FG Eyes N11.86trn For 2021 Budget, N5.16trn Deficit Loading

BY COBHAM NSA, ABUJA – The Federal Government has released the 2021-2023 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP), to kick-start the process of 2021 budget proposal of about 11.86 trillion Naira

The proposed N11.86 trillion
expenditure profile for 2021 budget document represents 9.7 per cent increase over and above the current 2020 revised budget of N10.81 trillion.

However, the economic indicators are still looking hazy for the country with the Federal Government projecting about N6.98 trillion as the aggregate earnings expected from available revenue sources in the country.

More so, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, admits current worrying picture of depleting revenue due to the global coronavirus (COVID-19) pandemic may result in a fiscal deficit of N5.16 trillion for year 2021.

To address this disturbing development, the Minister said government has plans to keep the deficit within the three per cent ceiling over the medium term, while making deliberate efforts at identifying new revenue sources as well as areas of reducing the cost of governance

In her virtual presentation at a Public Consultative Forum on the 2021-2023 MTEF/FSP in Abuja on Friday, Mrs Ahmed explained that the 2021-2023 MTEF/FSP document provides the framework for developing the 2021 budget amid challenging disturbing domestic factors and global macro-economic environment

The Minister, who put Nigeria’s total debt stock at $86 billion, including $3.5 billion bi-lateral loans, said government cannot focus on internal borrowing alone because the cost of borrowing locally would not only be higher than the cost of external borrowing, but also likely to crowd out indigenous firms and businesses from the domestic debt market.

This is as she further explained that contrary to misgivings in some quarters, Nigeria’s multi-lateral loans of about $35 billion is at present less than 50 per cent of its total debt stock.

Mrs Ahmed, while highlighting key assumptions for year 2021 and going forward as documented in the MTEF/FSP, said government is proposing oil price benchmark of $40 per barrel for 2021, from $28 per barrels in the revised 2020 budget.

Similarly, the policy document also left the oil benchmark at $40 per barrel for year 2022 and year 2023, even as the Minister said the developments captured in the budget proposals are predicate on crude oil production output of 1.86 million barrels per day (mbd) in 2021, as against 80 mbd in 2020.

Mrs Ahmed said for year 2022, the government is proposing 1.86 mbd and 2.09 mbd in 2023; while the exchange rate of N360 to a dollar remains the same for 2021, 2022 and 2023 respectively.

The Minister also spoke on crude oil impact on the MTEF, saying; “Although Nigeria’s total production capacity is 2.5 mbd, current crude production is about 1.4 mbd (in compliance with OPEC’s production quota) and an additional 300,000 barrels per day of condensates, totaling about 1.7 mbd.

“World Bank forecasts that crude oil prices would rise gradually from an average of $42 per barrel in 2021 to $44.5 per barrel in 2022 and $47 per barrel in 2023. EIA expects Brent crude oil price to average $41 per barrel during the second half of 2020 and $50 per barrel during 2021, and reaching $53 per barrel by the end of 2021.”

She said growth in oil GDP is expected to decline further before the year end, especially with global oil price projected to remain low and volatile in 2020, and Nigeria’s compliance with the OPEC+ cuts by reducing base production to between 1.412mbd and 1.579 mbd from June to end of the year.”

Going by the MTEF/FSP document, government is projecting inflation rate at 11.95 per cent; 10.94 per cent; and 11.02 per cent for 2021, 2022 and 2023 respectively.

The document captured non-oil Gross Domestic Product (GDP) of N132.59 trillion; N134.15 trillion; and N139.3 trillion for 2021, 2022 and 2023 respectively, just as oil GDP is projected at N10.1 trillion; N12.6 trillion; and 12.16 trillion for 2021, 2022 and 2023 respectively.

Aside Mrs Ahmed, other Webinar speakers at the meeting were Minister of State, Budget and National Planning, Prince Clem Agba and Director General, Budget Office of the Federation, Ben Akabueze.