Nigeria’s Minister of Finance and Coordinating Minister for the Economy, Wale Edun, has stated that relying on borrowing to fund the 2024 budget is not a sustainable option for the country.
Edun made this disclosure during his appearance on Thursday before the joint Senate Committee examining the 2024-2026 Medium Term Expenditure Framework and Fiscal Strategy Paper, chaired by Senator Sani Musa.
Accompanied by the Executive Chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji, and the Director General of the Debt Management Office, Patience Oniha, the finance minister disclosed that the most viable approach for funding Nigeria’s annual budgets is to prioritize increased spending on infrastructure rather than relying heavily on borrowing.
He stated: “We have an existing borrowing profile. Our direction of tariff is to reduce the quantum of borrowing or intercepting deficit financing in the 2024 budget.
“Clearly, the environment that we have now, internationally as well as nationally, we are in no position to rely on borrowing.
“They are in the process, sacrificing that immediate goal for compacting their economies, or at least contracting the money supplies and pushing up the interest rates and of course, high-interest rates and investments don’t go together.
“What is left for us to access those funds are expensive so it is the last thing that we must rely on. As we know we have all the figures and debt servicing and cushioning 98 per cent of government revenue.
“The last thing you can think of is to pike on more debts. The government needs to not just maintain its activity, it needs to spend more. If you look at government spending, if you look at the budget as a percentage of GDP, ours is one of the lowest being 10%, even Ghana is at 25%, and rich ones they are 50%.”
Nigeria’s public debt stock rose from N12.6 trillion in 2015 to N87 trillion in 2023 without significant improvements in developmental indices such as education, healthcare, poverty alleviation, and security. This backdrop has created a dire economic situation that the country is currently grappling with.
Economic reforms aimed at reviving the economy are yet to yield results. Edun said at the 2023 Annual Directors Conference of the Chartered Institute of Directors Nigeria on Thursday in Abuja that its benefits will take some time to materialize.
The minister highlighted that the country lacks sufficient foreign exchange savings to maintain a positive balance of trade. Consequently, he emphasized the importance of ensuring that export earnings surpass import expenditures in order to stabilize the national currency.
“The agenda is to provide first and foremost a stable economy, growing more than population growth, with low inflation, stable foreign exchange to enable investments in productive activities. This is what the president is working on and we are a work in progress and we look forward to the task at hand.
“The big price is to make ourselves a formidable economy, our institutions a corporate governance place so that those interested in investing can have trust in their investment. The IoD has a major role to play in championing corporate governance, so we have a clean lead corporate sector which the world can come and partner for growth and progress,” he said.
This approach is seen as crucial for achieving a more favorable trade balance and addressing foreign exchange challenges.
