Nigeria Cabinet Agrees Smaller Budget Amid Revenue Shortfall

(Bloomberg) -- Nigeria’s cabinet agreed to reduce next year’s budget as the biggest oil producer in Africa struggles to meet revenue targets.

The Federal Executive Council accepted the presidency’s 8.7 trillion-naira ($24 billion) spending plan, Budget and Planning Minister Udoma Udo Udoma told reporters in the capital, Abuja, on Wednesday. Nigeria’s budget has more than doubled since 2015 to 9.1 trillion naira this year and the spending cuts come as the country prepares to hold presidential elections in February.

“We want to keep spending at a level we can finance,” Udoma said.

Nigeria’s government forecasts gross domestic product will expand 3 percent next year, according to Udoma. It assumes oil output of 2.3 million barrels daily and crude at $60 per barrel, with an average exchange rate of 305 naira per dollar, he said.

Oil production averaged 1.7 million barrels a day in the first nine months of 2018, according to data compiled by Bloomberg. The naira trades at about 363 per dollar in the interbank market, while the central bank has maintained a stronger official rate of 305 for more than two years.

The spending proposals will be sent to lawmakers for consideration.

Revenue Shortfalls

The government might also cut capital spending in 2018 because of revenue shortfalls, Finance Minister Zainab Ahmed told reporters at the same press conference.

“If we’re not able to shore up revenue then the consequences are we will at some point have to reduce spending and also we will struggle in servicing our debts,” Ahmed said.

Total revenue received by August was 52 percent of the 6.2 trillion naira expected income, putting the government under pressure to expand avenues for raising funds, she said.

Oil and gas account for about two-thirds of government revenue and crude flows have been disrupted this year by the sabotage of key pipelines in the Niger River delta, the main producing region. The finance ministry in June questioned remittances from the state oil company that were less than expected, prompting a move to reconcile accounts.

“We are in the process of finalizing a new reporting template to ensure better transparency in the remittance information that they provide us,” Finance Minister Ahmed said Wednesday.

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