2024 Budget: FG Blames N9.1trn Deficit On Proposed Minimum Wage Review, Debt Servicing

… Over N5trn Spent On Debt Servicing In 9 Months

The federal government has hinted on plans to review the minimum wage by 2024, which it said is one of the reasons why it has a N9.1trn budget defict in the 2024 appropriation bill.

The Minister of Budget and Economic Planning, Abubakar Atiku Bagudu, made the disclosure on Wednesday at the Public Presentation of the FGN 2024 Budget Proposals held in Abuja.

President Bola Ahmed Tinubu presented the N27.5trn appropriation bill before a joint session of the National Assembly.

The budget is titled, ‘Budget of Renewed Hope’ which is N2.68trn or 10 per cent higher than the 2023 budget (N24.82trn).

A breakdown of the N27.5trn which includes statutory transfers of N1.3trn has the non-debt recurrent expenditure is N10.26trn while debt service is projected to be N8.25trn and N234bn has been provided for sinking fund to retire matured bonds issued to local contractors and creditors.

A total of 35.4 per cent of the projected revenue of N6.48trn would be spent on personnel and pension costs which rose by 9.8 per cent (N576.1bn) while capital expenditure is N8.7trn, higher than the N8.43trn of the 2023 budget.

The budget projected a revenue of N18.32trn, which is N7.2trn or 66 per cent higher than the projected revenue of 2023.

The minister said N7.94trn of the projected revenue will come from oil-related sources, while N10.39trn will be earned from non-oil sources.

The budget deficit is projected at N9.18trn or 3.88 per cent of GDP.

Bagudu said, “The budget deficit is projected to be N9.18trn in 2024. That is about N4.6trn down from the N13.8trn deficit in 2023. The proposed deficit represents about 50 per cent of total federal government of Nigeria revenues as well as 3.88 per cent of the estimated GDP. This is quite a significant achievement. This is a ratio that, in comparison with many in the world, we ought to be proud of ourselves.

“The projected level of deficit is partly attributable to the proposed salary review of federal workers across board, for which provision has been made, pensions obligations and increasing interest rates which has caused higher debt servicing obligation.”

The minister maintained that at 3.88 per cent, the improvement signals that the debt to GDP ratio will soon fall below 3 per cent as recommended by the Fiscal Responsibility Act 2007.

He further revealed that in 2022 alone, Nigeria spent N4.1trn on fuel subsidy, which was later scrapped on May 29, 2023, by Tinubu.

Bagudu said, “In 2022, what was spent on the fuel subsidy regime that was in operation then, fuel subsidy alone cost the country about N4.1trn. The performance of the economy will no doubt be limited by such distortions in the economy.”

On the 2023 revenue performance, the minister revealed that N5.79trn was spent on debt servicing in nine months of 2023.

According to him, only N1.47trn has been released to Ministries Department and Agencies (MDAs) for capital projects.

“The 2023 revenue performance of the N11.45trn expected as revenue in 2023, N8.65trn have been achieved by September and when the pro-rata is taken, it shows a performance where the pro-rata revenue expected between January to September is N8.2trn has been exceeded by the actual collection of N8.65trn.

“The aggregate expenditure for the 2023 budget is N24.82trn, including the two supplementary appropriations, and the pro-rata revenue expected between January and September is N18.61trn. However, only the sum of N12.7trn has been released, which shows a variance of -31 per cent.

“The aggregate expenditure has a pro-rata spending target of N18.6trn as at the end of September. However, the actual spending was N12.7trn. Of this N12.7trn, N5.79 was for debt service; N3.78trn was for personnel cost, including pensions and gratuities. Only about N1.47trn 25 per cent of the pro-rata budget has been released for MDAs capital expenditure as of September 2023.”

He said the difference between the revenue and what was required to balance the 2023 budget was N13.79trn.