Nigeria may need more loans to fund 2024 budget — Senate committee

The Joint Senate Committee on the 2024-2026 Medium Term Expenditure Framework and Fiscal Strategy Paper has said Nigeria may need to borrow more loans to fund the 2024 budget, expressing concerns over the ability of revenue-generating Ministries, Departments and Agencies (MDAs) to meet their targets.

Sani Musa, Chairman of the committee said the responses received so far from MDAs at the ongoing hearing on MTEF indicate that they may not be able to meet their revenue targets.

“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, Minister of Finance and Coordinating Minister of the Economy, the director general of the Debt Management Organization (DMO) and Chairman of the Federal Inland Revenue Service on Thursday.

Sani expressed worry 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, adding that a lot of money is realized or collected as revenues from many agancies are not remitted 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 Federal) issue receipts.

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 is recording revenue shortfalls due to the issuance of waivers, but 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.

Edun says government cannot rely on borrowing due to high interest, needs to spend more

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.

“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 incwstdont go together. What it means that access ro those funds are expensive, so it is the last thing we want to rely on.

Read also: 2024 budget: Senate worries over MDAs’ inability to meet revenue target

“And as you know our debt servicing was pushing 98 percent of revenue, that 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 optimise the opportunities sought.

“I believe we can help the revenue situation from those angles”, he said.