Nigeria cannot continue to rely on borrowing to fund its budgets, Finance Minister Wale Edun told the Senate Committee on the 2024-2026 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) on Thursday.
Edun stated that Nigeria’s current borrowing profile is unsustainable and that the country needs to focus on increasing its domestic revenue generation. He emphasised the importance of investing in infrastructure as a means of boosting economic activity and tax collection.
“Clearly, the environment that we have now, both internationally and nationally, means we are in no position to rely on borrowing,” Edun said. “We have an existing borrowing profile, and our direction is to reduce the amount of borrowing or deficit financing in the 2024 budget.”
He pointed out 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. 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,” Edun said. “As we know, we have all the figures, and debt servicing is consuming 98% of government revenue.”
Instead of borrowing more, Edun advocated for increased government spending to stimulate economic growth. He noted that Nigeria’s government spending as a percentage of GDP is one of the lowest in the world, standing at just 10%. Ghana’s government spending is at 25%, while developed countries spend closer to 50%.
Edun also highlighted the importance of investing in social safety nets and social security systems. He noted that developed countries typically spend around 70% of GDP on these programs.
“Government spending will definitely lead to an increase in revenues,” Edun said. “The number one source of revenue, especially in the short term and even in the medium term, is all revenue.”
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. Edun acknowledged the concerns and reiterated the need for MDAs to make every effort to improve their revenue collection efforts.
