Nigeria’s government finalized plans to ramp up spending and borrowing as it grapples with reviving an economy that shrank by the most in a quarter century last year due to the coronavirus pandemic.
Expenditure is projected at 16.4 trillion naira ($39.7 billion) next year, or 17.7% more than initially proposed, President Muhammadu Buhari said in a budget presentation to lawmakers on Thursday. The increased spending will help propel economic growth, forecast at 4.2% in 2021, Buhari said.
The government expects to raise 10.13 trillion naira in revenue, 3.15 trillion naira of which will be generated from crude sales and taxes. The budget assumed an oil price of $57 a barrel, and that the country will pump an average of 1.88 million barrels a day. Nigeria is Africa’s larges crude producer.
The spending increase will widen the budget deficit to 6.3 trillion naira, or 3.4% of gross domestic product, exceeding a legal threshold of 3% provided by Nigeria fiscal responsibility law. “We need to exceed this threshold considering our collective desire to continue tackling the existential security challenges facing our country,” he said.
To plug the funding gap, the government will raise an additional 5 trillion naira in loans. Other incomes of 90.73 billion naira from sales of government assets and a drawdown of 1.16 trillion naira on loans secured for specific development projects will also help close the gap.
Limits imposed by OPEC+, production cuts and operational challenges could hinder efforts to raise more revenue from the oil industry, Ibunkunoluwa Omoyeni, an economist at Vetiva Capital Management Ltd., said by email.