Lagos Chamber of Commerce and Industry (LCCI), on Monday, described the factors and suppositions that informed the proposed federal government’s 2025 budget as too optimistic and fragile to work with in view of current economic realities in Nigeria.
LCCI expressed its views in a statement, titled, “LCCI Statement on 2025-2027 Medium-Term Expenditure Framework of Federal Government,” which proposed that the federal government would spend N47.9 trillion to run the economy in 2025.
But Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, insisted that President Bola Tinubu was charting a way to lift many Nigerians out of poverty.
Edun spoke on Monday in Bauchi at the opening ceremony of the 2024 National Council on Finance and Economic Development (NACOFED) conference.
According to LCCI, “With federal government debt already about N134 trillion as of June 2024, inflation reaching a new high of 33.88 per cent as of October, and businesses burdened with a high Monetary Policy Rate at 27.25 per cent, the federal government has a narrow bridge to navigate choices of policy options.”
The statement issued by Director General of LCCI, Dr. Chinyere Almona, said the chamber’s review indicated that “the key parameters and assumptions on which the 2025 budget is being proposed appeared to be too optimistic in the face of current realities as recorded in the economic and social indicators”.
Almona explained, “The assumption of an exchange rate at N1,400 is too fragile to work with against the current average of above N1,600 to a dollar in both the official and parallel markets.”
She added, “Assuming an inflation rate at 15.8 per cent does not reflect the unbaiting factors pushing up both the headline and food inflation.
“With inflation rising to 33.88 per cent as of October 2024, it is unrealistic to assume a steep 51 per cent crash within a year.”
Almona stated that the current challenging economic conditions were mostly fuelled by the inflation rate and the exchange rate.
She advised the government to reconsider the apparently overambitious assumptions for the 2025 federal budget.
The LCCI director-general stated, “Beyond the assumptions and projections, the creation of an enabling environment for the private sector to thrive, and the clarity of policy direction in the economy are critical to achieving the projected growth rate of our Gross Domestic Product (GDP) in 2025.”
LCCI also declared that the country’s public debt appeared unsustainable, and said it was worsened by the projected deficit at N13.08 trillion and new borrowings of N9.22 trillion.
It said, “Further breakdown indicates that debt services are proposed to increase by 91.2 per cent to N15.38 trillion, which is equivalent to 32.1 per cent of the total budget. This appears to be unsustainable. The situation is further worsened.”
LCCI urged the Central Bank of Nigeria (CBN) to sustain its Ways and Means Advances to the federal government at a five per cent limit for the fiscal years 2024-2025. The federal government should sustain fiscal discipline by complying with the Fiscal Responsibility Act in budget management and borrowing, the organisation said.
The chamber also stated, “Non-oil revenues, such as taxes, customs duties, and surpluses from government agencies, are all subject to volatility in the economy.
“Current economic downturns, tense business environment, ongoing debates on tax policies, and shifts in consumer behaviour can impact non-oil revenue performance.
“In the face of current realities, we urge the government at all levels to be more proactive in respect of nature-induced casualties, climate change impacts, and damages caused by human activities.
“In recent months we have recorded massive destruction of lives and property due to climate-related factors.
“We, therefore, expect the legislative arms at all levels of government to appropriate more funds to tackle climate change adaptation and mitigation nationwide.”
LCCI advised the government to focus on sectors that had shown resilience and relevance, and were key drivers of current economic indicators, like inflation, exchange rate, unemployment, and interest rates.
It stated, “We, therefore, recommend more investments in food production (crop, livestock, fisheries, and poultry), power supply, the fight against insecurity, and becoming more intentional about having a robust and stable policy and regulatory environment.
“Other very critical areas needing coordinated and harmonised monetary and fiscal policies are power supply, energy costs, supply chain disruptions due to insecurity, reducing youth unemployment through skills acquisition, and a concerted effort towards empowering Small and Medium Size Enterprises.”
Meanwhile, Edun told the NACOFED conference that Tinubu was charting a way to lift Nigerians out of poverty.
He said the president had left no stone unturned in his effort to ensure that life was made easy for Nigerians, as he had come up with policies and programmes that were beneficial to the greatest majority of citizens.
The minister stated, “President Tinubu’s administration inherited assets and liabilities and there is no looking back but it’s a question of charting a way of looking forward and making plans to, first of all, stabilise the economy.
“He is working hard to get investments through private sector investors, both domestically and foreign direct investors, to increase the productivity of Nigeria, grow the economy, create jobs and, of course, move a large number of people out of poverty.
“When you try to look at where we are now, essentially, the major macroeconomic reforms are in place.
“He has stopped the bleeding that was costing five per cent of the GDP of the country every year that was adding no value except to a few people and neighbouring countries that were benefiting from what was happening with the fuel subsidy and as well, a related foreign exchange subsidy.”
Edun added, “The benefits were saved for just a few and a mass of Nigerians were not getting any benefits from those structures.
“They have been removed and the federation account will benefit from an increased flow of resources to the federal, states and local governments and so much more can be done in terms of investing not just in infrastructure but in social services, like education and health.”
The minister assured that the road was clear for private sector investors and the country was on the road to industrialisation based on what was happening in the petroleum refining sector.
He said crude oil was not just being shipped abroad but it was also being refined locally to give petroleum products and raw materials to industry.
He called on all Nigerians to be encouraged that the country now had a more stable and sustainable macroeconomic environment that was friendly to investors.
Tinubu said that would make it possible not only for them to produce competitively for the domestic market but also to export.
He appreciated the organisers of the conference for their effort to make the gathering a reality and also thanked Governor Bala Mohammed for his hospitality.
The Bauchi State governor said hosting the event was a privilege, and it had proven the importance of collaboration in addressing the economic challenges and opportunities before the country.
“Your presence is a testament to your commitment to advancing Nigeria’s financial and economic landscape,” the governor said.
Dike Onwuamaeze and Segun Awofadeji
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