The President of Nigeria yesterday presented the 2021 appropriation bill (Budget) to the joint session of the national assembly. The appropriation with an expected expenditure of N13.08tn has been tagged “Budget of Economic Recovery and Resilience”.
An aggregate sum of N3.85 trillion is expected to be available for capital projects in 2021, while N6.11 is expected for recurrent expenditure as well as sinking fund. Debt servicing from the 2021 budget is pegged at N3.12 trillion.
The expected revenue is pegged at N7.88 trillion giving a budget deficit of N5.2 trillion.
BUDGET ASSUMPTIONS
– $40 per barrel oil price benchmark , 1.86million barrel oil per day
– N379 to a US dollar exchange rate
– GDP growth rate of 3%
– Inflation rate of 11.59%.
OUR SUMMARY
The Franco-Nigerian Chamber Commerce and Industry commends the federal government for the quick presentation of the appropriation bill and believes this will be approved by the senate before the year end, giving a clear picture of the government expenditure drive for a full calendar year.
The debt servicing to revenue for the 2021 budget seems very significant, considering a deficit budget of about N5.2trillion which would require further borrowings to finance. We feel the cost of governance can be mildly considered while broadening the tax net and capturing the informal sector in the scheme.
We feel the assumptions of the 2021 budget are overly optimistic considering the reality as a result of the corona virus. A GDP growth rate of 3% from a current negative of -6.1% seems unrealistic, also the nation’s inflation mostly arising from increase in food prices might not relax in the near future. The oil price of $40pb considering the current price of about $42pb is a bit optimistic which makes the projected revenue unrealistic.
We must also commend the Federal government for its commitment towards rural electrification in the 36 states of Nigeria, the drive to complete the 2nd Niger bridge which would ease movement of goods, and the earmarked funds for projects such as the Lagos-Ibadan-Kano Line, Abuja-Kaduna Line, Port-Harcourt-Maiduguri Line and Itakpe-Ajaokuta-Warri rail line respectively. This speaks to the government drive in bridging the infrastructure gap in Nigeria. That being said, we also advocate for a quick passage of the Petroleum Industry Bill into law expected to boost confidence and attract further investments into the oil and gas sector.
