In this interview with BOLAJI OGUNDELE, the Minister of Budget and Economic Planning, Senator Atiku Bagudu, speaks on the positives of the 2024 Budget and the indices that will guide its implementation.
The government hopes to scale down borrowing this year, but how does it intend to fund the huge deficit ?
I think there are two elements to the question. One is the issue of size of borrowing. In 2023, the budget anticipated a borrowing of close to N14 trillion, this year’s budget is N9.1 trillion. We think that is significant because 2023 took us to about 6.11 per cent of our Gross Domestic Product (GDP) as borrowing, this one is 3.88 per cent. So, the quantum has decreased.
Secondly, the Coordinating Minister of the Economy stressed that we would not go outside the law and borrow from Ways and Means. What is outside the law? The law says the Central Bank can lend the government up to five per cent of its budget for the year. So, if you go out of that, you’re going outside the lawful limit and that’s the minister was very clear on that. We are not going to do that. We are not going to resort to borrowing outside the law.
Thirdly, as much as possible, we will even borrow from the Central Bank because sometimes it’s even cheaper to borrow there. Those are the two elements: the quantum has decreased, then we will go by the book. The President, in his steadfastness, has brought a Central Bank Governor who will not even allow it and we’re also determined, the Coordinating Minister and I.
Then, four, our revenue projections are designed to ensure that everyone earns his job. This is a country that had once produced more than two million barrels a day, so why are we behaving as if we can’t achieve that again? The first thing is to task people and ensure that they begin to run around to earn their job. The President said as much. That’s the basis of confidence and optimism.
We have seen the reforms; so far, they have been yielding more revenue, but we are not stopping there. We believe that our objective to achieve at least 1.8 million barrels per day production is something that has been done before and with security gains that are increasing, with mobilising of all stakeholders.
For example, just yesterday, maybe you will have seen, even the governors have re-energised the National Economic Council Committee on Crude Oil Theft and Prevention, so that they will say to the extent that it’s happening in their states, they will take personal responsibility and lead. If all the governors can control of their states, we are sure that these things can be done. Because of that, we are confident that the revenue projections are achievable and with the budget efficiency and discipline we are putting in place, we believe that we won’t recourse to additional borrowing; maybe we will even borrow less.
There is this concern about the foreign exchange rate projection for the 2024 Budget. It’s believed N800 to dollar is very high, like government is not anticipating better naira to dollar rate?
For budgeting purposes, you don’t use spot rate of anything. Oil price can go to $120 today, maybe there is a shortage, maybe there is a collision between two ships that will block a channel. It would be foolish to use that as a reference price. I should take a period, maybe six months to one year, and say, let me observe this average behaviour, so you don’t use spot prices. It’s also like that with exchange rates.
Much as we are hoping that it should come below, but at the time, you are doing the budget, you will take a view based on average performance and that’s what we took. In fact, we took an average performance of N750 on the executive side and we proposed it to the National Assembly and the National Assembly, in its wisdom (mind you this is democracy), and President Tinubu is a lifelong advocate of institutional Separation of Powers.
He respects democracy such that even though it’s higher than what he submitted, the institution that says so has the authority to say so. And even at the time they said N100. Because it’s not an official rate, it’s a guidance. Because with the deregulated market, you no longer have an official rate. It’s much lower than even the way the markets are bidding and with the measures that are being taken, which we believe will increase the supply of foreign exchange into the system because, to borrow from Professor Soludo, the President inherited a dead economy, dead in the sense that FOREX is not coming in. He explained what the concept of dead means. We believe that it’s not an unrealistic position to take by the National Assembly.
The Imo State Governor said recently that if Nigeria could achieve just 50 per cent implementation of these budgets, that all these economic issues would be sufficiently mended. How is that possible?
President Tinubu, even in the short time, did a number of things that are remarkable. When he was sworn in, he inherited a Supplementary Budget of N819 billion that was passed by the National Assembly, but was not signed into law. He quickly renegotiated with the National Assembly and said look, because we are removing fuel subsidy, I want N500 billion of this N819 billion to be used to fund palliatives; CNG buses, MSMEs, Nano credit, agricultural intervention. I think that is the first hallmark of a successful financial management and the National Assembly agreed with him. Even when he said we should imagine we are drawing water from dry wells, you quickly found N500 billion to intervene.
Then, secondly, three months later, he submitted to the National Assembly a Supplementary Appropriation that was very clear in its objective, consistent with the Eight-point agenda. Without security, you can’t achieve agriculture and food security or job creation or employment or poverty eradication.
He submitted a Supplementary Appropriation where close to N600 billion of the N2.17 trillion goes to the Defence and National Security sector, meaning let us give the security as much money as we can find so that we challenge them to give us the results.
