FEC okays $1bn loan as Tinubu presents budget Wednesday

President Bola Tinubu will on Wednesday present the 2024 Appropriation Bill to a joint session of the National Assembly.

This came as the Federal Executive Council on Monday approved the 2024 Appropriation Bill of N27.5tn.

This is an increase from the N26.01tn earlier considered by the council.

The Minister of Budget and Economic Planning, Abubakar Bagudu, disclosed the approval to State House correspondents after the close of FEC’s weekly meeting presided over by Tinubu at the Aso Rock Villa, Abuja.

While disclosing that the Federal Government is projecting N18tn revenue for the 2024 fiscal year, Bagudu said further details of the appropriation bill would be released when the President presents it to a joint session of the National Assembly on Wednesday.

According to the minister, the Medium Term Expenditure Framework passed by the National Assembly is being reviewed by the Council.

Bagudu said “Equally, the Federal Executive Council approved the 2024 Appropriation Bill and the presentation of such to the National Assembly by His Excellency, Mr. President.

“The bill has an aggregate expenditure of N27.5tn which is an increase of over N1.5tn from the previously estimated, using the old reference prices.”

He added, “The forecast revenue is now N18.32tn which is higher than the 2023 revenues, including that provided in the two supplementary budgets. Equally and commendably, the deficit is lower than that of 2023. Details of the Renewed Hope Budget will be announced by Mr. President when he makes the presentation to the National Assembly”

The minister also announced some changes made in the MTEF benchmarks by FEC.

“That approved Medium Term Expenditure Framework has the exchange rate of N700 to $1 and equally, the benchmark crude oil price at $73.96 cent. However, in Mr. President’s determination to find more money to fund our priorities, today the Federal Executive Council further revised the Medium Term Expenditure Framework and Fiscal Policy Framework and two of the important decisions were to use an exchange rate of N750 to $1 and also a benchmark crude oil reference price of $77.96, meaning $4 more than the earlier approval,” he noted.

The minister said the changes “will significantly increase government revenue that the President intends to use in supporting the ministries, departments and agencies in the execution of the eight priority areas, particularly Health, Education, infrastructure, security and other developmental areas.”

Also briefing, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, said that the Council approved $1bn budget support loan from the African Development Bank.

The AfDB loan will have an interest rate of 4.2 per cent for 25 years with an eight-year moratorium, according to the minister.

He said, “The Federal Executive Council approved a $1bn concessionary loan for general budget support and to be used to improve forex availability in the country.

“The $1bn loan from AfDB is a budget support fund for ongoing economic reforms. It is to support government programmes in the power sector, social inclusion, and the fiscal policy reforms as a whole sector policy initiative.”

In October, Edun disclosed that the Federal Government secured a $80m loan from the AfDB to finance various projects in critical sectors of the economy. He noted at the time that the $80m was to help young people in the knowledge economy, technology, and communications.

The finance minister also spoke on the tax initiatives of the Federal Government.

Edun said, “There was a briefing by the Fiscal Policy and Tax Reform Committee, essentially they’ve been working for roughly 90 days, they’ve been working very well and very effectively, such that they are in a position to have even impacted the economy by coming up with initial reforms, as well as signposting the way forward in terms of very important targets.

“So in a nutshell, the policy on VAT removal on diesel is from them, they are looking to help boost fiscal situation of the government by increasing revenue, particularly tax revenue, through digitalisation, additional efficiency and rationalisation of the range of taxes that we have at the moment.

“They are looking to increase the ratio of tax-revenue-to-GDP to 18 per cent which is the average for Africa; so many countries are above that level. It is actually about the double of where we are now and within a matter of a few years, their target is to reach 18 per cent.”

The minister said the FG was contemplating other economic measures in the short-term, adding that the tax reforms council’s report was well received by the President and other council members.

Edun also stated that the Federal Executive Council approved a total limit of N2tn to be available for use by the Ministry of Finance to go in and out of the market and essentially to, where possible, bring down the interest rate on the current outstanding.

He said this was “in order to keep working hard and maximising the ability of the government to use the markets and to take advantage of different situations and improve situations.”

“So essentially, it will be refinancing and the view is that there will be an opportunity to save about N50bn or more in debt servicing over time by giving back expensive debt refinancing with cheaper funding,” he concluded.

Ahead of the budget presentation, Tinubu had three weeks ago forwarded to both chambers of the National Assembly, the 2024 – 2026 MTEF and Fiscal Strategy Paper where the sum of N26.1tn was proposed as the total expenditure profile for the 2024 fiscal year.

The Senate through its committee on Finance after two weeks of interactive sessions with heads of Ministries, Departments and Agencies on revenue and expenditure projections made for them, approved the MTEF.

It specifically approved the N26.1tn proposed as 2024 budget and other parameters as proposed by the President.

It also approved the new borrowings of N7.8tn, pegs benchmark oil price for 2024 at $73.96 and oil production volume per day at 1.78m barrels.

Meanwhile, the Speaker of the House of Representatives, Tajudeen Abbas, also confirmed Tinubu would present the 2024 Appropriation Bill before a joint session of the National Assembly.

The Speaker disclosed this while declaring open a one-day capacity building retreat for chairmen and deputy chairmen of House committees in Abuja.