The Minister of Finance and Coordinating Minister for the Economy, Wale Edun, declared on Thursday that Nigeria could not continue to rely on borrowing to fund its budgets, stressing the need for adequate revenue to finance them.
Specifically, he said the nation must make necessary sacrifices to generate adequate revenues to reduce its current high deficit financing.
Edun, who spoke when he appeared before the joint Senate Committees on Finance, Appropriations, National Planning, and Local and Foreign Debts, scrutinising the 2024–2026 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP), maintained that the best way Nigeria could fund its annual budgets was to spend more money on infrastructure that could generate revenues.
The minister was flanked by the Executive Chairman of the Federal Inland Revenue Service, (FIRS), Mr Zacch Adedeji and the Director General of the Debt Management Office (DMO) Ms Patience Oniha, at the panel.
According to him, advanced countries have increased their interest rates because they wanted to bring down the inflation rate to stabilise their economies. The minister said accessing foreign loans would therefore be very expensive for a developing country to cope with.
“Clearly, in the environment that we have now, internationally as well as nationally, we are in no position to rely on borrowing. We have an existing borrowing profile. Our direction of tariff is to reduce the quantum of borrowing or intercept deficit financing in the 2024 budget.
“Simply put, internationally, there is a focus among rich countries on bringing down the inflation rate to stabilise the economies and give them opportunities for investment growth. They are in the process of sacrificing that immediate goal for compacting their economies, or at least contracting the money supply and pushing up the interest rates and, of course, high interest rates and investments don’t go together. What is left for us to access those funds are expensive so it is the last thing that we must rely on.
“As we know, we have all the figures, and debt servicing and cushioning 98 per cent of government revenue. The last thing you can think of is to pike on more debts. Government needs to not just maintain its activity; it needs to spend more. If you look at government spending, if you look at the budget as a percentage of GDP, ours is one of the lowest being 10%, even Ghana is at 25%; rich ones they are 50%.
“The very rich countries have to be most advanced in terms of social safety nets and their social security systems, at 70% of GDP. Government spending definitely will lead to increase. The number one source of revenue, especially in the short term and even in the medium term, is all revenue,” he stressed.
Earlier, the chairman of the joint panel, Senator Sani Musa (APC, Niger East), expressed fears that the revenue projections of the ministries, departments, and agencies (MDAs) that had so far appeared before his panel were a far cry from what the Federal Government was proposing as income in the 2024 fiscal year.
Senator Musa noted that going for external interventions would definitely be an option because it would further push the country towards further deficit financing.
He said: “Currently, there are lots of leakages in the use of government resources. A lot of funds being generated as revenues by most MDAs are not being remitted when due. Some even remit funds a year after they collect the money. The office of the Accountant General of the Federation should look properly in that direction.
“The current practice of delaying the remittances of revenues by the MDAs has created room for the misappropriation of those funds. After meeting with the Nigerian Customs Service officials yesterday, we realised that there were lots of shortfalls they were experiencing as a result of incidences of waivers. We want to know who is issuing those waivers. Is it the FIRS or the Ministry of Finance?
“We are also interested in knowing the details of the customs modernization project, known as e-customs. The Senate Committee on Finance is interested in knowing the type of agreement that was signed on behalf of the Federal Government of Nigeria.
“What is the value of the e-customs agreement? How much is Nigeria expecting? We are tired of judgement debts all over the place. We need to know the plans on ground to collect excise duties and other tariffs so that we won’t run a deficit budget again next year.”