Why we’re borrowing to finance budget despite meeting revenue target – Nigerian govt

Chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji, has justified the plan by the federal government to borrow money to finance the 2024 budget.

He said the government needed to borrow because the National Assembly had approved it as part of the sources to finance the budget.

Mr Adedeji said this on Monday in Abuja during an interactive session with members of the National Assembly Joint Committee on Finance, Budget and National Planning on 2025-2027 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).

On Thursday, the two chambers of the National Assembly granted President Bola Tinubu permission to obtain a $2.209 billion external loan, equivalent to N1.767 trillion.

The loan would be part of the funds that will be used to finance the 2024 budget.

Since the approval, many Nigerians have criticised the Tinubu administration for increasingly taking loans and causing hardship in the country.

Mr Adedeji said borrowing to finance the budget is necessary to enable the government to complete and execute capital projects proposed in the budget.

He said though the FIRS agency had surpassed its revenue target for 2024 which could be used to finance the budget but the government needed to borrow more.

“When you talk about the issue of meeting the target of revenue and borrowing, if you look at the budget you gave us last year, a portion of that budget is borrowing. That is part of the fact that you achieved the revenue that you put in the budget. Don’t forget also that you put in there that we should go and borrow.

“The budget we have has both borrowing components and internally generated revenue components. So, it’s the total package. Our borrowing target is there in the budget as approved by the National Assembly. So when we go to borrow, that is what it means,” he said.

The chairman said there is no problem with borrowing to finance the budget as long as it has been approved by the National Assembly.

“Most of the borrowing that you have approved for us are foreign loans which have to do with our international fiscal balances.

“So, borrowing, as I will say, is not a crime, is not a problem. In light of what has been approved for us by the National Assembly, we are actually carrying out our responsibility. So meeting the target and borrowing, they are not competing.”

Amount of borrowing that can be used to finance budget

On his part, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, also maintained that there is no ambiguity for the government to borrow for financing budgets even though the FIRS has surpassed its targets for the year.

Mr Edun said the government would leverage its revenue with borrowing to achieve productivity.

“So clearly, just as for any normal company, they have their equity, their own resources, and they leverage that with borrowing sensibly, sustainably and productively for their institutions, and it is the same with the government,” he said.

The minister also recalled that the Tinubu administration started with a budget deficit of 6.1 per cent of Gross Domestic Product but the deficit has been reduced by 4.4 per cent.

“An important issue is that we started last year with a budget deficit in the national world. And that is seen as extremely high everywhere except in America. We, too, have a budget deficit of 6 per cent. But then, they print the dollar, and everybody else accepts it. So this is a very special case. But it is a problem for them as well.

“Already, by the first half of this year, the budget deficit, the amount of borrowing compared to the wealth of the country, was already down to 4.4 per cent. Under the MTEF, it is expected to go next year to about 3.8 per cent, headed towards the limit of 3 per cent as allowed under the Fiscal Responsibility Act,’ he added.

Need for more investments

Corroborating the need for borrowing, the Minister of Budget and Economic Planning, Atiku Bagudu, said the Nigerian budget will continue to be predicated on borrowing and internally generated revenue.

“In order to achieve that, we need to be investing at least $100 billion per annum from both public and private sources. So our budget, which is constrained by fiscal responsibility requirements, will continue to have revenue targets and borrowing targets,” he said.

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Mr Bagudu added that the budget will continue to fund the Renewed Hope Agenda of the federal government.

“What is important for countries as well as companies, that is what analysts pay attention to is the projection consistent with what the entity said it is doing. Are we funding the strategy, yes we are! We have a renewed hope strategy which we are funding and it will continue to involve revenue from tax agencies to achieve and more funding from domestic and as well as international capital to support the realisation of that long term goal,” he said.