Finance Minister, Wale Edun has informed the Senate Committee on the 2024-2026 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) that Nigeria cannot continue to rely on borrowing to fund its budgets.
Edun affirmed that Nigeria’s current borrowing profile is unsustainable and that the country needs to focus on increasing its domestic revenue generation.
The minister highlighted the importance of investing in infrastructure as a means of boosting economic activity and tax collection.
He said “Clearly, the environment that we have now, both internationally and nationally, means we are in no position to rely on borrowing. We have an existing borrowing profile, and our direction is to reduce the amount of borrowing or deficit financing in the 2024 budget.”
He opined that developed countries are currently focused on reducing inflation and stabilising their economies, which has led to higher interest rates and a tightening of credit conditions, adding that this makes it more expensive for Nigeria to borrow from international lenders.
“What is left for us to access those funds is expensive, so it is the last thing we must rely on, As we know, we have all the figures, and debt servicing is consuming 98% of government revenue,” he added.
Edun advocated for increased government spending to stimulate economic growth instead of borrowing more.
He pointed out that Nigeria’s government spending as a percentage of GDP is one of the lowest in the world, standing at just 10%, stressing that Ghana’s government spending is at 25%, while developed countries spend closer to 50%.
Edun also harped on the importance of investing in social safety nets and social security systems, noting that developed countries typically spend around 70% of GDP on these programs.
“Government spending will definitely lead to an increase in revenues,” The number one source of revenue, especially in the short term and even in the medium term, is all revenue,” the minister said.
However, the Senate Committee expressed concern that the revenue projections of government ministries, departments, and agencies (MDAs) were lower than the Federal Government’s projections for 2024, while the minister acknowledged the concerns and harped on the need for MDAs to make every effort to improve their revenue collection efforts.