The founder of the Centre for the Promotion of Private Enterprise and immediate Past Director General of the Lagos Chamber of Commerce and Industry, Dr. Muda Yusuf has stated that the country’s projected revenue of approximately N18 trillion for the 2024 budget appears under threat due to declining oil output and growing debt.
Yusuf stated this at Nairametrics’ Q3 Microeconomic Outlook Webinar tagged ‘Renewed Hope or Reality Check’.
Yusuf stated that Nigeria’s debt-to-GDP ratio, which was previously less than 50%, is now reaching that threshold, creating concerns about debt servicing.
“We are beginning to see that the revenue projection of about 18 trillion for the 2024 budget may be under very serious risk.
“It’s now looking a bit optimistic, given what is happening to our oil output. Given the fact that we are now having challenges with our debts. Our debt is growing at a level that is making some of us very uncomfortable, particularly from the point of view of the debt service.
“Our debt-to-GDP ratio, which used to be far, far below 50, which used to be around 20 to 23, 25, is now close to 50%,” he said.
Muda lauded one of the first steps taken by Bola Tinubu’s administration after entering office: tackling tax and fiscal reforms, which resulted in the immediate establishment of the Presidential Committee on Tax Reforms.
“The results and reports from this committee have been unveiled this year, with some still in progress. We anticipate further improvements in tax revenue, particularly through leveraging technology to enhance revenue collection,” he said.
He added that there was significant budgetary consolidation during the first six months of the government, which included optimizing revenue and cutting spending.
He also stated that the reforms considerably enhanced revenue performance, particularly with the elimination of subsidies and foreign exchange reforms.
However, he believes that the country is witnessing challenges to public finance and fiscal reduction in the second half of this year.
Yusuf stated that the withdrawal of the oil subsidy at the start of the present administration greatly improved Nigeria’s budgetary status. However, recent exchange rate fluctuations and the relative strength of Nigeria’s currency in comparison to surrounding countries have resulted in increased smuggling and subsidies.
He said this development has negatively impacted the Nigerian National Petroleum Corporation’s (NNPC) ability to support government revenue and the federation accounts, posing a substantial risk to public finance and fiscal consolidation.
“A draft stabilization plan, which was subsequently withdrawn, indicated that the subsidy might reach N5 trillion or more by the end of the year.
“This presents a challenging situation both socially and politically, as the continuous withdrawal of the subsidy is difficult. Nonetheless, the reintroduction of the subsidy threatens fiscal consolidation and financial stability,” he said.
He stated that the continuous future commitment to source foreign exchange, which existed prior to this administration, are still a major worry, and that efforts to get bank loans and advance commitments continue to be difficult.
“These issues have major implications for the NNPC’s capacity to support domestic refining capabilities. In addressing fiscal sustainability, it is crucial to optimize revenue and rationalize expenditure.
“More effort is needed in this area, as progress has been insufficient so far. The social pushback against some reforms adds to the dilemma,” he said.
