Tinubu plans to cut budget deficit to 3.9% of GDP

Federal government of Nigeria plans to reduce its budget deficit to roughly 3.9% of gross domestic product (GDP) next year from about 6.1% this year, President Bola Tinubu said as he projected lower borrowing costs and higher revenues. Tinubu presented the 2024 Appropriation Bill of N26.1 trillion before a joint session of the Senate and the House of Representatives. The appropriation bill was christened the “Budget of Renewed Hope.” President Tinubu entered the Chamber of the House of Representatives at 11.13 a.m. The President of the Senate and Chairman of the National Assembly, Godswill Akpabio, called the House to order at 11.15 a.m.

Akpabio began the reading of the welcome address at 11.20 a.m. Ahead of today’s budget presentation three weeks ago, Tinubu forwarded to both chambers the 2024–2026 MTEF and Fiscal Strategy Paper. In the paper, N26.1 trillion was proposed as the total expenditure profile for the 2024 fiscal year. The Senate, through its Committee on Finance, after two weeks of interactive sessions with heads of ministries, departments, and agencies on revenue and expenditure projections made for them, approved the MTEF. Tinubu has embarked on Nigeria’s boldest reforms in decades, removing a popular fuel subsidy in May and scrapping foreign exchange controls, which have pushed up inflation to its highest levels in nearly two decades.

His government is seeking to balance between cushioning the impact of the double-digit inflation and the removal of the fuel subsidy with keeping spending in check. In his first budget speech to lawmakers, Tinubu projected higher oil production and tax collection would boost government revenues and his administration would borrow slightly less next year. “Nigeria remains committed to meeting its debt obligations. Projected debt service is 45% of the expected total revenue,” Tinubu said while presenting his N27.5 trillion expenditure plan for next year. Spending priorities include security, infrastructure and measures to ease a cost-of-living crisis. The president said the economy was expected to grow by at least 3.76% next year while inflation would moderate to 21.4%.

Analysts said the government’s revenue expectations looked ambitious and warned that there were downside risks to global prices of oil and production of crude, Nigeria’s biggest export. The government would also need to keep its promise to do away with the petrol subsidy and allow the market to determine the exchange rate. “They are going to have to increase the price of petrol and allow the exchange rate to move. If not, it may be difficult to achieve that deficit figure,” said Bismarck Rewane, managing director of Lagos-based Financial Derivatives Company. Tinubu inherited an economy that is struggling with high debt levels, low revenue collections, widespread insecurity, including a long-running insurgency in the northeast and kidnappings for ransom in the northwest.