Amidst revenue pressures facing the 2024 national budget, the Federal Government, FG, has indicated that it would no longer allow Central Bank of Nigeria, CBN, to print money by Ways and Means to fund the budget deficit.
Disclosing this in a chat with journalists in Lagos, the Minister of Budget and National Planning, Atiku Bagudu, however, indicated that the government will resort to issuing bonds, adding that the strategy will also attract private investments.
He stated: The central bank is not going to print money for the government anymore. If, to the extent that we would borrow from the Central Bank, it is going to be within what the law allows.
“The law allows that we can borrow but not more than 5% of the previous year’s revenue. What we have been doing wrong is to go beyond that 5% limit.
“And if we are to borrow, we will issue bonds. It’s an option. People can invest. It even provides opportunity for some private investors who have money to buy government bonds. There are those who are looking forward to it.”
The FG’s 2024 budget had projected a deficit of N9.2 trillion which is about 3.9 percent of the GDP.
But the figures in the key revenue lines have been changed by the National Assembly, appropriating more expenditure in an assumption that oil revenue and exchange rate gains would be higher than what was budgeted by the Federal Executive Council to cover for the consequential increment in deficit.
Commenting on this development, Bagudu stated: “We chose democracy, and democracy has opportunity cost. We have seen budget shutdowns in advanced democracies, particularly the US, because power is split and given to different institutions, executive, judiciary, legislature, particularly in appropriation.
“In fact, the person who has the last say in appropriation under our laws as it is, is the National Assembly. So executives can provide their proposals, just like Mr. President did on November 29, 2023, but the wisdom of the National Assembly was that the sport exchange rate was much higher than the proposal we submitted. And they felt it should go up by that amount, as well as even our revenue expectation from government owned enterprises. They feel it can go higher.
“So, we accepted what the National Assembly did, and while calling upon them, that let’s all ensure that we tax everyone by oversight, by interrogation, so that we achieve those thresholds we set for ourselves.”
On why the budget still provided for more borrowing despite the already high national debt, Bagudu said, “Unfortunately in our national life, some things cannot wait. We have many children. We want them to have education. We have security challenge. We need more foot on the ground. So as much as you would want to cut back on borrowing, there’s an irreducible minimum that you need to do.
“So we need an irreducible minimum of spending and we don’t have the money to meet that irreducible minimum. There are countries in the world that collect 50% of their GDP as revenue. Most European countries are over 30%. France is about 50%. Italy, I think, 38%. Nigeria used to be the second lowest in the world. So once you don’t have revenue and you have an irreducible minimum commitment you are in trouble somehow”.