Federal Government Plans N26tn Budget for 2024, With Debt Servicing Reaching N8.25tn

The Federal Government of Nigeria has unveiled its plans for the 2024 budget, indicating a total expenditure of N26.01 trillion. This represents a substantial increase of 19.15% compared to the N21.83 trillion budget approved for the year 2023. These financial projections were made during the approval of the Medium-Term Expenditure Framework for 2024 – 2026.

The 2024 budget’s allocation paints a striking picture. A major portion of this budget, 61.63%, is designated for personnel and debt servicing costs. Specifically, personnel and pension expenses are projected to consume N7.78 trillion, while the debt servicing cost is estimated at N8.25 trillion, summing up to a staggering N16.03 trillion. This allocation implies that the government plans to spend more on servicing its debts than on paying salaries and pensions to its workers.

The 2024 budget also showcases a notable increase in these costs. Personnel and pension expenses are set to rise from N5.87 trillion in 2023 to N7.78 trillion in 2024, marking an increase of N1.91 trillion or 32.54%. This upward trajectory has raised concerns about the government’s ability to curtail the cost of governance.

Furthermore, the debt service cost is expected to surge by 30.74%, from N6.31 trillion in 2023 to N8.25 trillion in 2024. This is a clear indication of the government’s ongoing challenge to manage its burgeoning debt obligations.

The World Bank has previously voiced concerns about Nigeria’s fiscal situation. In June 2023, the World Bank reported that the Federal Government’s spending on personnel costs and debt servicing had exceeded its total revenues in 2022. It was the first time in which personnel costs and debt servicing outstripped the government’s revenue. This imbalance was noted to weaken the government’s capacity for capital expenditures.

The Federal Government’s growing financial obligations, particularly in the context of removing the fuel subsidy, are leading to additional spending. The government is expected to allocate significant funds for various palliatives, including allowances for federal workers, support for agriculture, and assistance for small and medium-sized enterprises, among other initiatives. The total spending on these palliatives and loans could reach N3.27 trillion.

In light of these developments, the government anticipates presenting a supplementary budget to address its increasing obligations. It aims to ensure that these financial plans adhere to the January – December budget implementation cycle.

As part of the 2024 budget, the Federal Government has set certain economic assumptions, such as a crude oil price benchmark of $73.96 per barrel, an exchange rate of $700/N1, oil production of 1.78 million barrels per day, and debt servicing costs of N8.25 trillion. These assumptions indicate optimism regarding investment flows and the country’s economic outlook.

Despite these ambitious fiscal plans, some economists express concerns about the government’s growing debt burden. They emphasize the need to manage expenditures effectively and reduce the cost of governance. Additionally, they call for transparency regarding the source of funds to finance this substantial budget.

The shift of Federal Executive Council (FEC) meetings from Wednesdays to Mondays was also announced, with meetings being held when necessary rather than weekly.

In conclusion, the Federal Government’s unveiling of the 2024 budget highlights the challenges it faces in managing its finances, particularly in the context of rising debt servicing costs. The budget’s ambitious nature underscores the need for effective financial management and addressing expenditure-related issues to ensure the nation’s economic stability.