The federal government, on Friday, announced total projected expenditure of about N11.9 trillion for the 2021 fiscal year.
Also, the government said the country’s economy is primed to relapse into a second recession in four years, with the National Bureau of Statistics (NBS) saying the country’s GDP growth in the second and the third quarter of 2020 is projected to be negative.
The NBS said Nigeria’s real GDP declined from 2.55% in the fourth quarter of 2019 to 1.87% in the first quarter of 2020, with the impact of global disruptions caused by COVID-19 pandemic instigating the oil price crash and restriction in international trade.
The statistics agency said the country’s real GDP is now projected to contract by 4.2 per cent in 2020, as against the previous projected growth of 2.93 per cent.
The Minister of Finance, Budget & National Planning, Zainab Ahmed, made the announcements during the presentation of the draft 2021–2023 medium term expenditure framework (MTEF) and fiscal strategy paper (FSP) in Abuja.
Making the presentation during a virtual consultative session with civil society organisations, organised private sector and the general public, the minister gave aggregate projected total revenue for 2021 at N6.988 trillion, and total fiscal deficit at N5.16 trillion.
The 2021-2023 MTEF/FSP is the pre-budget statement by the government to provide the framework for the development of the 2021 budget.
The minister said the MTEF was being framed against the backdrop of a challenging global macroeconomic environment as well as other domestic factors.
Government to keep deficit level at 3%
Consequently, she said the government was not only determined to keep the deficit level in the budget within the 3 per cent ceiling over the medium term, but also working on identifying new revenue sources as well as adopt new cost reduction strategies to support the budget.
With the current global economic conditions, the minister said key parameters and other macroeconomic projections driving the medium term revenue and expenditure framework have been revised in line with emerging realities.
Consequently, crude oil price benchmark in 2021 would be revised from $28 per barrel in 2020 to $40 per barrel, while crude oil production capacity would be reviewed upwards from 1.8 million barrels per day to 1.86 million barrels per day.
The exchange rate of the naira, the minister said, would be left unchanged at N360 to the dollar during the year, with inflation rate expected to drop from 14.15 per cent in 2020 to 11.95 per cent in 2021.
Similarly, non-oil GDP is projected to grow from N131.16 trillion to N132.6 trillion; oil GDP from N88.69 trillion to N10.1 trillion; nominal GDP from N139.52 trillion to N142.19 trillion and nominal consumption would rise from N117.9 trillion to N118.89 trillion, with GDP growth rate projected to improve from a negative 4.2% to positive 3.00%.
The minister said although Nigeria’s total production capacity is about 2.5 million barrels per day (BPD), the current crude production capacity was about 1.4 million BPD.
The current output capacity, the minister explained, was in compliance with the subsisting Organization of Petroleum Exporting Countries (OPEC+) production quota cut announced in May 1 this year.
When about 300,000 barrels per day output of condensates is added to Nigeria’s oil production, the country’s total output would come to about 1.7 million barrels per day.
With the World Bank forecasting that crude oil prices would rise gradually from an average of $42 per barrel in 2021, the minister said the federal government would base the year’s budget on the benchmark oil price of $40 per barrel.
Oil price is projected to grow to about $44.5 per barrel in 2022, and $47 per barrel in 2023, with the Energy Information Agency (EIA) expecting Brent crude oil prices to average $41 per barrel during the second half of 2020; $50 per barrel during 2021, and about $53 per barrel average by the end of 2021.
“With oil price projected to remain low and volatile in 2020, and Nigeria’s compliance with the OPEC+ cuts by reducing base production to between 1.412 million BPD and 1.579 million BPD from June to end of the year, growth in Oil gross domestic product (GDP) is expected to decline in 2020,” the minister said.
Highlights of 2020 Budget Review
On the highlights of the 2020 budget revision, the minister said a total of N301.15 billion was added to the approved aggregate expenditure during the year, raising the total budget from N10.51 trillion to N10.81 trillion.
Other details of the review included an amendment of total capital expenditure by N257.88 billion, from N2.23 trillion to N2.49 trillion, and total capital supplement expenditure by N172.5 billion, from N437.84 billion to N610.33 billion.
The amendment also showed the total non-debt recurrent budget with a variance of about N13.74 billion, from N4.93 trillion to N4.94 billion, and statutory transfers revised from N398.5 billion to N428.03 billion, an increase of N29.5 billion.
A breakdown of the additional N301 billion revised budget figure, the minister said, included 10 per cent cuts in allocations to Statutory Transfer Agencies, while about N25.53 billion were reinstated by the National Assembly for arms of the government.
Also, the minister said the contingency provision in service wide votes was increased by N12.5 billion, while about N185.9 billion was realised as a result of the federation’s intervention in the budget.
About N4 billion was for hazard allowance for health workers in view of the impact of COVID-19, in addition to N3 billion for social housing and N70 billion for other adjustments.
The minister said oil GDP is expected to contract by 12.96 per cent in 2020, year-on-year, causing an economy-wide drag that would result in slower growth in non-oil GDP by -3.6 per cent, year-on-year, and real GDP expected to decline by 4.2 per cent in 2020.
However, nominal GDP, she noted, is expected to increase from N130,836.1 billion in 2020 to N132,125.4 billion in 2021 and then up to N138,415.8 billion in 2023.
Similarly, the minister said consumption expenditure is projected to stay flat at N118,735.2 billion in 2020 and N118,468.7 billion in 2021 before growing to N124,358.5 billion by 2023, reflecting a gradual steadiness in the recovery.
Other key parameters
On inflation, she said the expectation was for the rate to remain above single digit over the medium term, given the structural issues impacting on cost of doing business, including high cost of food distribution.
The minister noted that the 2021-2023 draft had been prepared against the backdrop of heightened global economic uncertainty.
She added that the draft showed that there were continuing global challenges due to COVID-19 pandemic.
According to her, the medium-term outlook for the country, suggested that the fiscal risks are somewhat elevated, largely due to COVID-19 related disruptions.
She added that this development had exacerbated structural weakness in the country’s economy.
On revised budget, Ms Ahmed pledged government’s commitment to accelerate implementation to maintain the estimate process credibility, enhance Gross Domestic Product (GDP) growth and promote social inclusion.