Nigeria’s parliament approves ₦6.2trn fresh injection into 2024 budget

Nigeria's National Assembly has recently approved President Bola Tinubu's request for a fresh injection of ₦6.2 trillion into the 27.5 trillion naira 2024 budget. This move comes amidst concerns surrounding the country's revenue base and the sustainability of such a large budget size. To shed light on the implications of this decision and the amendments to the 2023 Finance Act, Kenneth Erikume, Partner and Director of Tax Reporting and Strategy at PwC Nigeria, joined CNBC Africa for a discussion. Erikume highlighted several key points regarding the government's budget adjustments and tax proposals that aim to address the country's economic challenges. One of the major reasons behind the budget increase is the need to keep up with inflation and fund initiatives outlined by the Presidential Economic Coordination Council. Additionally, there have been calls for wage increases, including a revisitation of the national minimum wage, leading to a higher wage bill for the government. To cover these expenses, the government plans to allocate 3.2 trillion towards infrastructure development and another 3 trillion for increased wages. With the rising costs, sustainable revenue generation becomes crucial as excessive borrowing could further strain the economy. However, Erikume expressed concerns about the effectiveness of proposed measures, such as a windfall tax on banks' profits in 2023. He noted that taxing realized profits may not yield the desired revenue due to accounting complexities and retrospective implications for banks. Moreover, the reintroduction of the sugar sweetened beverages tax poses challenges for businesses in the FMCG sector. Erikume highlighted the potential impact of higher taxes on consumer goods and the manufacturing industry, especially amid prevailing economic hardships and low purchasing power. He emphasized the need for fiscal incentives to stimulate consumption and stabilize the economy. As Nigeria navigates these financial decisions, it is essential to evaluate the consequences on various sectors and consider adjustments to support sustainable growth. Erikume's insights underscore the importance of thoughtful economic policies and strategic tax reforms in addressing the country's fiscal challenges.