Debt servicing by the Federal Government is to increase from N6.31 trillion in 2023 to N8.25 trillion in the 2024 budget estimates, according to findings by The PUNCH. This is an increase of 30.74 per cent.
Amid concerns for a reduction in the cost of governance, the Federal Government is also proposing to increase budget for personnel and pension from the 2023 figure of N5.87 trillion to N7.78 trillion next year, a 32.54 per cent increase year-on-year.
Both estimated costs – debt servicing, and personnel and pension costs – make up N16.03 trillion of the N26.01 trillion 2024 budget estimates.
In June, the World Bank said that the Federal Government’s spending on personnel costs and debt servicing exceeded total revenues in 2022. According to the Washington-based bank, this was the first time the Federal Government’s personnel costs and debt servicing surpassed its total revenue. The bank added that due to this, spending on capital expenditures weakened.
According to the bank, personnel costs and interest payments on loans comprised 59 per cent of the government’s 2022 total expenditures.
Also on Monday, the Federal Government said it was projecting N26.01 trillion as expenses for the 2024 fiscal year, an increase of 19.15 per cent from the N21.83 trillion approved for this year.
The Federal Executive Council (FEC), which met at the Presidential Villa, Abuja for the second time in the Bola Tinubu administration, also approved the Medium-Term Expenditure Framework for 2024 – 2026. It said that it would maintain the January – December budget implementation cycle, assuring that President Bola Tinubu would soon present the 2024 Appropriation Bill to the National Assembly to ensure its ratification before the last day of this year.
“The aggregate expenditure is estimated at N26.01tn for the 2024 budget, which includes statutory transfers of N1.3tn non-debt recurrent expenditure of N10.26tn. Debt service estimated at N8.25tn as well as N7.78tn being provided for personnel pension cost”, the Minister of Budget and National Planning, Senator Abubakar Bagudu told State House correspondents.
Bagudu clarified the increased debt service, saying it was “because N22.7tn Ways and Means was securitised, meaning it became a Federal Government debt at nine per cent”.
He explained that personnel costs rose significantly due to transfers from the agreement between the Federal Government and the organised Labour.
The PUNCH earlier reported that the Federal Government might incur an additional N31 billion in wage bills in the next six months for the newly introduced allowance for federal workers.
This came as the organised Labour agreed to suspend its proposed nationwide strike for 30 days, following the signing of a Memorandum of Understanding with the Federal Government after a marathon meeting.
Others included N315 billion to pay federal workers’ N35,000 allowance for six months, N1.13 trillion to 15 million households at N25,000 per month for three months from October to December 2023, N70 billion earmarked as palliative measures for lawmakers, and N75 billion loan facility to 1.5 million market women.
The Federal Government also said it would present a supplementary budget given its growing obligations since the removal of petroleum subsidy.
“Yes, there would be a supplementary budget because there are continuing obligations and responses to security which can be immediate”, Bagudu said.
He explained that the perceived delays would not truncate the January – December implementation cycle because the President engaged with the National Assembly long before presentation day.
“Mr President is mindful of those and is assessing them. But he is also committed to the budget process and its integrity. He wants to ensure that monies that are appropriated will be spent in the period for which they are appropriated.
“And then in terms of presentation of the budget, Mr President has been engaging with the National Assembly leadership, even ahead of the presentation, to say, ‘these are our assumptions, these are our thought processes,’ so that it can reduce the lead time for which the budget has to go through such considerations.
“We believe that this budget will be presented in good time, particularly the 2024 budget will be passed and signed before December 31, 2023″, the minister explained.
Through the Ministry of Budget and Economic Planning, the Federal Government had earlier said it commenced the preparation of the 2024 budget, which it planned to submit in October 2023.
Reading the details of the discussion of the FEC on the 2024 budget, the former Kebbi State Governor said the Federal Government made informed assumptions about the reference price for crude oil, pegging it at $73.96 per barrel, an exchange rate of $700/N1, oil production of 1.78 million barrels per day, and debt service of N8.25tn.
He said that the Federal Government assumed an inflation rate of 21 per cent and an annual GDP growth rate of 3.76 per cent.
Bagudu said: “The council members acknowledge the medium-term expenditure framework and agreed that we can proceed to the next step of consultation and presentation to the National Assembly.
“The Medium-Term Expenditure Framework is a requirement of the Fiscal Responsibility Act. This Fiscal Responsibility Act is for the years 2024 to 2026. The several hundred-dollar reference price assumes optimism that investment flows will continue. Given all the engagements, given all the positive tractions.
“We are seeing from investors from the engagement led by Mr President personally, two different countries, in particular India, UAE and France, the engagements led by the Coordinating Minister of the Economy, the trade and investment minister and other ministers. We believe that these inflows will help us to clear the backlog, and the exchange rate will begin to reflect a stronger value than the current weakness.
“The assumptions include the oil price benchmark, which I said for 2024 we are assuming $73.96 per barrel, oil production of 1.78 million barrels a day, the exchange rate of $700. Then, the inflation of 21 per cent and GDP growth rate of 3.76 per cent. The aggregate expenditure is estimated at N26.01tn for the 2024 budget, which includes statutory transfers of N1.3tn, non-debt recurrent expenditure of N10.26tn, debt service estimated at N8.25tn and as well as N7.78tn being provided for personnel and pension cost”.
Source: The PUNCH
