives and loans to cushion the effect of the fuel subsidy removal may hit N3.27tn.

These palliatives included N100bn to acquire 3,000 units of 20-seater CNG-fuelled buses, N200bn to boost agriculture production, N75bn for manufacturers, N125bn for micro, small and medium-sized enterprises and the informal sector, N185bn as palliatives for states, N1tn on student loans and other programmes.

Others included N315bn to pay federal workers’ N35,000 allowance for six months, N1.13tn to 15 million households at N25,000 per month for three months from October to December 2023, N70bn earmarked as palliative measures for lawmakers, and N75bn loan facility to 1.5m market women.

The FG also said it 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 responses to security which can be immediate,” Bagudu affirmed.

He explained that the perceived delays would not truncate the January – December implementation cycle because the President engaged with the National Assembly long 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,” explained the Minister.

Through the Ministry of Budget and Economic Planning, the Federal Government had earlier said it commenced the preparation of the 2024 budget, which it planned to submit in October 2023.

FG targets N700/$

Reading the details of the discussion of the Council on the 2024 budget, the former Kebbi State Governor said the Federal Government made informed assumptions about the reference price for crude oil, pegging it at $73.96 per barrel, an exchange rate of $700/N1, oil production of 1.78 million barrels per day, and debt service of N8.25tn.

The Federal Government assumed an inflation rate of 21 per cent and an annual GDP growth rate of 3.76 per cent.

Bagudu said, “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.”

Meanwhile, FEC meetings will now be held on Mondays, a shift from Wednesdays as was held in the immediate past administration of Muhammadu Buhari and before. The Minister of Information, Mohammed Idris, who disclosed this to journalists after Monday’s FEC meeting, also noted that the meetings would be held when necessary and not every week.

Idris explained, “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.”

Reacting to the 2024 budget proposal, an economist and the Foundation for Economic Research and Training Chairman, Professor Akpan Ekpo, expressed worry that the country was getting 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 added.

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.”

Also, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, said, “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.”

Meanwhile, a professor of economics at the Olabisi Onabanjo University, Sheriffdeen Tella, said, “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.”



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