Utica Capital Projects over N15tn Deficit in FG’s 2024 Budget

Dike Onwuamaeze

A Lagos-based asset management firm, the Utica Capital Limited, has projected that the federal government would borrow more, and even resort to ways and means, to fund the deficit component of its 2024 budget, which it projected to hit N15 trillion due to envisaged shortfall in anticipated revenue.

President Bola Tinubu recently signed a budget of N28.78 trillion that comprised  N19.52 trillion revenue and N9.18 trillion deficit.

But the Utica Capital, which is licensed by the Securities and Exchange Commission (SEC), in its 2024 Economic Outlook titled: “A Slow Ascent to Economic Stability,” projected that the government would record total revenue of N12.8trillion for 2024 and a higher budget deficit for 2024.

It based its projection on the assumption that achieving the projected  N19.52 trillion revenue for 2024, particularly the oil revenue’s portion, is a largely optimistic target.

It opined that combined effects of challenges in the Niger Delta that had been hampering oil production and the downward review of Nigeria’s production quota to 1.50 mbpd by OPEC would deny the government its envisaged N19.6 trillion revenue.

The Utica Capital, however, observed that the proposed tax committee’s initiative to standardise and broaden the tax base is expected to bolster non-oil revenue.

It also projected that Nigeria’s public debt would witness a surge in 2024. “The 2024 fiscal year budget reveals a N9.18 trillion deficit, with fresh borrowings expected at N7.8trillion (77.4 per cent) through domestic borrowings and 22.6 per cent via foreign debt.

“Also, going by our expectations for revenue, we expect the government to take on more debt to fund the deficit. In our opinion, this signals an increased reliance on debt, with the potential use of the Central Bank of Nigeria’s Ways and Means facility up to N1.8trn (15 per cent) of previous years revenue estimated at N11.5trillion.

“We also note the government’s decision to access concessionary loans from organisations like the International Monetary Fund (IMF) and World Bank for additional funding,” Utica Capital stated.

It projected that the Nigerian economy would grow by 3.4 per cent year-on-year in 2024.

“Given that the persistent challenges faced by sub-sectors like manufacturing and agriculture that could impact their growth prospects in the near term, we expect modest growth in these sectors in 2024.

“However, we are positive about growth prospects in the ICT, financial & insurance, real estate and the mining & quarrying sectors, for 2024.

“On a balance of factors, we project that Nigeria’s economy will grow by 3.4 per cent Y-o-y in 2024,” it said.

The Utica Capital also identified expected drivers of growth in 2024. These included the adoption of 5G network, sustained technological and digital advancement, increased underwriting profitability, FX revaluation gains and wider e-commerce coverage.

Others are increasing free and bilateral trade and zones agreements (AFCTA and LFTZ), waning impact of fuel subsidy removal, and encouragement of local manufacturing, Dangote Refinery operations that should positively impact the manufacturing sector.

In addition, increased allocation of capital expenditure in the 2024 budget and Pensions Commission (PENCOM) guideline should improve production activities in real estate sector.

Nevertheless, it stated that exchange rate depreciation and challenges with FX sourcing for importation high borrowing cost for manufacturers, increase in non-performing loans, increasing inflationary pressures and limited port access are expected to drag down the growth in 2024.

It also projected that inflation rate would hover between 26.1 per cent and 31.6 per cent in 2024.

“For 2024, we anticipate a sustained upward trend in inflation due to persistent legacy issues identified. The expectation of food shortage, higher PMS price, poor road infrastructure and continued Naira devaluation will pressure the headline index.

“However, we opine that the federal government’s measures to boost agricultural output, coupled with the high base effect of 2023, may lead to lower inflation figures in the latter part of 2024,” Utica Capital said.