Nigerian Leader Proposes $24 Billion Spending for 2019

(Bloomberg) -- Nigerian President Muhammadu Buhari presented an 8.8 trillion-naira ($24.2 billion) budget for next year to lawmakers after the cabinet agreed to reduce spending plans as the nation struggles to meet revenue targets.

Nigeria, Africa’s biggest oil producer and most populous nation, has “recovered from recession” after a slump in 2016, Buhari told a joint session of the Senate and House of Representatives in the capital, Abuja, broadcast live on TV.

Key Insights:

  • President, cabinet members reviewed and approved next year’s spending plan on Dec. 7.
  • 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 vote in February.
  • The plan forecasts gross domestic product will expand 3 percent next year. It assumes oil output of 2.3 million barrels daily and crude at $60 per barrel, and is based on an exchange rate of 305 naira per dollar.
  • “At $60, the benchmark price could be ambitious,” said Bismarck Rewane, chief executive officer of Financial Derivatives Co., a risk advisory group based in the commercial hub of Lagos. “It means there could be a shortfall. A shortfall would lead to a deficit and a supplementary budget would then be imminent.”
  • The budget seeks to cut the fiscal deficit to 1.86 trillion naira, or 1.3 percent of GDP. “This reduction is in line with our plans to progressively reduce deficits and borrowings over the medium term,” Buhari said.
  • Nigeria, which depends on crude exports for two-thirds of government revenue, has budgeted 65 billion naira for an amnesty program that provides training and rehabilitation for former armed militants in the oil region.
  • Chances of the budget proposal being passed before the Feb. 16 general election are “virtually nil,” New York-based risk-advisory group Teneo said in a Dec. 17 note. “Past budgets presented by the Buhari administration were only approved in the second quarter of the following year, and the incentive for the opposition to delay the process this time around is particularly high.”

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