The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) has warned that extending the capital component of the 2023 budget to December may increase the money supply in circulation and undermine the Central Bank’s efforts to control inflation.
The president of the Association, Dele Oye, made this available in a statement seen by Nairametrics on Tuesday.
According to Oye, it is commendable on the part of the federal government to want to extend the capital expenditure of the 2023 budget to bridge the infrastructure deficit in the country.
He said that this move, however, can also mean injecting more money into the economy, which might lead to inflation.
Oye added that while the CBN is working to control inflation through monetary tightening policies, it is important for the federal government to avoid inflating the money supply with measures like the extension of the 2023 budget.
“The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) commends the Federal Government’s decision to extend the implementation of the capital component of the 2023 budget to December.
“However, while the intention behind this extension is commendable, it is imperative to consider the broader economic implications, especially in light of the Central Bank of Nigeria (CBN)’s current monetary policies aimed at reducing the amount of naira in circulation.
“The decision to inject substantial funds into the economy through capital expenditures must be carefully managed to avoid adverse effects such as inflation and currency devaluation,” NACCIMA said.
Risk of budget duplication
Furthermore, the Association also advised against the risk of budget duplication in the process of running both the 2023 and 2024 budgets concurrently.
Budget duplication refers to a situation where the same financial allocations, projects, or expenditures are listed more than once within a budget.
NACCIMA said such action will lead to inefficiency in terms of allocation and utilization of funds.
Accordingly, Oye advocated for a more transparent process in the implementation of the components of the extension of the 2023 budget to guard against this potential abuse in allocation.
“Another critical aspect to consider is the transparency and efficiency in the utilization of the extended budget funds.
“While the details of the projects involved in this extension have not been provided, there is an inherent risk of duplication in the current budget.
“Duplication not only wastes valuable resources but also undermines the effectiveness of public spending,” Oye added.
What you should know
Earlier yesterday, Nairametrics reported that the money supply in circulation neared N100 trillion despite CBN’s sustained position on monetary tightening policies.
The latest money and credit statistics data from the Central Bank of Nigeria (CBN) reveals a month-on-month (M-o-M) increase of 2% from N96.97 trillion the previous month and a year-on-year (Y-o-Y) growth of 78% from N55.69 trillion in the same month of the previous year.
Analysts are concerned that the extension of the 2023 budget could lead to an increase in the money supply in the country, potentially surpassing the N100 trillion benchmark.
Moreover, the extension implies that the federal government will inject more money into the economy, heightening the risk of increased inflation.