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Eregha: $1tn Economy Possible in Nigeria with Coordination of Monetary and Fiscal Policy

If you look at the structure of the budget, I didn’t see any serious departure from the previous budgets.

A professor and consultant of the Nigerian economic summit group (NESG), Perekunah Eregha has said that the $1Tn Economy of President Bola Tinubu is possible with proper coordination of monetary and fiscal Policy.

Eregha made this known in an interview with ARISE NEWS on Wednesday as the president gets set to present the 2024 budget to the national assembly.

“A 1 trillion economy in seven years is possible. The only problem is the coordination of both the fiscal and monetary policy, the transparency around those policies and then spending on quality expenditure, which is focusing on reducing cost of governance and ensuring efficiency of spending. This is because our fiscal policy has a way of eroding the benefits of policy decisions or expectations that we have.

“My point is, yes, it is possible, however, we need to estimate what I call what will be the financing need of that kind of GDP that we are looking at for a one trillion economy. If we put our economy on the same pedestal, we would need about 30% of that amount to be invested from now till then.

“You know the president has the vision of taking this economy to a 1 trillion dollar economy by 2026, now if we are going to have a growth rate of about 4% in this current budget, and if you look at the MTEF  that this budget is coming from and that by 2026 we are going to have a GDP of about 292 trillion naira, if you put that on the exchange rate assumption of the MTEF, that means our economy will still be about 500 billion dollars, not trillion.

“So, my advice to the government is that as they are taking a look at revising the MTEF, they need to know that there is a vision from the president to take this economy to 1 trillion. So, if you go on this same part of 4% growth and with the assumption and the structure of this economy, I don’t think that by 2026 we are going to have an economy that will be 1 trillion dollars and this is one caveat area that this government should look into.”

Eregha also said that the 2024 budget had no departure from the Previous Budgets, adding that there are comparable metrics with the 2023 budget.

He said “N27.5trn in naira terms represents an increase in the 2024 budget, but benched on the dollar it is significantly lower, however, there are comparable metrics with the 2023 budget, debt service to revenue across both budgets is about 50% also, the ratio of capital expenditure to recurrent expenditure is 70:30 which is curious as the government is supposed to have more revenue from the unification of the exchange rate and subsidy removal.

“If you look at the structure of the budget, I didn’t see any serious departure from the previous budgets that we have been seeing. The 2023 budget was about 60% and in actual sense, from January to July, we have a 2023 budget that has a debt service to revenue ratio of about 75% and so it means that there is no serious departure in terms of these dynamics.

“If we are going to have unification, which is going to rake in more revenue because customs will have a new valuation of their custom duties, we should expect more revenue coming in from there. On the oil side also because of unification, there should also have more revenue from there. Also, subsidy removal, we were informed that it was going to free up resources for the government. I expect that in real terms, these budgets should be far higher in terms of expenditures or in terms of revenue, and should have a significant difference because 2023 was about 11 trillion and this one is about  18trillion. So, in dollar terms or if you put it in real terms, I didn’t see any significant difference.”

Chioma Kalu