The federal government says has mapped out some cost-cutting measures to drive good governance, including a possible review of the 2007 Public Procurement Act as it looks for ways to improve efficiency, value for money, as well as reduce corruption.
It has also slashed its own 2024 budget deficit to N9.05 trillion, 22 percent lower than the N11.60 trillion budgeted in 2023, and it says it intends to keep the figure with the 3 percent threshold as stipulated in the 2007 Fiscal Responsibility Act (FRA), going forward.
The proposed deficit represents about 53% of its total revenues and 3.83 percent of the estimated GDP.
The federal government intends to spend some N26.01 trillion in 2024 which is 14.8% or about N3.36 trillion higher than the corresponding 2023 estimated spending of N22.65 trillion which includes the N819.54 billion supplementary provision.
Out of the planned spending, N8.25 trillion and N243 billion have been provided for debt service and sinking fund to retire maturing bonds issued to local contractors and creditors, respectively.
Ben Akabueze, the Director General, Budget of the Federation announced this on Monday during the public consultation of the draft FGN 2023-2026 Medium Term Fiscal Framework and Fiscal Strategy Paper (MTEF/FSP) which held in Abuja as part of the ongoing Nigeria Economic Summit (NES#29).
The MTEF/FSP which is the first in President Tinubu’s administration reflects current key policy and fiscal challenges and government’s direction in addressing them.
It particularly provides a comprehensive framework for prudent fiscal management and resource allocation, amid overwhelming challenges in domestic revenue mobilization; Public Debt Sustainability concerns; elevated inflation; as well as negative impact of insecurity on the domestic economy, among others.
On Monday, BusinessDay had reported how poor implementation of the Public Procurement Act 2007 has failed to instill prudence and efficiency in government spending.
During his presentation, Akabueze noted that the government also intends to enhance discipline and sustainability in recurrent expenditures, especially personnel costs.
It will also mandate that all capital expenditures beyond a certain threshold must pass a viability assessment / cost benefit analysis before being admitted into the budgets of Ministries, Departments and Agencies (MDAs).
Another strategy is to increase spending efficiency by creating a benchmark price list, and spending caps for certain expenditures.
Going forward, some critical expenditures (especially those with long-term and multiplier effects) will be tagged to certain revenue lines and earmarked taxes.
The government will equally strive to achieve and sustain full deregulated pricing of petroleum products and cost-reflective electricity tariffs in 2024.
Akabueze regretted how fiscal deficits over several years have consistently surpassed what was budgeted as well as the 3% threshold due to several factors including poor performance management framework for GOEs, over-optimistic revenue projections, and extra-budgetary spending.
This, according to him has forced the government to rely increasingly on borrowings, including the expensive and inflationary Ways & Means advances by the Central Bank of Nigeria which reached N22.7 trillion before President Buhari left office.
He acknowledged that more stringent revenue projections would help to reduce fiscal indiscipline, as budget deficits are worsened by expenditures based on unrealistic revenue projections that undermine the credibility of the budget itself.
According to him, government will ensure that all expenditure items in the budget are aligned with the set national priorities; adopt a more rigorous approach to allocating capital to agencies and admitting capital projects to the budget, as well as enhance the execution capacity of agencies.
Government will also seek to strengthen expenditure controls and oversight mechanisms; enhance budget implementation and monitoring processes; as well as strengthen debt sustainability analysis and management framework.
Meanwhile, as contained in the draft MTEF/FSP, the 2024, 2025 and 2026 budgets are predicated on oil benchmark of $73.96/ barrel; $73.76/barrel and $69.90/ barrel respectively, which Wale Edun, finance minister and Coordinating minster for the economy had told BusinessDay was “conservative”.
The government also intends to achieve an oil production level of 1.78million barrels per day; 1.80 million barrels per day and 1.81 million barrels per day respectively for the three years.
“Crude oil forecast assumes that all evacuation lines will be operational as the security situation is expected to improve,” Akabueze said.
Exchange rate is put at N700/$ for 2024; N665.61/$ for 2025; and N669.79 for 2026.
Also, government projects inflation to average 21.4% in 2024 before declining to 20.3% and 18.6% in 2025 and 2026, respectively.
