‘ Aggregate capital expenditure of 2024 budget close to N11tr’
Some economists see the 2024 budget from the lens of the old tradition. But in an interview with GEOFF IYATSE and other journalists at the sidelines of KPMG/ Arise Budget Day in Lagos last week, Abubakar Atiku
Bagudu, the Minister of Budget and National Planning, who is also an economist, argues that the appropriation act lays a clear path to accelerated growth even though it is kneecapped by poor legacy issues ranging from low tax revenue to poor infrastructure spending. He also speaks about misconceptions about the projected capital expenditure, saying the aggregate of capital votes, which includes statutory transfers, is close to N11 trillion.
Could you contextualise the 2024 budget planning? What are the objectives?
THE budget as passed by the National Assembly derives its key objectives from the review of the agenda and manifestoes of President Bola Tinubu during his campaign, which was the basis on which he was elected. Central to that agenda is a reflection of the consensus as contained in the Agenda 2050. This means we can grow our talents.
We should be growing at a faster rate than the population growth. Our infrastructure needs should be at that level of growth. The Agenda 2050, which is our long- term plan, says that we need to invest $ 100 billion a year to achieve an outcome of about $ 90,000 per capita. Much of the investment should come from the private sector. So, President Tinubu, from the first day he was sworn in, could not afford distractions. Hence, he had to remove the fuel subsidy. The Central Bank of Nigeria ( CBN) also floated the exchange rate. These were aimed at building confidence among the private sector operators. The message is clear – it is not going to be a discriminatory macroeconomic space; the public sector does not have money to spend.
So, we had to balance the pre- election act and provide economic stability and certainty that the private sector appreciates. We have seen rating agencies passing a vote of confidence on the outlook for Nigeria; the International Monetary Fund ( IMF) said that inflation will come down. We have seen the bond market reflecting how investors think about our country. We are improving.
This is the context of the 2024 budget. The N28.77 trillion budget that has been passed into law contains a lower deficit than the 2023 budget because we want to send the right signal. Then 39 per cent of the budget is capital expenditure, which is the highest in a very long time in our national life. When we talk about capital expenditure, most people do not add the capital component of the statutory transfers, which are transfers that go to the Niger Delta Development Commission, North East Development Commission and several other agencies. When you disaggregate the number and add it, you will see that the capital is close to N11 trillion. Spending also across all the priority areas – defence and national security, agriculture and food security, infrastructure, roads, housing, creative economy, innovation, digital, science and technology, just to underscore the importance of innovation in enabling us to achieve a near double- digit growth.
There was also the creation of a system of funds, including N100 billion for consumer credits, because, in some countries, most economic activities are driven by credit. I do not have to buy a car and pay 100 per cent. I don't have to buy anything and pay 100 per cent. In Nigeria, potential demand is being suppressed because not many people can afford to pay 100 per cent for everything. To achieve credit- driven growth, we recognised that we need to support manufacturing activity with a pool of capital, which can de- risk consumer credit. Also, N65 billion was provided for mortgage de- risking. This is too small in the context of our mortgage need, but the idea is to send a signal to mortgage providers that we mean business. We will de- risk mortgage lending so that it is more profitable so that the private capital and private mortgage providers who can help us support the millions of homes that are needed will come into the market and boost economic activity.
Equally, we provided N100 billion for agricultural funds. This, like the mortgage fund, is to de- risk so that companies that will not otherwise come will see that the government is putting its money where its mouth is. There is also N100 billion to support school feeding and better nutrition for kids. We have also provided N550 billion in anticipation of a negotiated wage increase with the labour union. So, money has been provided to meet commitments that we anticipate as well as providing more capital in the priority areas while meeting our obligations.
The estimated deficit may be lower than last year’s figure. But with the government still looking forward to borrowing that much from the domestic market is it not going to continue to crowd out the private sector?
It is not going to crowd out the private sector because the first directive the President gave was that we would no longer borrow money unlawfully. So, the CBN is not going to print money for the government anymore.
If we must borrow from the CBN, it will be within what the law allows. The law allows and anticipates that every government around the world may need to go to the CBN to say we are expecting money but we currently don’t have money to meet current obligations. Could you give us five per cent of the money we are expecting to meet liquidity challenges? That is not an unusual request. That is why the law allows five per cent of the previous year’s revenue. What we have been doing wrong was going beyond the five per cent limit. Now, there is clarity.
