Increasing 2024 budget to N28.7 trn on exchange rates consideration unrealistic – expert

A financial expert, Dr. Uche Uwaleke, says an increase in the size of the 2024 budget by the National Assembly will render the inflation rate projection of 21.4 percent for 2024 unrealistic.

Uwaleke, the Director, Institute of Capital Market Studies at the Nasarawa State University, Keffi, said this in an interview with the newsmen on Sunday in Abuja.

He said that such a move would have adverse implications for the inflation and interest rate environment in 2024.

Supreme News reports that the National Assembly approved a 2024 Appropriation Bill of N28.7 trillion, effecting an increase of N1.2 trillion on the N27.5 trillion proposed by President Bola Tinubu.

“I had expected the National Assembly to effect amendments within the original N27.5 trillion submitted by the executive arm of government.

“The increase by N1.2 trillion was largely on account of the upward adjustment in the exchange rate from N750 to N800 to the dollar.

“A sustainable basis for any increase ought to have been an increase in the forecast for non-oil revenues,” he said.

According to Uwaleke, overall, the 2024 budget holds a lot of promise for the economy if well implemented.

He said that a major snag, however, stems from the likely distortionary impact of the new FX regime.

“A naira float in the face of weak supply and strong demand, with its attendant forex market volatility, introduces uncertainty in budget implementation.

“It is most likely that the exchange rate will be the major cause of wide budget variances in the 2024 budget on account of Nigerian Autonomous Foreign Exchange Market (NAFEM) operations.

“This is particularly so in respect of the dollar-denominated component of the budget, much of which can be found in the over three trillion Naira proposed defence spending as well as in recurrent debt expenditure.

“A volatile and high exchange rate will increase the cost of servicing external debt and further widen the budget deficit,” he said.

Supreme News reports that the Senate approved the 2024 budget during a special session on Saturday.

According to the report submitted by the Appropriation Committee, aggregate expenditure has been pegged at N28.77 trillion and statutory transfers at N1.74 trillion.

Recurrent expenditure was pegged at N8.76 trillion, capital expenditure at N9.99 trillion, and gross domestic product (GDP) at 3.88 percent.

Tinubu, on November 29, presented a total of N27.5 trillion in budget to a joint session of the National Assembly.

The president pegged the budget deficit at N9.18 trillion.

He said that the N9.18 trillion deficit was lower than the N13.78 trillion deficit recorded in 2023, which represents 6.11 percent of GDP.

He said that the deficit would be financed by new borrowings totaling N7.83 trillion, N298.49 billion from privatisation proceeds, and a N1.05 trillion drawdown on multilateral and bilateral loans secured for specific development projects.