The Senate said yesterday it extended the implementation of the capital component of the 2024 budget till December 31 to ensure the completion of ongoing projects.
Deputy Senate President, Barau Jibrin, okayed the extension after the consideration of an Appropriation Bill seeking the amendment and extension.
The bill was read for the first, second and third times on the same day and supported by most senators.
Chairman of the Senate Committee on Appropriations, Solomon Adeola, sponsored the Bill.
Adeola (APC – Ogun West), in his lead debate, explained that the extension was necessary to allow the Federal Government to complete ongoing projects contained in the budget.
He said the Federal Government lacked enough resources to execute the projects proposed in the budget.
He urged his colleagues to support the extension of the 2024 budget to prevent project abandonment.
This marks the second time the Senate has extended the capital implementation phase of the 2024 budget.
The initial extension followed a request from President Bola Ahmed Tinubu.
He wrote to the National Assembly in December for approval to shift the capital expenditure implementation deadline from December 31, 2024, to June 30, 2025.
The President explained that it was necessary to enable the executive arm to complete ongoing capital projects and optimise budgetary allocations.
That extension was granted after extensive debate by both chambers of the National Assembly.
However, as the June 30 deadline approached, it became evident that several critical projects funded under the 2024 budget had not been completed, prompting the fresh extension.
With the new December 31, Nigeria is now operating two budgets within a single fiscal year: the 2024 budget, which is still being implemented, and the 2025 budget, which is currently in force.
As of the time it was extended in 2024, some critics argued that the extensions reflected weak execution capacity within government ministries, departments, and agencies (MDAs).
Supporters of the move believe it helped to ensure value for money and completion of critical projects that otherwise would have been abandoned.
Next year’s N27.5 trillion Appropriation Bill is designed to stimulate economic growth through a combination of strategies, Minister of Finance & Coordinating Minister for the Economy, Mr. Olawale Edun, told federal lawmakers yesterday.
He listed fiscal discipline, targeted tax incentives and innovative revenue generation as some of the strategies designed to get the economy back on track.
Edun gave the explanation yesterday at the National Assembly when he led the management team of the Ministry of Finance to defend the budget before members of the House of Representatives Committee on Appropriation.
Highlighting three key elements of the proposed budget intended to spur economic growth, the minister spoke of government’s plan to prioritise savings within the budget, essentially suggesting a focus on fiscal consolidation, reducing unnecessary spending and accumulating resources for future investments.
He said tax incentives would be applied as strategy to boost the economy, adding that the government has no plan to raise taxes and levies.
According to him, the government is considering tax cuts and other measures to encourage investment and economic activity.
The minister told the lawmakers that some taxes and levies being collected never end up in government coffers.
He said: “I would say there is no plan for increase in tax rates as such. There is a plan for increasing the revenue from taxation.
“It is to increase tax returns, tax revenue as a percentage of GDP from around nine percent within three years to 18 per cent which is closer to the African average.
“So, the emphasis is on collections, not on increasing the tax rates. It is increasing the efficiency of tax administration particularly collection”.
Acknowledging wholesale revenue as a contributor to the N27.5 trillion budget estimates, the minister indicated that the government was considering generating revenue through the sale of government assets or other wholesale transactions, rather than relying solely on traditional tax sources.
“A solid revenue performance would further enhance the economy”, Edun said.
Speaking to ministry’s activities in the coming year, Edun explained that the Ministry of Finance will be “spearheading digitalisation for the purpose of achieving greater efficiency and cost reduction in governance, which will in turn boost the economy.
“Digitalisation is a veritable tool in safe guarding against wrongful use and invasion of the entire public service system.”
The minister reiterated the need for fiscal policy review and tax reforms for revenue generation to run the nation’s economy, adding that such measures would attract domestic and foreign direct investment into the country for job and wealth creation.
He also disclosed that the 2023 Supplementary Budget would run concurrently with the 2024 Appropriation Act.
On his claim that some collected taxes and levies did not get into government coffers, the minister said the government lacked the required resources to fund critical infrastructure hence the need to look inward for better revenue generating opportunities.
