….Edun says high interest, a disincentive for extra debt
Wale Edun, Minister of finance and Coordinating Minister for the Economy on Thursday presented opposing views on government raising more debt to be able to fund the proposed 2024 budget.
Out of the N26.01 trillion which the federal government has proposed to spend in 2024, N9.05 trillion is projected as deficit.
Though at 22%, the deficit is lower than the N11.60 trillion budgeted in 2023, it represents about 53% of total federal government revenues and 3.83% of the estimated GDP.
At a meeting with the finance minister, the Joint Senate Committee on the 2024-2026 Medium Term Expenditure Framework and Fiscal Strategy Paper said that the government may need to borrow more to fund the 2024 budget, expressing concerns over the ability of revenue-generating Ministries, Departments and Agencies (MDAs) to meet their targets.
Read also: Nigeria may need more loans to fund 2024 budget — Senate committee
Sani Musa, Chairman of the committee said the responses received so far from MDAs at their ongoing meetings on the MTEF indicate that they may not be able to meet their revenue targets.
“With the responses we are getting from MDAs, as finance committee, I am afraid if such targets will be met, if we will be able to fund the 2024 budget without going for more interventions, that is more loans”, Sani said during a meeting of the committee with Wale Edun; the director general of the Debt Management Office (DMO) and Chairman of the Federal Inland Revenue Service (FIRS) at the Senate.
Sani also raised fears that borrowing more loans will increase the deficit, and the burden of debt servicing will increase.
The chairman, further expressed concerns that there are a lot of leakages in the use of government resources, noting that a lot of money realized or collected as revenues from many agencies are not reported as, and when due.
“I cannot believe that an agency will receive revenue in 2022, and is showing a receipt of collection in October 2023. So, I don’t know how these collections are made and how they (Accountant-General of the Federation) issues receipts.
Read also: Nigeria can fund 2024 budget without debt – Agbakoba
Sani said the issuance of receipts has created room for misappropriation and mismanagement of funds and should be probed further
The chairman further said the government revenue shortfalls have spiraled due to the issuance of waivers, but that there is no clarity on the agency issuing the waiver – whether the Federal Inland Revenue Service, Nigeria Investment Promotion Council or the Ministry of Finance. Sani sought more clarity on the collection of revenue.
In response, Edun said Nigeria cannot afford to rely on loans at the moment and needs to ramp up revenue.
“In the environment that we have now, we are clearly in no position to rely on borrowing. We have an existing borrowing programme, our direction is to reduce reliance on borrowing, reduce the quantum and percentage of deficit financing in the 2024 budget”, he said.
Read also: Nigeria may need more loans to fund 2024 budget — Senate committee
“Internationally, there is focus among the rich countries on bringing down the inflation rate to stabilize their economies and give them an opportunity for investment and growth. But they are sacrificing that immediate growth for contracting economies or atleast contracting money supplies and pushing up their interest rates. And of course, high interest rates and growth do not go together. What it means that access to those funds are expensive, so it is the last thing we want to rely on.
“And as you know our debt servicing was taking 98 percent of revenue, so the last thing to think of is piling more debt”, he added.
He stressed that the solution remains revenue, and the government needs to not just maintain its activity, but also spend more.
“If you look at government spending, if you look at the budget as a percentage of GDP, it is one of the Lowest, maybe around 10%, even Ghana is at 25 per cent. The most advanced countries in terms of social safety nets and social security systems are at 70% of GDP. So, we need to increase”, Edun said.
Mukhail Abiru, Chairman of, the Senate Committee on Banking, Insurance, and Other Financial Institutions (SCBIFI) highlighted the need to screen the budget of all those revenue agencies, and find a way to optimize the opportunities sought.
“I believe we can help the revenue situation from those angles”, he said.
