Mr. Wale Edun, Nigeria’s Minister of Finance and Coordinating Minister for the Economy, has stated that the country cannot rely on borrowings to fund the 2024 budget.
He explained that the country needs to make some tough choices, increase its revenue, and cut its current, unsustainable deficit financing immediately.
While testifying before the Joint Senate Committee led by Senator Sani Musa yesterday in Abuja to discuss the projections contained in the 2024-2026 Medium Term Expenditure Framework and Fiscal Strategy Paper, Edun made this statement in his opening remarks.
The minister was joined by Zacch Adedeji, the FIRS’s executive chairman, and Patience Oniha, the DMO’s director general, when they testified before the Senate committee.
Before the lawmakers went into a closed session, he spoke to the press outside the meeting room.
The minister stated that increasing national spending on infrastructure would help the country bring in more money for its annual budget.
He emphasised that governments in developed countries had raised interest rates to reduce inflation and stabilise their economies.
He thinks that for a country like Nigeria, which is still in the process of developing, taking out foreign loans is a risky and expensive proposition.
Edun said: “Clearly, the environment that we have now, internationally, as well as nationally, we are in no position to rely on borrowing.
Our credit history is already established. Our tariff strategy for the 2024 budget aims to cut down on the total amount borrowed or intercepted as deficit financing.
“Simply put, internationally, there is focus among rich countries on bringing down the inflation rate to stabilise the economies and give them opportunity for investment growth.
Since high interest rates discourage investment, they are currently foregoing this short-term gain in favour of consolidating their economies, or at least tightening the money supplies and increasing interest rates.
This is our last resort because the remaining options to get at those funds are prohibitively expensive. All the numbers for paying off the government’s debt and cushioning the budget are in plain sight.
“The last thing you can think of is to accumulate more debts. Government needs to, not just maintain its activity, it needs to spend more. If you look at government spending, if you look at the budget as a percentage of GDP, ours is one of the lowest, being 10%. Even Ghana is at 25%, affluent ones are 50 per cent.
“The very rich countries have to be most advanced in terms of social safety nets and its social security system at 70 per cent of the GDP. Government expenditure undoubtedly will lead to increase. The number one source of revenue, especially in (the) short term, even in the medium term, is oil revenue.”
How economy can attract investors
At another event: the 2023 annual directors conference of the Chartered Institute of Directors of Nigeria, CioD, in Abuja yesterday, Edun said: “The agenda of the Federal Government is to provide first and foremost a stable economy, growing more than population growth, with low inflation, stable foreign exchange to enable investments in productive activities.
“This is what the president is working on and we are a work in progress and we look forward to the task at hand.
“The big price is to make ourselves a formidable economy, our institutions a corporate governance place so that those interested in investing can have trust in their investment.
According to him, the Nigerian economy is already diversified, but its source of foreign money is not entirely diversified.
Earlier, the committee chairman, Senator Sani Musa, expressed fears that the revenue projections of the ministries, departments and agencies, MDAs, of the federal government that had so far appeared before the committee represented a far cry from what the Federal Government was proposing as income in the 2024 fiscal year.