Edun said the government was revamping the collection of Value Added Tax (VAT) to remove the middleman from the system and ensure that revenue from VAT goes directly to government coffers from the point of sale.
Foreclosing the possibility of tax raise, Edun said the government plans to increase efficiency in tax collection by bringing in more people into the tax net.
He said the government was compressing the multiplicity of taxes and placing less emphasis on borrowing from foreign sources.
He disclosed that the government through the Nigeria National Petroleum Corporation Limited (NNPCL) and the Ministry of Finance Incorporated was compiling a list of its assets to determine the cost of such assets.
He said the government was giving about one percent of its Gross Domestic Product (GDP) to waivers every year, adding that in 2024, government emphasis was on increasing government revenue.
“It is an acceptance and understanding that the fiscal space is constrained, that the capacity and the leeway for relying on borrowing whether domestic or foreign is limited and so the emphasis is on domestic resource mobilisation.
“The emphasis is on getting government revenue up. The revenue, number one from oil sales, which depends on production and is under one’s control more than the price which is internationally determined by all kinds of factors, but which is favourable at the moment.
“So, the emphasis clearly is on the number one source of revenue particularly foreign exchange revenue, which is oil production.
“But in addition, there is also less emphasis on borrowing from multilateral institutions. They do not have that much extra funding for us even though it is concessional. Of course, when you look at the international market, interest rates are high across the world, particularly the developed world. So we all cannot look there.
“If you look at the budget, it even indicates that we are looking to equity, to privatisation, even though estimates for revenue from there are relatively modest. But, it is the direction of travel and intention that is important.
“So, we would be looking at getting more revenue from across board from government businesses, which is government enterprises, the parastatals as well as looking to private sector investment.
“I must inform you that I am aware that NNPCL is looking very carefully at its assets and Ministry of Finance Incorporated is carrying out a very thorough and comprehensive tabulation, valuation and categorization of all the assets owned by the Federal Government.
“Between those two exercises, we should have a robust assets register. We should know what the nation owns by way of assets and what is the value. That is the first step in deciding in what way we can now optimize those holdings.
“In terms of tax administration, there is a wholesale and comprehensive revamping of tax administration and that is being done through the instrumentality of the fiscal policy and tax reform policy.
“It has a year to work, but throughout that year, it is going to be recommending and having implemented, various improvements. The plethora, multiplicity, duplicity and sheer weight of number of taxes is being compressed, because research has shown that 90 percent of the tax revenue that is actually collected into government coffers at all levels actually comes from about nine particular tax heads.
“So, all the rest that are collected under the names of taxes and fees do not reach government coffers. That is a veritable area for creating greater efficiency.
“The other key area is that about one percent of the GDP of this country is given out in waivers, tax, incentives, import duty waivers and so on and so forth and from that system, that expenditure by government needs very serious analysis in order to make sure that items that were relevant years ago or even given out years ago are not now still being given where they are not required and where they are not adding value.
“One of the particular areas is that incentives are often given out up front and with the technology that is available today, we are looking to move to a system of rebates.
“A system of immediate payments so that VAT is paid by returns. It first of all goes into private hands and the goes into the government hands. What we are looking at is a system where the payments at the point of sale, the government’s payment and goes straight to government.
“It is possible with the technology we have these days and of course we can all see how it would create a much more efficient way of collecting government revenue, because if you put it in none government hands before it goes into government, you can expect and probably know that you will get some leakage, some inefficiency in that process”.
On the importance of accounting for oil revenue is a very important issue, Edun said: “Clearly, whatever is being done, whatever we have met as way of process of monitoring the oil revenue, oil sales, oil production and payment into government coffers as required by section 162 of the constitution, work needs to be done there, torchlights need to be shone.
“At all levels, disquiet has been expressed, you the honourable members have mentioned it today, the Commissioners of Finance at the federation account allocation committee meetings have expressed it, the Nigerian Governors Forum (NGF) has said it, so many commentators have pointed out the fact we need to have a robust system identifying the sales, the production, payment into government coffers, the exchange rate, so all those issues are going to be looked at in a comprehensive manner.”
In terms of cost of governance and recurrent expenditure, he said the emphasis was on raising revenue, adding that government spending was relatively low when compared to the GDP.
