•Spending plan based on oil price of just $38 a barrel
•Government will stick to borrowing limit of 3% of GDP


Nigeria’s government said it will boost spending by a fifth in next year’s budget without overstepping borrowing targets, even as oil revenue in Africa’s largest economy is set to fall.

Under a three-year economic plan approved by the cabinet, expenditure will rise to 6 trillion naira ($30.2 billion), Budget and Planning Minister Udoma Udo Udoma told reporters late on Monday in the capital, Abuja. Lawmakers last week authorized anincrease of 466 billion nairain this year’s budget of 4.5 trillion naira to pay for fuel subsidies and for troops fighting an Islamist insurgency in the northeast.

Africa’s largest oil producer is struggling to cope with a slump in the price of crude, which is the source of 70 percent of government revenue. Economic growth is set to slow to 3.9 percent this year from 6.3 percent in 2014, according to the median estimate of 10 economists surveyed by Bloomberg.

While the budget next year will be “expansionist,” the spending plan is based on an oil price of just $38 a barrel because of “uncertainties,” Udoma said. The crude output target is set at 2.2 million barrels a day, he said. The benchmark price in this year’s budget, approved in April, was $53 a barrel.

All the additional expenditure planned for next year will go toward capital projects, such as infrastructure, rather than recurrent spending on government salaries, which has eaten up the majority of Nigeria’s past budgets, he said.

‘Prudent Budget’

Udoma didn’t specify when the budget proposal will be sent to lawmakers for approval.

The government will try to boost its income by increasing revenue from industries other than oil, cutting costs and improving the collection of taxes and fees, said Udoma


The “level of borrowing that we anticipate and we’re projecting will be well within the maximum that we allow, which is 3 percent of gross domestic product because we want a prudent budget,” Udoma said. He didn’t provide further details about how the budget will be financed.

President Muhammadu Buhari, who won elections in March, said he inherited depleted government coffers and a bureaucracy that multiple probes have blamed for looting billions of dollars of oil revenue. Vice President Yemi Osinbajo said in an interview in October that the government plans tospend its way out of a slowing economy and that an infrastructure fund will be created with public and private financing.

“Our concern still remains on how the government plans to finance this budget,” Olumide Awe and Seun Olanipekun, analysts at Lagos-based Investment One, said in a research note. “The current low interest rate environment suggests the government may borrow locally to finance the potential deficit.”

Exchange Rate

The 2016 budget’s projected exchange rate will be the central bank’s official one, which has fixed the naira at about 198 to 199 per dollar since March, despite the unofficial, or parallel market, falling to a record low last week of 253.

The Central Bank of Nigeria, with Buhari’s backing, has choked off supply of foreign exchange to banks and their customers to defend the naira, even as major oil exporters such as Russia and Colombia have let their currencies slide. The restrictions prompted JPMorgan Chase & Co. to remove Nigeria from its local-currency emerging-market bond indexes, tracked by more than $200 billion of funds, in September, triggering a selloff in the nations’ assets.

“Abuja looks set to record a fairly large fiscal deficit next year, which will likely be financed by increased borrowing,” Cobus de Hart, an analyst at NKC African Economics in South Africa, said in a client note on Tuesday. “Authorities may again decide to foray into international debt markets.

http://www.bloomberg.com/news/articles/2015-12-08/nigeria-boosts-2016-budget-by-a-fifth-even-as-oil-revenue-slumps

cc mynd44, Lalasticlala

take it or leave it, this a budget with a real plan.

I'm not worried for now- APC is basically not operating on its own budget but the idiocy from the so called havard frog eyed and her teams.

it is apparent that they lack every sense of budgetary calculations. In spite of their 13% of capital expenditures, the mofos left the coffers high and dry even as at march of 2015!

SLIDEwaxie:
take it or leave it, this a budget with a real plan.

I'm not worried for now- APC is basically not operating on its own budget but the idiocy from the so called havard frog eyed and her teams.

it is apparent that they lack every sense of budgetary calculations. In spite of their 13% of capital expenditures, the mofos left the coffers high and dry even as at march of 2015!

You don't understand all the ecoeconomic terms that is been explained in the opening post!
3% of GDP is around $10billion for borrowing alone excluding subsidy payments and extra budgetary spendings
At $38 / barrel(not forgetting that you have backlog of oil unsold).
You guys should stop and start thinking for once

Diversify or die

baralatie:

You don't understand all the ecoeconomic terms that is been explained in the opening post!
3% of GDP is around $10billion for borrowing alone excluding subsidy payments and extra budgetary spendings
At $38 / barrel(not forgetting that you have backlog of oil unsold).
You guys should stop and start thinking for once

we understand the economic terms that has been explained, but not the eco economic terms you are explaining. sorry!

On a smarter note, the government of APC has said it is embarking on zero based budgeting I.e. projects embarked on with a scale of preference, as they come. We will see what they can do differently. Its good that they are talking about more capital projects and there is a focus on infrastructure challenges. We will see the outcome. we are watching with two eyes.

Some individual rush here to condemn a 6 trillion budge but wont hesitate to compare Nigeria with the united states with 900 trillion budget...