On Reduced Expectations, Renewed Expenses, and Reused Excuses
Nigeria’s federal government has just proposed an annual budget for 2024 that is less than the 2023 budget.
Dataphyte’s analysis shows that, in dollar terms, the 2024 budget is 36% less than the country’s budget in 2023.
According to the government’s budget estimates, the official exchange rate for the 2024 budget is pegged at N750/$. The exchange rate proposed for the 2023 budget was put at N435.57/$.
Actually, in naira terms, the 2024 budget, otherwise known as the “Renewed Hope” budget, is larger than the 2023 budget by over N2 trillion. Nigeria has budgeted the sum of N27 trillion for the 2024 budget. In 2023, the government budgeted N24.82 trillion (inclusive of the 2023 supplementary budget).
However, if the government measures the hope by the size of the budget, especially by the government’s stated dollar terms, it could be called a budget of reduced hope.
Between 2023 and 2024, the country’s budget dropped by $20 billion, equivalent to a 36% drop. While the government budgeted $56.98 billion in 2023, it plans to spend $36.7 billion in 2024.
Further review also shows that Nigeria plans to spend less on capital needs than it budgeted in 2023.
The 2024 capital expenditure is $8 billion less than the previous year. The 2023 capital budget was $18.27 while the 2024 capital budget is 10.29 billion.
The government’s recurrent (non-debt) expenditure is also projected to reduce for 2024, with $13.23 billion budgeted, compared to the $21.4 billion budgeted in 2023.
However, the government plans a smaller budget deficit, with an expected deficit budget finance of $12.24 billion, compared to the $31.63 billion budget in 2023. Yet, this could result from the high hopes of getting double the 2023 oil revenue in 2024 instead of seeking debt funding.
Reduced Expectations: Lower revenue projection for the Country
The government’s projected revenue in Naira is expected to increase in 2024 compared to 2023, but the aggregate revenue in dollars is predicted to decrease due to the projected dollar-to-naira exchange rate.
The review shows that in 2023, the country planned $25.67 billion in revenue but dropped to $24.43 billion in 2024. Yet, a lot of this reduced revenue depends on what happens in the oil sector
Oil revenue alone is projected at $10.59 billion, making about 45% of the 2024 revenue. It also doubles the projected $5.26 billion oil revenue for 2023.
It follows, too, that oil revenue (of $10.59 bn) is expected to cater for one-third of Nigeria’s total expenditure (of $36.67 bn) for 2024.
There is also a projected drop in non-oil revenue by the country, from $5.58 billion in 2023 to $4.69 billion in 2024.
In Naira terms, the country plans to earn more revenue and spend more as well. The budgeted revenue of N18.32 trillion for 2024 is above the N11.05 trillion revenue budgeted for 2023.
Oil revenue is expected to grow from N2.29 trillion in 2023 to N7.94 trillion in 2024.
Renewed Expenses: How feasible are the 2024 budget projections?
Reviewing previous budget implementation reports reveals a persistent inability to meet budgetary projections.
If the trend in the past two years is anything to go by, the 2024 renewed hope budget may recycle a history of low budget credibility, where the difference between the budget projections and actual performance exceeds an absolute 15%.
To start with, in 2022, the actual expenditure of N14.77 trillion was 18% less than the projected N18.13 trillion.
Worse still, only 35% (or N2.2 trn) was spent on capital projects out of the N6.2 trn budgeted for capital expenditure.
This may be linked to the government’s inability to realize a significant portion of its projected revenue.
On the revenue side too, the actual revenue in 2022 was 22% short of the projected figure. While the projected revenue was pegged at N10.7 trn, only N8.4trn was realized, resulting in an actual budget revenue shortfall of over N2trn.
Similarly, the actual oil revenue of N1.72 trillion was 62% less than the projected oil revenue of N4.53 trillion.
Even though the actual non-oil revenue exceeded the projected by 7%, this marginal increase was insignificant to the whole, as the 62% shortfall in oil revenue still caused a 22% shortfall in the total revenue.
Reused Excuses: Of Unmet Big Dollar Oil Revenues
The same shortfall in total revenue in 2022 occurred in 2021. Although an N8.4 trillion revenue was projected for that year, only N6.3 trillion was realised.
Likewise, only 33% (N1.4 trn) of the projected oil revenue of N4.1 trn was realized.