Education got the highest budget share N90, 664, 994, 252 (20.88 percent). It is followed by infrastructure which got N74, 316, 325, 706 (17.11 percent); health has N40, 998, 197, 758.30 (9.44 percent) and Agriculture had N15, 848, 707, 310.80 (3.65 percent)
The governor presented the budget on Tuesday to the 32-member House of Assembly at an event with top government functionaries, traditional rulers, and political office holders among others in attendance.
He said the government will continue to use technology to block loopholes, noting that the government has no plan to increase taxes.
He assured that the budget will cover projects, policies, and actions which when implemented will cushion the effect t of the hardship the people are facing due to fuel subsidy removal.
President Bola Ahmed Tinubu on Wednesday November 29 presented Nigeria’s biggest budget size in Naira terms (N27.5 trillion) tagged the Budget of Renewed Hope to the joint session of the National Assembly. A critical look at the budget document showed that it is an ambitious budget which if well-funded and implemented would create a positive impact in enhancing national security, fostering economic prosperity and job creation in the country. The major challenge usually with the national budget is full implementation, which if not corrected this time may hamper the success of achieving the desired result of renewing the hope of Nigerians through the budget.
Over the years, past presidents have coined beautiful developmental names for the yearly budget which always ended up not living up to those names and expectations. Year after year, we have seen promising budget titles such as the 2023 Budget of Fiscal Sustainability and Transition; 2022 Budget of Economic Growth and Sustainability; 2021 Budget of Recovery and Resilience; 2020 Budget of Sustaining Growth and Job Creation; 2017 Budget of Recovery and Growth; 2016 Budget of Change; 2015 Budget of Transition; 2014 Budget for Job Creation and Inclusive Growth; 2012 Fiscal Consolidation, Inclusive growth and Job creation etc. Experience has shown that the success of a national budget is not in its title but in its implementation.
The federal government’s budget has been on the increase over the last 23 years. The exceptions are 2002, 2012, 2014, 2015 and 2019. For example, in 2002, it reduced by 35% to N578 billion from N894 billion in 2001. It declined from N4.9 trillion in 2011 to N4.8 trillion in 2012. The budget also declined by 7% in 2014 to N4.64 trillion from N4.99 trillion in 2013. The budget equally declined by 3.2% to N4.49 trillion the following year, 2015. In 2019, it reduced to N8.83 trillion from N9.12 trillion in 2018.
From a budget size of N677 billion in 2000, the budget jumped to N3.93 trillion in 2010 which is an increase of about 399% in 10 years. The budget crossed the trillion Naira mark for the first time in 2005 with a sum of N1.35 trillion. It increased to N4.99 trillion in 2013 and N21.83 trillion in 2023 which was later increased to N24.82 trillion under President Tinubu through a supplementary budget.
Former President Olusegun Obasanjo’s administration left the national budget at N2.3 trillion in 2007, late Umaru Musa Yar’Adua took it up and left it at N3.1 trillion, former President Goodluck Jonathan increased it to N4.5 trillion in 2015 and Muhammadu Buhari at N21.83 trillion in 2023. As the budget size increases in naira terms over these years, the dollar value of the budget has fluctuated due to the continued depreciation of naira.
The worrisome fact with the increase in the national budget size is that with each increment, the budget deficit widens. This leads to an increase in borrowing which has skyrocketed our national debt to an all-time high of N87.38 trillion without corresponding economic growth and development. Presently our national debt in relation to GDP is at an alarming 38.79%.
The question is why increasing the budget size that our expected revenue cannot fund. It’s better to plan a budget based on realistic expected revenue than to rely funding of the budget mostly on borrowings. The height of the budget deficit in Nigeria was witnessed in the 2023 national budget where the budget deficit was N13.78 trillion out of the total budget expenditure of N24.82 trillion, more than the aggregate expected revenue of N11.45 trillion. No wonder the administration of former President Buhari plunged Nigeria into all-time debt due to an astronomical increment in our budget size.
