Nigeria Budget 2021 Proposal: Analysed

On 8th October 2020, The Nigerian president presented the 2021 proposal. According to his speech, the president noted that the Nigerian economy is currently facing serious challenges, with the macroeconomic environment being significantly disrupted by the Coronavirus Pandemic.

The country’s Real Gross Domestic Product (‘GDP’) growth declined by 6.1 per cent in the second quarter of 2020. This ended the 3-year trend of positive, but modest, real GDP growth recorded since the second quarter of 2017.

The presidency has re-emphasize that Nigerians expect that the 2021 Budget will contain only implementable and critical projects, which when completed, will significantly address current structural challenges of the economy, improve the business environment and accelerate economic recovery, but a closer look at the figures says otherwise.

This is what we know about the budget proposal numbers;

Major Assumptions for Nigerian 2021 Budget

• Benchmark Oil Price: $40
• Oil Production Estimate: 1.86 million bpd
• Exchange Rate: ₦379/$
• GDP Growth: 3%
• Inflation: 11.95%

Budget Revenue Projections

• Total Revenue Federally Distributable: ₦8.433 trillion.
• Total Revenue Available (Estimate Inclusive of Grants, Aids and Revenues from 60 Government-Owned Enterprises): ₦7.886 trillion
• Oil Revenue: ₦2.01 trillion.
• Non-Oil Revenue: ₦1.49 trillion

Planned Budget Expenditure — ₦13.08 trillion

• Sinking Fund: ₦220 billion
• Non-debt Recurrent Costs: ₦5.65 trillion
• Statutory Transfers: ₦484.49 billion
• Personnel Costs: ₦3.76 trillion
• Debt Service: ₦3.124 trillion
• Overheads: ₦625.50 billion
• Pensions, Retirees’ Benefits: ₦501.19 billion

Budget Deficit

The 2021 Budget deficit (inclusive of Government-Owned Enterprises and project-tied loans), is projected at ₦5.20 trillion. This represents 3.64% of estimated GDP and is slightly above the 3% threshold set by the Fiscal Responsibility Act, 2007.

The deficit is expected to be funded as shown below:

• New borrowings: ₦4.28 trillion
• Privatization Proceeds: ₦205.15 billion
• Drawdowns on multilateral and bilateral loans: ₦709.69 billion

Government’s Budget Implementation Strategy:

President Buhari stated that the Federal Government is implementing
several measures to overcome fiscal constraints as it leverages on technology and automation, as well as monitoring of Independently Generated Revenues so as to reduce revenue leakages and redirecting scarce resources to the poor and vulnerable.

Some of the strategies include:
• Deregulation of the price of petroleum products;
• Ongoing verification exercise with Integrated Payroll and Personnel Information System (System); and
• Implementation of service-based electricity tariffs.

According to the President, the new petrol pricing regime, ongoing IPPIS verification exercise and new electricity tariffs have released trillions of Naira for allocation to other priority areas.