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 drive economic growth, with a 4.2% expansion in gross domestic product seen in 2022, Buhari said.
The government expects to raise 10.1 trillion naira in revenue, 3.2 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 largest crude producer.
The spending increase will widen the budget deficit to 6.3 trillion naira, or 3.4% of GDP, exceeding a legal threshold of 3% stipulated in Nigeria’s fiscal responsibility law. “We need to exceed this threshold considering our collective desire to continue tackling the existential security challenges facing our country,” the president said.
New Loans
To plug the funding gap, the government will raise an additional 5 trillion naira in loans. It also expects to raise 90.7 billion naira through asset sales and draw down on loans of 1.16 trillion naira that were secured for specific development projects.
Buhari lamented the government’s continued subsidization of fuel when the money could have been put to better use elsewhere.
He announced the scrapping of subsidies in March 2020 after crude prices plunged, but they have since rebounded, and the government has left pump prices unchanged because it fears that raising them could stoke social unrest. The national petroleum company said in March this year that it was spending an average of 120 billion naira a month on the subsidies at a time when the crude price was averaging $70 a barrel.
A provision in a new oil law Buhari signed last month stipulates that fuel should be sold at market-determined prices. Labor unions have hardened their stance against price deregulation, the president said, without stipulating how he would respond.
Nigeria imports all its refined fuel, because its four oil refineries are moribund. Many Nigerians see the fuel subsidies as the only benefit they derive from the nation’s mineral riches.