The President Bola Tinubu administration is not leaving anything to chance in tackling the rising cost of debt servicing as well as steps geared at reducing the budget deficit. Minister of Budget and Economic Planning, Abubakar Atiku Bagudu, in this interview speaks on the strategies in place to address these issues, among other incentives to trigger economic growth. Group Business Editor, SIMEON EBULU, reports.
The President increased the 2025 budget, citing higher revenue from MDAs and other sources. What strategy will the Federal Government employ to cut, or reduce the budget deficit?
The budget presented by the President to the National Assembly was set at N49.7 trillion. However, even after the budget was presented, engagement continued between the executive and the National Assembly as part of the process, which is work in progress.
During the engagements, the Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service (NCS) confirmed that they could generate additional revenue ranging from N4.5 trillion to N6 trillion.The decision on why we did not apply this revenue to deficit reduction is always a matter of judgment. Some economists and commentators always argue that prioritising economic expansion is more beneficial than immediate debt repayment because a stronger economy leads to higher tax revenue in the long run.
For a country that is under the pressure of investment, part of the crisis we are confronting is the realisation that we have been under-investing almost everything. Nigeria has faced underinvestment in security, infrastructure, and human capital, which is why we decided to allocate this additional revenue to critical sectors that will expand the economy rather than using it solely for debt servicing.
In fact, out of the N4.5 trillion in additional revenue, Mr President wrote a letter allocating every kobo of it. Allocations were made, which include, N1.5 trillion for the recapitalization of the Bank of Agriculture, N1 trillion for solid minerals development, N500 billion for the Bank of Industry (BoI). That is about N3 trillion. From the N1.5 trillion, N800 billion went for road infrastructure and the balance was directed towards water resources.
This was a deliberate and strategic decision to support economic expansion, given the minimum of public expenditure that you need to put into de-risk and support private capital. It is not going to fund additional vehicle procurement. Not that they are not needed, but that is the priority.
The revenue is also extremely ambitious compared to previous National Budgets. How do we plan to achieve this?
A budget can either reflect what is comfortable, or what is aspirational. I believe that a budget should be a bit above and should challenge your team, not make them live in their comfort zone.
You mentioned that compared to countries like Indonesia or Brazil, Nigeria lags in public spending. That is precisely why we must push ourselves to generate more revenue and expand our economy. Secondly, the N40 trillion revenue target may seem large, but it is not unprecedented.
Twenty years ago, Nigeria’s oil production was at 2.2 million barrels per day. Today, we are struggling to return to that level, even though the price per barrel is significantly higher. Our focus is on restoring and surpassing past production levels, while also reducing costs.
Equally, when we are producing 2.2 million barrels per day, maybe we are doing so at under $20 per barrel. Now some of our cost of production is close to $40 per barrel. So, if I say I want to go back to producing over 2 million barrels at a lower cost, it is not even something that my history cannot relate to. Therefore, I should be able to do so.
Nigeria’s budget is extremely low compared to other emerging economies. Even if we dedicated the entire budget to a single region’s road infrastructure, we would still have a gap. This means we need to explore the public-private partnership (PPPs) option to drive infrastructure investment. But we are yet to see a clear framework on how this can be done. Why is it so?
On PPP, we already have a framework and we have multiple institutions handling infrastructure investments, including, the Infrastructure Concession and Regulatory Commission (ICRC), the Bureau of Public Enterprises (BPE), the Infrastructure Bank, the Debt Management Office (DMO) and the Ministry of Budget and Economic Planning.
However, these institutions often work in silos, which is why I now personally chair a roundtable with all key stakeholders, discussing both Public-Private Partnerships and transformational projects, to ensure better coordination. This ensures that instead of waiting for investors, we actively develop and market bankable projects to them.
Nigeria is rich in solid minerals, and experts suggest this sector could even surpass oil in revenue. However, concerns persist over illegal mining, lack of proper revenue tracking, and security threats.
Does the government have a clear revenue projection from solid minerals, and what is expected in the next one to five years?
Solid minerals have massive potential, possibly equaling or even surpassing oil revenue. First, the country is blessed with solid minerals, equitably spread, but those we know, we ask any Nigerian, particularly around the room, we know about coal deposits in Enugu. Historically, we know about tar sands in Ondo, bitumen and gold in Osun, Oyo, and so on.
To harness this potential, Mr. President took steps to undertake an institutional alignment and separate the Ministry of Solid Minerals from the Ministry of Steel, allowing each sector to have dedicated policy and investment strategies. Improve licensing and regulation. Previously, many licenses were issued to individuals with no capacity to develop the sector, leading to illegal activities.
One day, the former Minister of Solid Minerals, Kayode Fayemi was invited to a mining site in his local government. It’s a gold mining site. On approach to the gold mining site, about 20 to 25 young men from the community stopped us and said, do you know that the license holder is not declaring the right production? We say, how can you prove that?
They gave us time, up to 10 minutes to run into the license area, and each one of us, we can assure you, will come back with gold. And we did, and they came back, I think about nine of them came back with gold within 10 minutes. And we entered the license area, I don’t know whether it was the same, but we met non-Nigerians who had been there.
So, the licensing has been improved, part of the reason for putting N1 trillion to the solid minerals sector to support exploration, security, and infrastructure. Currently, at least four lithium processing plants are under construction. Recently, a $400 million cement project was signed in Kebbi State, and gold mining operations are expanding across the country. These investments will drive significant revenue growth in the coming years.
