Why are we borrowing money to finance the budget despite meeting the revenue target – Nigerian Government

Chairman Federal Tax Service (FIRS), Zach Adedeji, has made the case for the Federal Government’s plan to borrow money to fund the 2024 budget.

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

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 the Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) 2025-2027.

On Thursday, the two houses of the National Assembly provided President Bola Tinubu’s approval for an external loan of $2.209 billion, equivalent to N1.767 trillion.

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

Following the approval, many Nigerians criticized Tinubu’s administration for increasingly borrowing and causing hardship in the country.

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

He said that although the FIRS agency had exceeded the 2024 revenue target that could be used to finance the budget, the government needed to borrow more.

“When you talk about meeting the revenue target and borrowing, if you look at the budget that you gave us last year, part of that budget is borrowing. This is part of the fact that you achieved the income you budgeted for. Don’t forget also that you wrote there that we need to go and borrow.

“Our budget has both a borrowed component and an internal revenue component. So it’s the complete package. Our borrowing target is stated in the budget approved by the National Assembly. So when we go to take out loans, this is what it means,” he said.

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

“Most of the borrowings that you have approved for us are foreign loans that are linked to our international fiscal balances.

“So borrowing, as I will say, is not a crime, not a problem. In light of what has been approved for us by the National Assembly, we are actually fulfilling our responsibility. Thus, having achieved the goal and borrowed, they do not compete.”

Loan amount that can be used to finance the budget

On his part, the Minister of Finance and Coordinating Minister for the Economy, Wale Edun, also said that there is no doubt that the government will borrow funds to finance the budgets even though the FIRS has exceeded its targets for the year.

Mr Edun said the government would use its earnings through borrowing to achieve productivity.

“Obviously, like any normal company, they have their own capital, their own resources, and they use that by borrowing wisely, sustainably and productively for their institutions, and the same thing happens with the government,” he said.

The minister also recalled that the Tinubu administration started with a budget deficit of 6.1 percent of the gross domestic product, but the deficit was reduced by 4.4 percent.

“The important issue is that we started last year with a global budget deficit. And this figure is considered extremely high everywhere except America. We also have a budget deficit of 6 percent. But then they print the dollar and everyone else accepts it. So this is a very special case. But this is also a problem for them.

“By the first half of this year, the budget deficit, the amount of borrowing compared to the country’s wealth, had already dropped to 4.4 percent. Under the MTEF, it is expected to rise to about 3.8 percent next year, approaching the 3 percent limit allowed under the Budget Responsibility Act,” he added.

Need for additional investment

Reiterating the need for borrowing, Minister of Budget and Economic Planning, Atiku Bagudu, said Nigeria’s budget will continue to rely on borrowing and internally generated revenue.

“To achieve this goal, we need to invest at least $100 billion a year 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 Federal Government’s Renewed Hope programme.

“What is important for countries and companies, and what analysts look for, is that the forecast is consistent with what the organization says it is doing. Are we funding the strategy? Yes! We have a renewed Hope Strategy that we are funding and will continue to leverage revenue from tax authorities to achieve and increase funding from domestic as well as international capital to support the implementation of this long-term goal,” he said.