By: Abdulmalik Adetola
During the latest Council meeting in Abuja, President Bola Tinubu presided over the Federal Executive Council’s proposal of a budget of N26.01 trillion ($34 billion) for Nigeria’s 2024 fiscal year. The budget is based on an assumed oil price of $73.96 per barrel and an exchange rate of 700 naira per dollar, with a focus on oil production targets and significant allocations for debt service, salaries, and pensions.
In this regard, the government plans to produce 1.78 million barrels of oil per day, with significant funding set aside for debt repayment, wages, and pensions. Although 3.76% economic growth is anticipated, inflation is at a 20-year high of 27.72%. The planned budget shows Nigeria’s significant reliance on oil revenues and the proposed budget emphasizes the nation’s strong reliance on oil money, and it does so at a time when the economy is already under pressure from skyrocketing inflation. The government’s hopes for economic stability are reflected in the assumptions about oil prices and exchange rates, but in reality, the population is seeing a sharp fall in purchasing power as a result of rising prices and a faltering economy.
While the proposed budget may benefit Nigeria’s economy by providing funding for essential services and infrastructure, the growing public debt poses significant risks. It’s worth noting that significant economic concerns are posed by Nigeria’s rising governmental debt, which rose by 4.96% to N46.25 trillion (US$103.11 billion) in Q4 2022. The government’s budget may be strained by this growing debt load, which would leave less money for critical infrastructure and services. Additionally, it raises questions about credit ratings, which could result in increased borrowing costs and decreased investor confidence, all of which could worsen economic woes and impair long-term stability.
To reduce these risks and guarantee a more sustainable economic future, prudent budgetary management is crucial. This will involve scrutinizing the allocations, revenue projections, and strategies to address inflation. The government must implement monetary policies to stabilize the currency and reduce inflation, as well as diversify the economy away from heavy reliance on oil revenue. Addressing the economic challenges, including managing public debt, is essential for the well-being of Nigerians and the country’s economic future. With the fear that this might not be essentially utilized due to lack of implementation framework, it is imperative to note that Nigeria as a sovereign country with unexplored resources might find itself borrowing trillions of naira for sustaining the economy, again.