By Nkiruka Nnorom

There are indications that the federal government (FG) will exceed the proposed N6.06 trillion borrowing from the domestic capital market to fund part of the 2024 budget deficit.

Analysis at Cordros Capital stated this in their 2023 macroeconomy review and outlook for 2024 titled: “Unravelling the Tapestry: Crisis of Confidence?”, saying that at the current run rate, the aggregate domestic borrowing by the FG this year will settle at N7.27 trillion.

The federal government had in the 2024 budget estimated N27.50 trillion total expenditure and N18.32 trillion revenue, leaving the FG with a N9.05 trillion fiscal deficit.

According the FG, the fiscal deficit is expected to be financed by a combination of domestic borrowings (N6.04 trillion), foreign borrowings (N1.77 trillion), multilateral/bilateral loan drawdowns (N941.19 billion), and privatisation proceeds amounting to N298.49 billion.

However, the analysts in the report posited that the federal government may not be able to tap the eurobond market in 2024 due to the high interest rate environment in international markets.

They projected that N2 trillion will be passed through the Central Bank of Nigeria (CBN’s) Ways & Means advances; N1.77 trillion from multilateral financing, leaving N6.80 trillion to be borrowed in the domestic capital market in 2024.

They said: “In framing our views on the possible demand and supply imbalance, we assessed the sources of financing and magnitude of inflows expected for all sources, save for domestic borrowings. For foreign borrowings, we expect global interest rates to remain prohibitively high in 2024 as central banks globally are only expected to halt hiking cycles in the half year 2024 (H2’24).

“The mantra, “higher-for-longer” seems to be a uniform theme for now; thus, we do not expect the federal government to tap the Eurobond market in 2024. Elsewhere, we expect multilateral financing to be sourced from the World Bank and the IMF as the country has implemented many suggested reforms from prior years which had precluded sourcing of non-project tied funding.

“Overall, we expect the FGN to increase its domestic debt issuances while maintaining its use of the Central Bank of Nigeria (CBN’s) overdraft facilities (Ways & Means), albeit lower than 2023 full year levels.”