Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, yesterday admitted that the federal government is exceeding its borrowing plan for 2021, blaming the development on the COVID-19 pandemic and the fall in oil prices.

In an interview with France 24, monitored by THISDAY yesterday, the minister said inflation had continued to heighten, worsened by an inadequate supply of foreign exchange, adding that the problems have a lot of multiplier effects on the economy.

She stated that the fiscal space remains tight now, but the federal government is re-planning, cutting down non-essential expenditures and providing resources where they are most needed like in the health sector.


Ahmed described as disturbing a World Bank report, which put a large portion of Nigerians under the poverty line, saying it was caused largely by the COVID-19 pandemic and fall in oil prices.

However, she said the economic sustainability plan was targeting massive recruitment, health insurance, and a review of the poverty indices, to redress the setback COVID-19.

“Our fiscal threshold was that we shouldn’t borrow more than 3 per cent of Gross Domestic Product (GDP), now we are at about 4 per cent of GDP and that’s a target that we are trying to work on and bring down,” she said.


On the revenue side, she stated that the target is to move revenue to GDP from the current 8 per cent to 15 per cent, adding that the 8 per cent is low for the size of the Nigerian economy.

Speaking on the ease of doing business, against the backdrop of the federal government’s suspension of Twitter’s operations, she said it won’t affect Nigeria’s image, as no foreign body should be allowed to cause war in the country.


“You cannot shut out the president of a country and not expect consequences,” the minister added.

She described the suspension of Twitter as a well-thought-out decision, saying it shouldn’t affect the country’s image in the eyes of international investors.

She said the move was “not something that we take lightly,” and that the government had planned talks with the social media company over the issue.

The minister identified accessing available doses as the biggest challenge facing the country’s COVID-19 vaccination programme.


Nigeria has so far only received four million of the 43 million vaccines it was promised by the Covax programme, according to the minister, who said the government expected to vaccinate 70 per cent of its population by next year.

The country’s economy went into recession in 2020, largely due to a drop in oil prices, but Ahmed hoped for a strong upsurge in growth by the end of the year.

The government is planning to create jobs with massive new investment in public works and low-cost housing, she said, while the extra spending would be funded by increasing tax revenue and improving tax collection process.

Corden and Neary (1982) have demonstrated how Dutch disease occurs in an economy. According to them, in a country experiencing "boom" in the export of a commodity, the economy can be divided into three sectors: the "booming" export sector, the "lagging' traditional export sector and the non-export sector. The Dutch disease occurs when the traditional export (tradable goods) sector is crowded out by the booming export sector and the non-tradable goods sector.

The lagging traditional tradable goods sector may include cocoa, palm produce, cotton, rubber, coal, copper, textiles and some manufactured goods while the booming export sector may be crude oil, coffee, gold, etc. The non-tradable (non-export) goods sector covers all those goods that are produced for domestic consumption only, e.g. staple food items, clothing, building materials, locally-assembled cars.

Where crude oil (and gas) is the booming export sector, the non-oil export sector may be crowded out by the oil sector and the non-tradable goods sector of the economy. This can happen when the oil revenue windfall increases domestic demand for non-tradable goods and pushes up domestic prices leading to an appreciation of the real exchange rate which in turn reduces the competitiveness of the non-oil export sector. This will in turn lead to a reduction in non-oil exports in both quantum and value terms. The oil windfall may also lead to movement of the factors of production in the economy. For instance, capital and labor (and land) may shift from the non-oil export sector to the oil sector (in order to maintain or increase reserves and production) and the non-tradable goods sector (to take advantage of the growing domestic demand). This explains why the increase in oil prices and the subsequent oil revenue windfall in many oil-exporting countries have tended to depress their non-oil export sector while at the same time generating a boom in both the oil and the non-tradable goods sectors.

With capital and labor shifting from the non-oil export sector to the oil-sector and non-traded goods sector, firms in the non-oil export sector are forced to either close down or reduce their scale of operation. The boom in the oil and non-traded goods sector increases the demand for imported goods. This may not be a problem in the short-term so long as the country has enough foreign exchange to pay for the imports. The depression in the non-oil export sector and the boom in the other two sectors have medium to long term implications for the economy because the oil windfall will not be permanent given the volatility, unpredictability and exhaustibility of crude oil.

For instance, if there is a decline in oil prices and oil revenue, the lagging and collapsing non-oil export sector will not be able to compensate for the drop in oil revenue while domestic demand for the non-traded goods and imports remain sticky. Consequently, the country will be forced to borrow from the international financial market to compensate for the decline in oil revenue. Over time, external debts will increase and so will the debt service obligations. Even when oil prices go up later and there is another round of oil windfall, it is difficult to correct the earlier damage or distortions created by the initial or previous oil windfall. In some cases, the oil exporting country may be forced to adopt some form of structural adjustment program (SAP) to correct such distortions or imbalances. Some of these SAPs are painful and may increase the prevalence, depth and severity of poverty.