Uwaleke Urges FG to Fund 2025 Recurrent Budget with IGR, Not Borrowed Funds
Ndubuisi Francis in Abuja
President of the Capital Market Academics of Nigeria (CMAN) and former Commissioner for Finance, Imo State, Prof. Uche Uwaleke, has advised the federal government to discontinue the practice of funding recurrent expenditure with borrowed funds but to strictly fund from internally generated revenue (IGR) sources.
Uwaleke, gave the advice in Abuja while delivering the inaugural CMAN Fellowship Lecture and investiture ceremony with the theme, “The 2025 Proposed Budget and Capital Market Financing Options,” in partial fulfillment of the requirements for the award of Fellowship Certificate of the Capital Market Academics of Nigeria to some distinguished Nigerians.
He observed that a common feature of annual budgets in Nigeria was the wide and adverse discrepancies with respect to capital expenditure.
“At present, the capital component of the 2023 Appropriation Act inclusive of the 2023 supplementary budget as well as the 2024 Appropriation are being implemented concurrently,” he observed.
Citing the Medium Term Expenditure Framework (MTEF) document (2025-2027), he explained that only N3.7 trillion out of the N9.2 trillion budgeted between January and August for capital expenditure (Capex) this year had been spent, leaving a shortfall of over N5 trillion.
“This unfavourable outcome may not be unconnected with incidents of funding mismatch and the general financing arrangements around capital spend,” he stated, adding that a major issue with government budgets in Nigeria over the years had to do with borrowing to finance recurrent spending.
Going by the proposed 2025 budget, he said the projected federal government revenue of N34.82 trillion would be sufficient to take care of total recurrent expenditure (debt and non-debt) of N30.02 trillion, leaving about N4.8 trillion available for capex (if budget benchmarks are met).
“By implication, the projected deficit of N13.08 trillion which will “largely be financed by domestic borrowings, considering the narrow window for external borrowing,” should be channeled to capex.
“To achieve a favourable outcome in the implementation of the 2025 capital budget this time around, the FG is advised to explore innovative financing options such as the ones highlighted in this lecture,” he said.
Uwaleke pointed out that domestic debts are dominated by FGN Bonds (at 78 per cent), most of which, he said, do not appear tied to self-liquidating projects, unlike Sukuk and Green bonds which are linked to infrastructure.
Uwaleke, who is also the Director, Institute of Capital Market Studies, Nasarawa State University, Keffi, regretted that real infrastructure-tied bonds, including Sukuk and Green bonds, represent an insignificant proportion (2 per cent).
He lent credence to Section 41 of the Fiscal Responsibility Act (FRA 2007), which provides that “government at all tiers shall borrow for capital expenditure and human development,” and that such borrowing should be long-term and concessional in nature.
However, the university don lamented that budget deficit financing in recent years had relied significantly on external borrowing.
Urging the federal government to de-emphasise Eurobonds financing option because of their expensive rates, he stated that the weight of non-concessional Eurobonds in the external debt portfolio had grown substantially.
“Although Eurobonds represent about 35% of the country’s external debt stock, they now account for 55 percent of the cost of external debt service,” he affirmed.
Dissecting the proposed 2025 budget with an aggregate expenditure of N47.9 trillion, debt recurrent expenditure of N15.81 trillion, non-debt recurrent expenditure of N14.21 trillion, and capital expenditure of N16.48 trillion, he explained that the federal government’s revenue was projected at N34.82 trillion while the budget deficit was projected to be N13.08 trillion.
He recommended that the recurrent expenditure of N30.02 trillion (including the non-developmental portion of capital spending such as the purchase of cars) should be financed via government revenues and not borrowing funds.
According to him, capital expenditure should be financed via the capital market plus any surplus from government revenues, providing a long list of capital market funding options that will benefit the country.
They include, among others, infrastructure bonds (domestic and sovereign Sukuk, Green bonds), and Panda bonds (instead of expensive Eurobonds), securitisation, public-private partnerships (PPPs), privatisation proceeds, and long term funds from development partners.
Nigerians who bagged CMAN Fellowship yesterday were the Chairman, Senate Committee on Capital Market, Sen. Osita Izunaso; Chairman, Senate Committee on Banking, Insurance and Other Financial Institutions, Sen. Adetokunbo Abiru; Chairman, House of Representatived Committee on Capital Market and Institutions, Hon. Solomon Bob; Group Chairman, Nigerian Exchange Group (NGX), Dr. Umaru Kwairanga; a former Vice Chancellor, Nasarawa State University, Prof. Muhammad Mainoma, and two former Directors Heneral Securities and Exchange Commission (SEC), Suleiman Ndanusa and Lamido Yuguda, among others
