WITH a proposed outlay of N27.5 trillion for fiscal 2024, President Bola Tinubu’s first full year annual budget entrenches the pattern of bloated recurrent spending, new borrowings, and unsustainable debt servicing. Capital expenditure receives low priority. In a country with a very wide infrastructure gap, this is disappointing. The President should quickly rework the estimates to kick-start the much-needed infrastructure renewal programme.
Tinubu allocated N9.92 trillion to non-debt recurrent expenditure. It is the largest single item in the estimates, which Senate Majority Leader, Opeyemi Bamidele, described as too high at 43 per cent of the budget. Out of this, personnel costs and pensions will gulp N7.78 trillion. In the 2022 budget,non-debt recurrent spending was N6.83 trillion, with N4.11 trillion or 60 per cent for personnel costs.
Already, the administration plans to increase public sector salaries by April 2024. Although wages in Nigeria are admittedly low, the government is broke and has been funding its activities with borrowings. But inflation, fuelled by a crashing naira, and stoppage of petrol subsidies, will promptly wipe out the modest wage increases. Without stabilising the naira and inflation, hardship still lies ahead of Nigerians.
Critically, capital expenditure is inadequate. Though N8.7 trillion was earmarked,infrastructure development will receive just N1.32 trillion of this. That is paltry given the colossal infrastructure deficit. In November, the Minister of Works, David Umahi, disclosed that the administration inherited a debt of N6 trillion from its predecessor on uncompleted road projects. Atrociously, instead of voting more funds to fix the roads, the National Assembly said it is buying SUVs for members because of the bad roads!
In 2019, the Global Competitive Index Report listed Nigeria 130th out of 141 economies surveyed for quality of infrastructure facilities. At 30 per cent, the World Bank says Nigeria’s infrastructure stock falls short of the global standard of 70 per cent-to-GDP. It adds that the country needs to invest $3 trillion in the next 30 years to bridge the gap.
The mismatch of recurrent to capital spending hinders development. Participants at the Third United Nations Conference on Least Developed Countries heard: “Building infrastructure – roads, bridges, and communications–is a means for wider development ends, such as poverty reduction.”
There is more bad news. In 2024, debt service is allotted N8.25 trillion. Tinubu ambitiously projects debt servicing at 45 per cent of total income in 2024, though the Federal Government is currently servicing debt with 98 per cent of its revenue. In December 2022, the World Bank warned that unless drastic reforms are implemented, Nigeria’s debt service-to-revenue ratio would hit 160 per cent by 2027. Meanwhile, the government continues to borrow.
The deficit of N9.98 trillion, though lower than the 2023 figure of N13.78 trillion or 6.11 per cent of GDP, is 3.88 per cent of GDP. This violates the Fiscal Responsibility Act, which prescribes a maximum of 3.0 per cent.
To reboot the economy, emphasis should shift to infrastructure development. The President should cut down on the cost of governance, setting the pace by trimming his bloated cabinet. Belgium, a federation with a GDP of $594.1 billion, operates with just 15 ministers, including the prime minister. Therefore, it is economically wasteful for Nigeria, with a GDP of $440.8 billion, to have 48 cabinet ministers, apart from the battalions of other appointees.
Tinubu should drastically reduce the Presidential Air Fleet size, cut back on international trips, and through mergers, scrapping and outsourcing, slash the large number of MDAs. The government should stop establishing new public tertiary institutions and conduct transparent privatisation of the commanding heights of the economy.
The times call for frugality, and creative economy-stimulating fiscal activities.
