December 1, 2023/CSL Research
During the week, the President of the Federal Republic of Nigeria, Bola Ahmed Tinubu presented the 2024 budget themed “budget of renewed hope” to the national assembly. As part of the 2024 – 2026 medium term expenditure framework and fiscal strategy paper, the 2024 budget is focused on achieving macro-economic stability, a better investment environment, enhanced human capital development, poverty reduction, and greater access to social security.
The budget projects expenditure of N27.5tn, which is N2.68tn higher than the estimated budget expenditure of N24.82tn for 2023 (inclusive of the N2.96bn supplementary provision) and projects revenue of N18.32tn in 2024 which is N7.28tn more than the N11.04tn projected revenue in the 2023 budget, leaving a budget deficit of N9.18tn.
The 2024 aggregate expenditure includes capital expenditure of N8.70tn which is 3.2% y/y higher than N8.43tn estimated for 2023 while statutory transfers, non-debt recurrent and sinking fund will take up the sum of N1.38tn, N10.26tn, N243.66bn (vs N985.49bn, N9.32tn and N247.73bn in 2023) respectively. Debt service is expected to gulp the sum of N8.25tn from an estimated N6.31tn in 2023. The budget projects revenue of N18.32tn in 2024. It is expected that the sum of N7.94tn from oil-related sources will contribute 43.34% to the nation’s budget’s revenue.
The balance of N10.39tn will come from non-oil sources which include the FGN share of non-oil tax (N3.52tn), minerals and mining (N4.56tn), independent revenue (N1.91tn), grants and donors (N685.63bn), dividends from the Nigerian LNG Limited (NLNG), Bank of Agriculture and others (N357.92bn) and education tax, oil price royalty, drawdowns from special accounts and others (N1.05tn).
The 2024 budget assumes an oil price benchmark of US$77.96/bbl. and oil production of 1.78mbpd. The exchange rate was pegged at N750/US$ while the headline inflation and Gross Domestic Product (GDP) rates were estimated at 21.40% and 3.76% respectively in 2024. While we believe the oil price assumption is realistic, we struggle to believe the country can raise production to 1.78mpd in 2024.
According to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s oil production (with condensates) increased to 1.57 mbpd in September 2023, the highest level in 2023. We remain concerned about the country’s increasing expenditure amidst significantly low revenue generation capacity.
Though we believe the fiscal position will likely improve next year, owing to expected savings on subsidies, the impact of currency devaluation on FX revenue, and expectations of growth in tax revenue from new taxes introduced in the new Finance Act, we still believe the government needs to either cut down expenditure significantly or find ways to significantly boost revenue.
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