Dr. Muda Yusuf, Founder of the Centre for the Promotion of Private Enterprise and immediate Past Director General, of the Lagos Chamber of Commerce and Industry (LCCI) has said that the country’s projected revenue of approximately N18 trillion for the 2024 budget appears under threat due to declining oil output and growing debt. 

Yusuf stated this at Nairametrics’ Q3 Microeconomic Outlook Webinar tagged ‘Renewed Hope or Reality Check’  

Yusuf noted that the Nigerian debt-to-GDP ratio, which was previously below 50%, is now approaching that threshold, raising concerns about debt servicing. 

“We are beginning to see that the revenue projection of about 18 trillion for the 2024 budget may be under very serious risk. 

 It’s now looking a bit optimistic, given what is happening to our oil output. Given the fact that we are now having challenges with our debts. Our debt is growing at a level that is making some of us very uncomfortable, particularly from the point of view of the debt service. 

 Our debt-to-GDP ratio, which used to be far, far below 50, which used to be around 20 to 23, 25, is now close to 50%,” he said. 

Muda noted that he appreciates that one of the first actions the administration of Bola Tinubu took upon taking office was addressing tax and fiscal reforms, which led to the immediate establishment of the Presidential Committee on Tax Reforms.  

“The results and reports from this committee have been unveiled this year, with some still in progress. We anticipate further improvements in tax revenue, particularly through leveraging technology to enhance revenue collection,” he said. 

He noted that in the first six months of the administration, there was notable fiscal consolidation, which involved optimizing revenue and reducing expenditure.  

He added that the reforms significantly improved revenue performance, particularly with the removal of subsidies and foreign exchange reforms. 

According to him, however, in the second half of the year, the country beginning to see risks to public finance and fiscal consolidation. 

Yusuf noted that at the beginning of the current administration, the removal of the oil subsidy significantly improved Nigeria’s fiscal situation. However, the recent changes in exchange rates and the relative strength of the Nigerian currency compared to neighbouring countries have led to increased smuggling and subsidies.  

He said this development has negatively impacted the Nigerian National Petroleum Corporation’s (NNPC) ability to support government revenue and the federation accounts, posing a substantial risk to public finance and fiscal consolidation. 

“A draft stabilization plan, which was subsequently withdrawn, indicated that the subsidy might reach N5 trillion or more by the end of the year.  

This presents a challenging situation both socially and politically, as the continuous withdrawal of the subsidy is difficult. Nonetheless, the reintroduction of the subsidy threatens fiscal consolidation and financial stability,” he said. 

He noted that the ongoing forward commitments to source foreign estates, which existed before this administration, remain a significant concern adding that efforts to secure bank loans and forward commitments continue to pose challenges. 

“These issues have major implications for the NNPC’s capacity to support domestic refining capabilities. In addressing fiscal sustainability, it is crucial to optimize revenue and rationalize expenditure.  

More effort is needed in this area, as progress has been insufficient so far. The social pushback against some reforms adds to the dilemma,” he said. 

Yusuf said, the government has offered concessions on taxes and import duties, which, while desirable, have implications for revenue.  

He stated that the current revenue and fiscal balance situation is worrisome adding that to address this, it is essential to demonstrate courage in reducing expenditure and potentially cutting down on non-critical projects.