Where we are to borrow, we will issue bonds. It is an option; people can invest. It even provides an opportunity for some private investors who have money to buy government bonds. Some are looking for the opportunity. Certainly, that will not cause a crowding- out effect.
The National Assembly expanded both revenue and expenditure by adjusting the projected exchange rate, which we thought the Ministry of Budget and National Planning should have envisaged. And between the executive and legislature, who could be closer to the realistic exchange rate?
We chose democracy, and democracy has an opportunity cost. We have seen budget shutdowns in advanced democracies, particularly the U. S. because power is split and given to different institutions. The person who has the last say in appropriation under our laws is the legislator because it is the National Assembly that passes the final document.
The executives can provide their proposals, just like the President graciously did on November 29. However, the wisdom of the National Assembly was that the support exchange rate was much higher than the proposal we submitted. And they felt it should go up just even our revenue expectation from government enterprises. We have a very committed democrat in the President who, despite his opinion, knows that in a democracy we must respect institutions. Not surprisingly, we accepted what the National Assembly said, while calling on them to join us in tasking everyone through oversight, interrogation, and others to ensure that we achieve those thresholds we set for ourselves.
What is the discussion within the government like to ramp up investment, especially from outside the country? Is it possible to bring all the ministries into the conversation to realise that each and each is an investment point?
The Ministry of Budget and National Planning is a custodian of the national consensus, which is a prospective plan on where we want to be in 50 years.
Other ministries are implementing that consensus. So, we remind all to engage in inter- ministries meetings that a federation consisting of federal and sub- nationals needs a minimum of investment that should go into our economy per year. The estimate is about $ 100 billion and only about 16 per cent of it can come from the public sector, meaning we should roll out the red carpet for private investors.
The President, in his wisdom, also created the coordinating mechanism for the economy under the Minister of Finance and Coordinating Minister of the Economy, Olawale Edun. And we meet all the time. Even the cabinet discussions and the retreats have shown that we should learn from what has happened both in Nigeria and what is happening elsewhere.
If you go to many countries, the health sector is largely the private sector. Even in Nigeria, we have some first- class hospitals. Maybe in the 70s, we thought hospitals could only be built by the government. We are seeing airports owned by companies. We are seeing roads being concessioned. If we recall, when the President was a Lagos governor, we saw how the private sector could drive development even in areas like waste management.
We understand that there is a lot the private sector can do. There is much money out there in the private space, which we must leverage. The role of public officers is even to lead so that private capital can come and the President has been doing this. He visited India, the UAE, Germany and a couple of other countries for this purpose. He continues to emphasise the need to interact with investors, meet and hear their expectations.
It has been announced that a coastal railway of over 780 kilometers from Lagos to Calabar is going to be undertaken by the private sector.
We have seen Siemens investing more and expanding; it is supporting us more to expand our power sector. We have seen gas deals sealed. Every day we are seeing deals in different sectors.
We understand that over 90 per cent of our revenue goes into debt servicing yet we continue to add more debt. Why are we piling up debts that do not translate to higher revenue?
Unfortunately, in our national life, some things cannot wait. We have many children. We want them to have an education. We have a security challenge. We need more boots on
“Revenue is also a problem. Some countries collect 50 per cent of their GDP. Most European countries are over 30 per cent; France is about 50 per cent. Italy, I think, is around 38 per cent. Nigeria used to be the second lowest in the world. Think of it – you don't have revenue and you have irreducible commitments ”
the ground. So as much as you would want to cut back on borrowing, there is an irreducible minimum that you need to do. So, it is a choice.
And investment in, maybe, security is not like building a house, certainly. So, you won't see it when you come back, maybe that invisible spending. During Gen. Yakubu Gowon's era, he made the famous statement that money was not Nigeria's problem. We became a more populous country thereafter. Demand for everything – infrastructure and security – started growing. So, we need an irreducible minimum of spending, and we don't have the money to meet that minimum.
Revenue is also a problem. Some countries collect 50 per cent of their GDP. Most European countries are over 30 per cent; France is about 50 per cent. Italy , I think, is around 38 per cent. Nigeria used to be the second lowest in the world. Think of it – you don't have revenue and y ou have irreducible commitments. You are in trouble somehow. But we recognise this and that is why in the 2024 budget, despite the need for spending, we want to make the private sector have confidence in us. From the economic planning point of view, what are we doing about our exchange rate policies so that prospective in vestors have confidence in the economy?
Beyond the economic planning point of view , the President has signed two executive orders, because we had been deceiving ourselves. We had run a system where we did not ha ve foreign exchange anymore.