The Senate received the 2024-2026 Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) from President Bola Tinubu, on Tuesday, October 31. It is expected that the preparation of the 2024 national budget will be predicated on the indices and parametres contained in the approved version of the 2024-2026 MTEF/FSP. However, if the 2024 budget is expected to be prepared and submitted to the National Assembly for possible approval before the end of December 2023, the currently debated 2024 – 2026 Medium Term Expenditures Framework (MTEF) document may no longer form the basis for the preparation of the 2024 annual budget. If that is the case, the implication is that the intent of the Fiscal Responsibility Act 2007 for the timing of the preparation, presentation, and approval of the MTEF would not have been met.
Projection of Key Macroeconomic Parameters in the 2024-2026 MTEF
| Description | 2023 | 2023 Revised Forecast (July 2023) | 2024 | 2025 | 2026 |
| Oil Price Benchmark (US$/b) | 75.00 | 75.00 | 73.96 | 73.76 | 69.90 |
| Oil Production (mbpd) | 1.69 | 1.72 | 1.78 | 1.80 | 1.81 |
| Exchange Rate (N/$) | 435.57 | 700.00 | 700.00 | 665.61 | 669.79 |
| Inflation (%) | 17.16 | 17.16 | 21.40 | 20.30 | 18.60 |
| Non-Oil GDP (N’bn) | 214,049.50 | 214,049.50 | 223,989.20 | 249,188.00 | 278,251.70 |
| Oil GDP (N’bn) | 11,457.80 | 11,457.80 | 12,316.00 | 13,225.70 | 14,272.00 |
| Nominal GDP (N’bn) | 225,507.00 | 225,507.00 | 236,305.20 | 262,413.70 | 292,523.70 |
| GDP Growth Rate (%) | 3.75 | 3.75 | 3.76 | 4.22 | 4.78 |
| Imports | 24,385.60 | 24,385.60 | 32,453.50 | 33,401.30 | 34,515.40 |
| Nominal Consumption (N’bn) | 121,933.10 | 121,933.10 | 163,227.80 | 189,992.80 | 218,594.00 |
A general overview of the table above suggests that the current administration is very optimistic and ambitious in its projections. However, it may look unrealistic if the optimism is not based on any macroeconomic foundations of recent trends.
International price of crude oil as recorded by the Central Bank of Nigeria (CBN) between September 2022 and August 2023 shows an overall average price of US$85.53 per barrel. The implication is that there is a difference of an average of US$11.57 per barrel between the benchmark price of US$73.96 per barrel for the 2024 fiscal year and the observed average price between September 2022 to August 2023. Based on the observed average price, the projected benchmark price is rather small.
There is a huge difference between the projected oil production volume in the MTEF document and the observed average production volumes in recent months. By implication, the projection of daily oil production volume seems rather too optimistic.
The exchange rates projected in the 2024 – 2026 MTEF document are not consistent with any economic projected expectation based on the current trend. There may indeed be expectations that the value of the local currency will improve in the coming weeks. However, actual improvement in the value of the currency will not be based on mere expectations.
The projected inflation rates presented in the MTEF document seem to be too optimistic in comparison to the current inflation trend. The observed inflation rate left the neighbourhood of 21 percent since February 2023 and has remained above 22 percent since then. It is therefore not clear the basis upon which the inflation rate for the 2024 fiscal year is projected to stand at 21.40 percent, whereas the actual inflation rate got up to 26.72 percent as at September 2023.
There is also the need to revise the macroeconomic forecasts to reflect existing realities, especially the exchange rate and crude oil price/production volumes. As long as the current administration continues to support a floating exchange rate, it is not rational to project an exchange rate that is much lower than the market rates.