The economy has been projected to grow at 3.76 percent; 4.22 percent and 4.78 percent for the three years consecutively.
This is as the total federation account revenue is projected to increase to N24.54 trillion in 2024, up from N11.86 trillion projected for 2023. Out of this, the main Pool is projected at N20.70 trillion, while VAT Pool and EMTL are put at N3.66 trillion and N174.26 billion, respectively.
Government had assured that it will not tax higher but will improve collection efficiencies to bring in more revenues, while ensuring that its own agencies (GOEs) deliver up to 50 percent of their earnings into the federations account as and when due.
“The exchange rate effects, higher oil production projection, and the removal of subsidy are mainly responsible for the increase in projected revenue inflows,” according to Akabueze who spoke on behalf of Abubakar Atiku Bagudu, minister of budget and national planning.
But the federal government’s revenue for 2024 is projected at N16.96 trillion, which is N5.91 trillion or 54percent more than the 2023 Budget.
Out of the aggregate revenue, N6.95 trillion or 41 percent is projected to come from oil-related sources. The balance of N10.01 trillion is to be earned from non-oil sources.
Also, federal government’s share of non-oil tax is projected to increase to N3.52 trillion compared to N2.43 trillion in 2023, while its share of mineral and mining revenues is N4.56 billion in 2024 from N3.64 billion in 2023.
The projection for independent revenue has been moderated to N1.91 trillion, down from N3.17 trillion, while the grants and donor funded projects will bring in some N639.92 billion.
Also, the government expects dividends from the Bank of Industry, Development Bank of Nigeria, Galaxy Backbone, and Bank of Agriculture worth N316.68 billion compared to N81.79 billion in 2023.
The projected sum of other revenues, including FGN’s share of Oil Price Royalty, Education Tax, Electronic Money Transfer Levy, and Drawdowns from Special Accounts, is N736.04 billion.
The federal government has also estimates an aggregate expenditure at N26.01 trillion,which is 14.8% or about N3.36 trillion higher than its 2023 aggregate expenditure estimate of N22.65 trillion, including the N819.54 billion supplementary provision.
The 2024 expenditure estimate includes statutory transfers of N1.30 trillion and non-debt recurrent expenditure of N10.26 trillion.
N8.25 trillion and N243 billion have been provided for Debt Service and Sinking Fund to retire maturing bonds issued to local contractors/creditors, respectively.
A total of N6.78 trillion (inclusive of N1.02 trillion for GOEs) is provided for personnel and pension costs, an increase of N904.49 billion or 15 percent over the 2023 provision. This is 40 percent of the projected aggregate revenues for 2024.
The aggregate amount available for capital expenditures in the 2024 budget is N6.87 trillion and represents 26 percent of total expenditure and about 5 percent less than the 2023 provision of N7.27 trillion.
Consequently, the federal government’s budget deficit is projected to be N9.05 trillion in 2024, which is 22 percent down from N11.60 trillion budgeted in 2023. The proposed deficit represents about 53 percent of total FGN revenues and 3.83 percent of the estimated GDP.
The high projected level of fiscal deficit in 2024 is partly attributable to the proposed salary review of Federal workers across board, increased pension obligations and higher debt service cost.
Although at 3.83 percent, the projected level of deficit is higher than the 3 percent threshold stipulated in the Fiscal Responsibility Act (FRA), 2007, it is significantly lower than the 2023 level of 5.1% percent.
The FRA 2007, however allows government to exceed the 3 percent threshold if justified by threats to national security, but the DG budget assured of government’s commitment to keep the deficit within the 3 percent limit going forward.
According to him, the draft 2024-2026 MTEF/FSP represents a realistic, well-balanced and forward-looking fiscal framework that sets the stage for inclusive growth, resilience and sustainable development, while also addressing key fiscal challenges and promoting transparency.
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He further noted that it strikes a crucial balance between fiscal prudence and supporting economic growth and lays the foundation for sustainable development over the next three years.
“Over the medium term, we shall implement measures for revenue diversification and improved tax administration in order to enhance fiscal sustainability, reduce dependency on volatile revenue sources and promote fiscal stability.
“The current administration is committed to managing and monitoring debt sustainability, ensuring that the country’s debt remains at manageable levels while financing critical projects and programmes,” he stressed.