Despite the large budget size under the Buhari regime, Nigeria failed to achieve the high economic growth rate recorded under former presidents Jonathan, Yar’Adua and Obasanjo. Buhari’s best annual GDP growth rate was 3.4% in 2021 which fell short of Obasanjo’s best annual GDP growth rate of 15.3% in 2002, Yar’Adua’s best of 8.04% in 2009 and Jonathan’s best of 9.3% recorded in 2010. These high economic growth rates were achieved under the Obasanjo, Yar’Adua and Jonathan administrations despite having a smaller budget size. It goes to show that the size of the budget does not matter much as far as the items budgeted were judiciously implemented. This is not an exoneration of Obasanjo, Yar’Adua and Jonathan regimes from budget padding and complying 100% in budget performance.
In dollar terms, Nigeria’s national budget size when compared with other developing African countries budget sizes is far below. Also, given our huge population, it is expected that our budget size should be big enough to create the desired impact and achieve the desired results in our economy. The dollar value of the 2024 budget proposal of N27.5 trillion for over 220 million Nigerians is about $33 billion. The budget size of South Africa with a population of 60 million is $132 billion, Algeria with a population of 45 million has a national budget of $98 billion, Egypt with a population of 112 million has a national budget of $97 billion, Kenya with a population of 55 million has $25.78 billion budget and Tanzania with a population of 67 million has a national budget of $19.23 billion.
From the above comparison, it showed that Nigeria is still lagging in terms of budget size. Our national budget ratio to GDP is a mere 12%. The question is, is Nigeria truly rich as being projected? Or that corruption has eaten so deep into the fabric of our economy that we cannot generate adequate revenue from our rich resources to fund our budgets.
I still can’t understand why Nigeria cannot fund our budget which is relatively low in dollar terms when compared with other developing African countries without the negative consequence of wide budget deficits which gaps can only be closed through borrowing. I wonder what will happen if we dare to increase our budget to the size of maybe South Africa. What are these African countries with big budget sizes higher than Nigeria’s budget doing differently that Nigeria cannot do better?
We can’t keep borrowing to fund budgets because we are not seeing the positive results rather, we should fashion out ways to increase our revenues. It is obvious that we cannot achieve the desired economic growth with our current rate of excessive borrowing without corresponding results. Debt service seriously is weighing the country down.
We need to work on increasing our revenues. Our current revenue to GDP is 10% which is too low. Nevertheless, it is a welcome development that the total expected revenue has been increased to N18.32 trillion in the 2024 budget proposal from an aggregrate revenue of 11.45 trillion in 2023. However, with Nigeria’s potential, we should be doing more than that figure if we can curb corruption and plug leakages through the effective implementation of key public financial management reforms.
Now to the 2024 budget proposal details, it is good that the budget deficit has been reduced to N9.18 trillion representing 3.8% of the GDP from N13.78 trillion in the 2023 budget which represents 6.11% of GDP, although the deficit gap is still very wide. Another commendable area in the budget proposal to note is the increment of the capital expenditure to N8.73 trillion representing approximately 32% of the total budget expenditure. The projected debt service of N8.25 trillion representing 45% of the expected total revenue is an improvement from the current year’s budget.
Other 2024 budget indices and projections such as an exchange rate of N750/$1, a benchmark oil price of $77.96, oil production of 1.78 million barrels per day, a growth rate of 3.76% and an inflation rate of 21.4% are seemingly realistic figures.
Based on sectoral allocations, Defence and Security got the highest allocation of N3.25 trillion representing 12% of the proposed 2024 budget followed by the education sector which got N2.18 trillion or 7.9% of the budget, health sector got N1.33 trillion or 5% of the budget, infrastructure got N1.32 trillion or 5% of the budget and social development got N534 billion or 2% of the budget as well as other sectors.
Despite the noticeable improvement in the 2024 budget proposal, there is a serious need to improve the budget in many areas such as further significant reduction in recurrent expenditure, budget deficit, debt service and others.
For this budget to achieve its aim of enhancing national security, providing infrastructure, creating jobs and fostering economic growth, there should be a thorough review of the budget to strike out irrelevant items and padding and ensure full implementation of the budget.
Nwosu, a public affairs analyst, political economist and development expert writes from Abuja.
