(Bloomberg) -- Nigerian lawmakers approved a 2018 budget of 9.1 trillion naira ($25 billion), its biggest yet, to help boost economic growth less than a year before general elections.
The Senate voted to increase spending plans by more than a fifth from the previous year, according to proceedings led by chamber President Bukola Saraki on Wednesday in the capital, Abuja. The House of Representatives, the National Assembly’s lower chamber, also approved the plans.
The bill comes six months after being presented to lawmakers by President Muhammadu Buhari and is 5.8 percent more than the 8.6 trillion-naira budget proposed in November. The legislators also increased the oil-benchmark price for the budget to $51 per barrel from $45 proposed by Buhari, on the assumption of crude output of 2.3 million barrels daily and an exchange rate of 305 naira per dollar.
Africa’s most-populous nation and biggest oil producer wants to boost economic expansion to about 3.5 percent this year, partly by investing almost a third of the budget in roads, rail, ports and power. Last year, the economy staged a fragile recovery after contracting in 2016 for the first time in a quarter century.
The plan includes recurrent expenditure of 3.5 trillion naira, capital spending of 2.8 trillion naira and debt service of 2.2 trillion naira. The fiscal deficit is forecast at 1.9 trillion naira, or 1.73 percent of GDP. Buhari will have to sign his approval for the budget to become law.
It’s important for the administration to continue to boost spending on infrastructure because that’s what will help the ruling party to win the next election scheduled for February, Finance Minister Kemi Adeosun said in a January interview. Buhari said he will seek another term.
While fiscal expansion could spur growth, it might increase inflationary pressures, according to economists including Razia Khan at Standard Chartered Bank Plc. That may limit room for the central bank to cut its key interest rate from a record 14 percent, where it’s been since July 2016 to curb high inflation. Annual price growth slowed to 12.5 percent in May, the lowest rate since March 2016.
The government will fund the bulk of the budget deficit with 1.7 trillion naira of borrowing, half of which will be external, and by selling 306 billion naira of non-oil assets, budget documents presented in November showed.
©2018 Bloomberg L.P.