Must you beg?
FG will be borrowing to partly finance the 2025 budget
Good morning, Big Brains. It’s officially seven days to Christmas, and the kids are up like mad. I went to get lunch this afternoon and saw a satisfied-looking little diva returning from what was obviously Christmas shopping with her mum. Must be nice.
- Chigor
Word count: ~ 1, 000
Reading time ~ 4 mins
Let’s get into today’s edition:
FG will be borrowing to partly finance the 2025 budget
Inflation is the Grinch nobody asked for
The Big Deal
FG will be borrowing to partly finance the 2025 budget
If we all planned our lives with the confidence of the Nigerian government, we’d be balling more and budgeting less. FG literally lives the baby girl lifestyle that we all dream of.
On Monday, December 16, the Minister for Finance and Coordinating Minister for the Economy, Wale Edun said that the Tinubu administration will be borrowing (again 💀) to finance Nigeria’s 2025 budget.
The full picture: FG has prepared a budget totalling ₦48 trillion, which the Federal Executive Council (FEC) approved. The thing, though, is that the country’s projected revenue (₦34.8 trillion) is less than what it plans to spend, leaving a ₦13 trillion deficit. But according to Wale Edun, the FG will gather this remaining money through domestic and foreign borrowing, but mostly domestic because the window for external financing is “narrow.”
Why is this a big deal?
Nigeria spends way more than it earns, and we’ll be kidding ourselves if we keep calling it a red flag. It deserves a stronger description at this point.
For starters, the Tinubu administration has already borrowed over ₦20 trillion from domestic investors within its first year, which is 117% more than the previous year.
Also, the Nigerian Bureau of Statistics (NBS) Nigeria’s Foreign Debt Report for the second quarter of 2024 showed that the country’s public stock debt (a combo of foreign and domestic debt) was ₦134.30 trillion. Out of that amount, the domestic debt was ₦71.22 trillion. See why this additional domestic borrowing the FG is planning on is far from cute?
Still wondering why we are hot and bothered about this domestic borrowing? We have a couple of reasons, but the crowding out of private investment is at the top of the list. The FG usually borrows through treasury bonds (and data shows it’s been doing this a lot). Now, If it continues to borrow money through these bonds, banks might increasingly favour lending to them (because it’s the FG and they’re a safer bet, duh) and ice out small businesses or startups, which will hugely stifle the growth of an already failing economy.
Already, Micro, Small, and Medium Enterprises (MSMEs) in the country are suffering and need a $160 billion bailout. Excessive domestic borrowing, the type the FG seems to be basing its 2025 budget, might give MSMEs a harder time than they already have to deal with.
The second thing bugging us about this budget is how messy the debt servicing situation will get. The FG is already in a debt trap where it has to incur more debt to service the debt already on its shoulders—The heavy borrowing it’s planning for 2025 is going to push the country further into an endless loop of death. We’re not just bothered by how embarrassing it’ll look; we’re also concerned that the government will use whatever small money it makes to pay this mounting debt, leaving little or no room for important stuff like education, infrastructure, and healthcare. A great example of this is the country spending 96.3% of its revenue on loan repayment in 2022.
Even more worrying is that the government might throw us into generational gbese by possibly seeking a quick fix to its debt problem. How? If Nigeria keeps spending more than it earns, stacking up debts, the CBN, in an attempt to fix it, might print more money, leading to hyperinflation where the price of basic items skyrockets like crazy. We are talking about something as simple as a loaf of bread costing up to ₦50,000. Don’t say “It can never be us” — the citizens of Venezuela and Zimbabwe probably said that, but it ended up being them like mad.
As much as we hate to say it (because it’s silly, really), we just have to hope for the best, and hope is hardly a strategy.
Inflation is the Grinch nobody asked for
Nigerians can’t catch a break because, on top of all that they’re facing, inflation has jumped out of nowhere to volunteer for the role of Grinch that nobody asked for.
On Monday, December 16, the National Bureau of Statistics (NBS) released its latest Consumer Price Index (CPI) report showing that Nigeria’s headline inflation rose to 34.6% in November, while food inflation rose to 39.93% from 32.84% in November of 2023.
The NBS report also shows that more than half the country (19 states) recorded a food inflation rate of over 40%, with some states recording as high as 51%. According to NBS, the culprits were high transportation costs, supply chain disruptions, and insecurity. Some of the states which recorded these wild food inflation rates include the Federal Capital Territory (FCT), Enugu, Niger, Kaduna, Ebonyi, Edo Anambra, and Sokoto.
What does this mean?
Seeing as these figures are from November, this means the inflation is likely to stay put across these states until Christmas (or beyond), due to increased seasonal demand and already-existing challenges like supply chain disruptions, insecurity, and rising transportation costs.
Essential Christmas (and all-around) staples like rice, maize, palm oil, and yam, which have been particularly affected by the inflation, will now be as precious as gold for many, making life even harder for tons of Nigerian households in a season that is supposed to be jolly.
Since 2023, when President Tinubu pulled the rug from underneath Nigerians’ feet by removing the fuel subsidy and floating the Naira, Nigeria has hardly remained the same. It has been plunged into its worst economic crisis on record, and it continues to show in things like food inflation, which has obviously sworn not to let us forget even for a minute that we are in for a long ride, not even on holidays as special as Christmas.
This Week’s Big Question
“What is your favourite Christmas memory?”
Rolake’s response– “Adulthood has wiped my memory with sandpaper.”
You can also share your response here, and if it’s as interesting as Rolake’s, we’ll feature it in the next edition.
The Big Picks
DR Congo Sues Apple Over Alleged Illegal Mineral Exploitation: The Democratic Republic of the Congo says that Apple illegally bought supplies from conflict-ridden parts of the country as well as East Rwanda, falsely presenting them as clean
Reps probe non-delivery of 2,000 tractors, other equipment promised by Tinubu: Lawmakers in Nigeria’s House of Representatives have launched an investigation to determine why the Tinubu administration did not deliver on the 2000 trucks and 100 harvesters it promised in 2023.
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