The Nigerian government has recently unveiled its proposed budget for the year 2024, which amounts to a staggering 26 trillion Naira. This is a 20% increase from the previous year’s budget, and the highest in the country’s history. The budget is based on some optimistic projections, such as a 6% GDP growth rate, a 3.5% inflation rate, and a 1.8 million barrels per day oil production. But are these projections realistic, or are they mere assumptions that will not materialize?
We will examine some of the key assumptions behind the budget and assess their feasibility and implications for the Nigerian economy and society. We will also compare the budget with those of other African countries and evaluate its impact on the regional and global dynamics.
The first assumption that we will scrutinize is the GDP growth rate of 6%. This is a significant improvement from the 2.7% growth rate recorded in 2023, and the highest since 2015. The government claims that this growth will be driven by the recovery of the oil sector, the diversification of the economy, and the implementation of various reforms and infrastructure projects.
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However, some experts have expressed doubts about the sustainability and inclusiveness of this growth. They argue that the oil sector is still vulnerable to volatility and shocks in the global market, and that the diversification of the economy is still slow and uneven. They also point out that the reforms and infrastructure projects are often delayed or abandoned due to corruption, mismanagement, and insecurity. Therefore, they suggest that the government should be more cautious and realistic in its projections and focus on addressing the structural and institutional challenges that hinder the economic development.
The second assumption that we will analyze is the inflation rate of 3.5%. This is a remarkable reduction from the 15.7% inflation rate recorded in 2023, and the lowest since 2014. The government asserts that this reduction will be achieved by maintaining a stable exchange rate, improving fiscal discipline, and enhancing monetary policy coordination. However, some analysts have questioned the feasibility and desirability of this reduction.
They contend that the exchange rate stability is dependent on external factors, such as the oil price and the foreign exchange reserves, which are beyond the government’s control. They also warn that fiscal discipline may come at the expense of social spending and public investment, which are essential for poverty reduction and human development.
They also doubt that monetary policy coordination will be effective, given the conflicting objectives and interests of the Central Bank of Nigeria (CBN) and the Ministry of Finance. Therefore, they recommend that the government should be more flexible and pragmatic in its inflation target and balance it with other macroeconomic goals.
The third assumption that we will evaluate is the oil production of 1.8 million barrels per day. This is a modest increase from the current production of 1.6 million barrels per day, which is below the OPEC quota of 1.9 million barrels per day. The government maintains that this production level will be attained by resolving the security issues in the Niger Delta region, investing in new oil fields, and complying with the OPEC agreement.
However, some observers have challenged this assumption, highlighting the environmental and social costs of oil production in Nigeria. They emphasize that oil production has caused severe pollution, degradation, and conflict in the Niger Delta region, affecting the livelihoods and health of millions of people. They also stress that oil production has made Nigeria dependent on a volatile and finite resource, exposing it to external shocks and uncertainties.
One of the main challenges that the budget faces is the issue of revenue generation. According to the budget breakdown, the government expects to generate 10.6 trillion Naira from oil and gas revenues, 6.5 trillion Naira from non-oil revenues, and 8.9 trillion Naira from borrowing. However, these sources of income are subject to various uncertainties and volatilities.
For instance, the oil and gas sector are dependent on the global market prices and demand, which can fluctuate significantly due to various factors such as geopolitical tensions, environmental concerns, and technological innovations. Moreover, the oil and gas sector are also vulnerable to sabotage, vandalism, and theft, which can disrupt the production and export of crude oil. Furthermore, the government has to contend with the demands of the oil-producing regions, which have been agitating for a fair share of the oil revenues and a greater autonomy.
Similarly, the non-oil revenues are also not guaranteed, as they rely on the efficiency and effectiveness of the tax administration system, which has been plagued by corruption, evasion, and loopholes. Moreover, the non-oil revenues are also affected by the performance of the non-oil sectors of the economy, such as agriculture, manufacturing, and services, which have been struggling to cope with various challenges such as insecurity, infrastructure deficits, power shortages, and policy inconsistencies.
Finally, the borrowing option is also fraught with risks and costs. The government has already accumulated a huge debt burden, which stood at 35.5 trillion Naira as of June 2023. This represents about 35% of the GDP, which is still within the acceptable threshold according to international standards. However, servicing this debt consumes a large chunk of the government’s revenues, which reduces the funds available for other developmental purposes. Moreover, borrowing more money exposes the government to external shocks and pressures from creditors and lenders, who may impose stringent conditions and terms on the loans.
Despite these challenges, the budget also offers some opportunities for Nigeria to achieve its developmental goals and aspirations. The budget reflects the government’s commitment to invest in human capital development and social welfare programs, which are essential for improving the quality of life and well-being of Nigerians. The budget allocates 1.5 trillion Naira for education, 1.2 trillion Naira for health, and 0.8 trillion Naira for social intervention programs.
These allocations are expected to enhance access to quality education and health care services for millions of Nigerians, especially those in rural areas and marginalized groups. They are also expected to reduce poverty and inequality levels in the country, which have been exacerbated by the COVID-19 pandemic and its aftermath. Moreover, these allocations are expected to boost human capital productivity and competitiveness in the global market.
Another opportunity that the budget provides is the opportunity to improve Nigeria’s physical infrastructure and security situation. The budget allocates 4.9 trillion Naira for capital expenditure on works and housing, transportation, power, water resources, and defense.
These expenditures are expected to address some of the critical infrastructure gaps and bottlenecks that have hampered the economic growth and development of Nigeria. They are also expected to enhance the security and stability of Nigeria, which have been threatened by various forms of violence and conflicts, such as insurgency, banditry, kidnapping, and communal clashes.
The implications of Nigeria’s 26 trillion Naira budget 2024 are both positive and negative, depending on how well the budget is implemented and managed. On one hand, the budget has the potential to stimulate the economic recovery and growth of Nigeria, which has been battered by the COVID-19 pandemic and its fallout. It also has the potential to improve the living standards and welfare of Nigerians, who have been suffering from poverty, hunger, and disease.
On the other hand, the budget also poses some serious risks and challenges for Nigeria, which could undermine its fiscal sustainability and macroeconomic stability. It also exposes Nigeria to external shocks and pressures, which could compromise its sovereignty and autonomy. Therefore, the success or failure of Nigeria’s 26 trillion Naira budget 2024 will depend largely on the political will, the institutional capacity, and the public accountability of the government and its agencies, as well as the cooperation and participation of the private sector, the civil society, and the citizens.