Nigeria’s deficit is expected to rise to 2.36 trillion naira ($7.75 billion) in 2017, as the government struggles to salvage the economy out of recession with a budget that foresees record spending.
President Muhammadu Buhari said this on Wednesday while addressing a joint session of the National Assembly to present the 2017 budget.
Buhari is facing rising disenchantment with his handling of the economy as Nigeria struggles with 18 percent inflation and its first recession in 25 years, brought on by low global prices for the oil it produces.
Capital expenditure will rise by nearly a quarter next year to 2.24 trillion naira as the state invests in roads, railways and power plants to diversify the economy, Buhari told parliament.
“This budget…represents a major step in delivering on our desired goals through a strong partnership across the arms of government and between the public and private sectors to create inclusive growth,” he said. “Fiscal, monetary and trade policies will be fully aligned.”
But John Ashbourne, economist at Capital Economics in London, said the budget’s planned oil production of 2.2 million barrels a day looked “very, very optimistic” as militant attacks had cut output to 1.68 million bpd.
He said the assumed currency rate of 305 naira to the dollar, some 40 percent stronger than the black market rate, meant Nigeria did not plan a new devaluation, as demanded by investors who have been reluctant to commit money at the current rate. “That’s pretty worrying for the non-oil economy,” he said.
Spending is set to rise 20.4 percent to 7.3 trillion naira, and revenues are projected to increase by 28 percent to 4.94 trillion naira, the president said.
The deficit would be funded by borrowing 1.254 trillion naira domestically and 1.067 trillion naira abroad, he said, putting the debt to GDP ratio at 2.18 percent compared with 2.16 percent in 2016.
Buhari did not say when Nigeria would emerge from recession and whether the deficit for 2016 would be 2.2 trillion naira as forecast. The government has struggled to fund the 2016 budget as a Eurobond sale and World Bank loan have been delayed.
The budget must be agreed by parliament before being sent back to Buhari to be passed into law. The 2016 budget became law in May after being delayed by several months by wrangling between the government and the upper house of parliament.
Senate President Bukola Saraki said lawmakers would cooperate with the government. “We assure you Mr. President and all Nigerians that not even a single minute would be wasted on our side in the course of getting this budget approved,” he said.