Just like I said earlier, three days ago, I was at Kebbi Governor’s Lodge where a company in Kebbi state signed a $400 million cement, some additional gold refining in addition to Segilola gold. Even the presidential additional gold mining initiative was all taking place. So, a framework has been put in place that manages the licensing and monitoring activity in a way that revenue can be collected, whether royalties or revenue from companies participating in the activity.
You have been a strong supporter of the policies of the current administration. But in your region, there is strong opposition to tax reforms. How do you address this when engaging your constituents?
Regarding tax reforms, there has been misrepresentation and misinformation, especially on social media, which has not helped. The executive, through the President, submitted four tax reform bills to the National Assembly aimed at improving tax administration, collection, rates and compliance. In a democracy, these proposals are not decrees but are meant to be debated not imposed. If it is oil-producing versus non-oil-producing areas, maybe Osun is in the same situation as Kebbi, in terms of incentive or otherwise, if it is agriculture, maybe some are fishing communities, the mischaracterisation that some zones are against tax reform is wrong.
There are individuals, governors, who felt maybe for one reason or the other they wanted it in a particular way. Some governors initially called for more consultations, which was misinterpreted as opposition. However, after further discussions, most governors, including those from the North, now support the reforms. Only a few areas remain under discussion, such as the BAT Business Activity Tax (BAT) rate and revenue distribution models. Generally, in many developing countries, maybe even in all countries, tax increase or additional tax avoidance is not necessarily a pleasant popular measure. Some people speak their mind, but a lot of people, maybe 99 per cent of those in the National Assembly representing all parts of Nigeria, are today in the process of passing those reforms, because they understood that these are reforms that we need.
I am sure some of you may know, literally for a small company today to comply with the law, they have to hire a consultant. So, maybe the money you pay to the consultant is even higher than the money you would pay as tax, but because there are laws, some of them as old as 50 years, that to get it right, you all have to reflect.
So, we are simplifying this so that it can be understood, so that companies can do things in accordance with the law, so that we are not held hostage. Maybe we are speaking in KPMG, maybe some tax consultants may have diminished fees because everyone would be able to understand the tax legislation and to comply and to pay without hiring a consultant, I think this is a big gain.
The last GDP numbers showed the economy is growing fast. But the manufacturing sector performs poorly. How will the 2025 budget support the manufacturing sector?
The GDP grew by 3.84 per cent in Q4 2024 up from Q3 2023, a significant achievement given that many European economies barely grew by one per cent. This is even though money is not as much of an issue in those economies as it is in Nigeria.
However, our manufacturing sector has suffered global changes, part of it because the manufacturing sector is always in transformation around the world. Today you have 3D printing and automation. You have companies, whose cost of production or shift in markets or the methodology of consolidation or mergers and acquisitions will necessitate them moving in or out of markets.
That is one of the reasons the President authorised and directed that we create a Consumer Credit Fund, ensuring that businesses have a stable demand base for their products. Additionally, we are working on sector-specific incentives to boost industrial production.
The FX benchmark in the budget is N1,500/$1. If it averages at above N1,500/$1 in the year, how are you going to manage that situation?
The most important one is our prayer and hope that the economy will keep expanding. Because even when the economy expands and you have a fluctuation in one of the assumptions, then the next effect will cancel out in the sense that you will still be generating revenue. Particularly for foreign exchange assumption, it’s not just for revenue. Somebody who is putting his money in Nigeria, and there are many people who are willing to, and many Nigerians who have been experiencing this in the past. So, you are in London, or the United States, you are a medical doctor, you have $100,000, and maybe you want to start a clinic at home.
Before, the only way you can get proper exchange rate and documentation is if you want capital importation, you import it to the bank, and you get a lower exchange rate. But now you see the exchange rate, you have confidence that this is not an artificially-determined exchange rate. So, you are confident that your investment in the economy will be supported by the exchange rate outlook, and that even when you make money, you can reasonably export the dividend.
So, it’s not just for revenue that the projection was made, but even where it differs from the assumption, the growth in the economy will compensate for that.
You mentioned the possibility of a commercial market attracting $100 billion in investment. Could you emphasise how we can possibly achieve this?
Our Agenda 2050, which is our long-term perspective plan, was developed in 2020 and was chaired by both the private sector and public sector under the Minister of Finance, and with the sub-nationals, projected that for us to achieve a GDP per capita of 33,000 by the year 2050, we must be investing no less than $100 billion per annum, with about 85 percent of it from the private sector. $100 billion may sound large, but when one maps out that the capital market in the world is close to $40 trillion, you find that, I am not talking about an over-ambitious figure, what is required is for us to set up a marketing strategy. We have put the policies in place, for us to pitch all the rating agencies and say you have done well, you are doing the right thing. So, we now have to be deliberate in meeting those investors, those who are hoarding capital and Mr President has been personally leading investment drives, meeting with sovereign wealth funds, private equity firms, and institutional investors.
He was in Asia twice, we were in the Middle East, he was in Europe and in all these trips, he was in the U.S, he met not only with official dorms but with hundreds of capital and they are increasingly showing interest in record. Part of the President’s transformation is to appreciate that all public officials must see themselves as marketing officers of the country and the kind of support we are receiving from the media is encouraging us so that we get our country properly. Even while there are challenges, our challenges may be smaller than challenges elsewhere, but we find out that those people can compartmentalise those challenges and we can convince the capital markets to put money into the economy.With the right policies, investor confidence, and Nigeria’s enormous economic potential, we can successfully attract and absorb these investments.