Equally, the promises that were made to Labour; N400 billion additional money for cash and wage awards was also provided for in the Supplementary Appropriation. Then infrastructure; Works, Housing, Federal Capital Territory and then some money for INEC to do elections.
I think that again is a very smart and transformational way of budgeting, where you just convince everyone who matters and say, everyone needs money at all times, but let us concentrate our energy and sort some sectors out and already we are implementing 50 per cent of the capital for that N2.17 trillion has been released.
Now, again, you have the 2024 Budget, which followed through. We have three ministries that are either above N1trillion or close to it. In fact, if you add personnel and capital, just on capital, agriculture and works are both close to N900 billion each and that’s quite significant, that we’re able to prioritise and there is a linkage that if you solve infrastructure, you are helping even the security. If you solve the security, you are helping production, you are helping poverty eradication and so on and so forth.
We have provided in that budget, money for additional spending, more than has ever been done before in education and health, social sectors that are very important to us, that we have demonstrated that they are priorities: Water Resources, Infrastructure, and all the Creative Economy, Digital Economy – those things that will help innovation.
Coming back to your question, if we’re able to achieve these, because we have gotten our priorities right, you see Agriculture is a low-hanging fruit. If we can mobilise domestic production, inflation will come down and more people will be employed, they will be able to take care of their families. They’ll be able to contribute to health outcomes because they can now use additional money for healthcare, and for some educational services.
That’s the thought process and because of the quantum increase and efficiency gains, I’m sure somebody can say even if we’re able to achieve 50 per cent, this will generate economic activity and lower inflation and plus confidence that we are already seeing. Even with just the measures taken because three rating agencies have improved their outlook for Nigeria, based on the measures that have been taken to date.
What are the institutional things you are going to put on ground so that we get the sectors that are supposed to contribute to the economy, the budget, so that we can fully fund this budget?
First, is the budget efficiency, particularly for a leader who has done it before in a state. We have seen how he was able to mobilise private sector into the Lagos economy, even though he was a governor, so that the budget is not burdened by things that can be done by the private sector, because that’s part of the failure that we have seen … if I don’t have enough money, why don’t I incentivise the private sector to do those things that I would have done? And we have examples. Many of us grew up in the Nigeria where there were no private universities or even where they were very few. Today, universities are commonplace, hospitals, airports, so that means the private sector can be incentivised to relieve the burden and even generate more money by contributing to taxes for the public sector.
He did that in Lagos and we are doing that because he has challenged ministers to imagine they are drawing water from a dry well. That means think out of the box, see what part of your job can be done by the private sector and there’s money out there in the private sector, so that we’re just not all stuck with waiting for budgetary allocations.
The second element in addition to budget efficiency is financial engineering. We have energised the Ministry of Finance Incorporated (MOFI) because we have a lot of assets lying idle that are underutilised. You will be surprised about the trillions of dollars that the Federal Government is sitting on. It can be landed property, it can be companies that are not working. The challenge is to make these things work for you.
In the world, we are seeing people moving to ‘what I own’rather than ‘what I owe’. If I have a land I can’t develop, I can invite somebody to come let us develop it together. You can build a hotel, you can build a house and it will generate income rather than holding a dead asset. We are bringing more consciousness to it and even with the challenge in the economy, we are already seeing prospects.
There’s a private sector person that has announced over 700 kilometres coastal road. Siemens of Germany, impressed by our reforms, has expanded the support to our power sector that will see us generate more and distribute more. To someone, these are the kinds of transformational processes that the new reality is bringing in.
Third is that you’re a leader who means what he says; so, when he tells ministers that better believe it or if you can’t support us, if you can’t help us, maybe you can leave. He’s not mincing words. We are all very clear about that. It has been done elsewhere. He has the experience he has the team leadership and he has a team and I believe it can be done.
About the interventions during the Yuletide, like the free train rides and subsidised road transportation, the question has been where did the money come from? This is for the sake of accountability and investor confidence.
That’s a moral judgment you know. Once a leader is elected, particularly our Constitution does not allow you to take office until a critical step is taken. That critical step is that you have to swear to an oath and that oath, in addition to being elected by the people, you can’t take office without it and it imposes on you the obligation to use the best of your capacity, your best of judgments, to deliver on the mandate. Those are very lonely moments for any leader because best of capacity, best of judgment are equitable issues, only you can know sometimes why you make some decisions.They reflect your humanity, they reflect your belief about the future, they reflect your past.
So he is a magnanimous person, by nature, because one of the things I’ve always said is maybe we have not paid attention to.
