The Federal Government of Nigeria plans to borrow an extra N7.24 trillion in 2024 to support an intervention plan aimed at revitalizing the economy. This was revealed by Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, during the presentation of the Accelerated Stabilisation and Advancement Plan (ASAP).
Thank you for reading this post, don't forget to subscribe!The 2024 budget, which has a deficit of N9.18 trillion, will partially rely on N7.83 trillion in new borrowings. However, ASAP outlines borrowing N9.18 trillion to cover the deficit, with an additional N7.24 trillion to fund the intervention plan, bringing the total borrowing for 2024 to N16.42 trillion. Debt financing is expected to cost N8.81 trillion.
Nigeria’s total public debt was N97 trillion as of December 2023. With the new borrowing, the debt is projected to rise to N113.4 trillion. The increased borrowing is anticipated due to revenue shortfalls, and the government acknowledges that solely funding the intervention through borrowing could negatively affect leverage metrics.
In the first two months of 2024, government revenue was only 60% of the target, mainly due to lower crude oil production. If this trend continues, annual revenue may not exceed N15.8 trillion. Tax waivers supporting the economic intervention could further reduce revenue by 3%.
The emergency intervention plan, costing between N6.6 trillion and N5 trillion, targets key sectors like agriculture, energy, business support, health, and social welfare. The specific funding needs include:
– Agriculture and food security: N498 billion to N373.5 billion
– Energy: N3.25 trillion to N2.44 trillion
– Health and social welfare: N1.10 trillion to N825 billion
– Business support: N1.80 trillion to N1.35 trillion
These interventions aim to improve access to essential medicines, clear power subsidies, and support MSMEs, manufacturers, entrepreneurs, and artisans.
The government noted that prioritizing intervention spending is crucial to maintaining the reforms’ momentum and mitigating leverage impact. The debt-to-GDP ratio is expected to reach 47.6% if all spending is financed by additional borrowing, up from 46% at the end of 2023.
The International Monetary Fund (IMF) has assessed Nigeria’s risk of sovereign stress as moderate, citing long debt maturities and moderate financing needs but highlighting risks from global uncertainty, exchange rate depreciation, and weak revenue mobilization.
Minister Edun emphasized executing the 2024 budget with less reliance on borrowing, focusing instead on promoting investment and privatizing government assets. During the IMF and World Bank spring meetings, he announced Nigeria’s qualification for a $2.25 billion loan from the World Bank at a 1% interest rate.
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