President Muhammadu Buhari presented the Federal Government’s Proposal for the 2021 fiscal year before a joint sitting of the National Assembly. The proposed Revenue and Expenditure budgets are ₦7.89 trillion and ₦13.08 trillion respectively, representing a ₦5.20 trillion fiscal deficit.1 With an estimated Gross Domestic Product (GDP) of ₦1.43 trillion2, the fiscal deficit is 3.64 percent of estimated GDP, above the 3 percent threshold set by the Fiscal Responsibility Act of 2007. Key assumptions of the proposed budget include: $40 per barrel oil benchmark, crude oil production of 1.86 million barrel per day, an exchange rate of ₦379 per US$, GDP growth rate of 3 percent and inflation rate of 11.95 percent. The high fiscal deficit increases the likelihood of a default in the near term as the government is unlikely to considerably raise tax or cut back on government programmes. The overtly expansionary macroeconomic policies and explicitly unsustainable public debt dynamics calls for reforms capable of increasing the share of domestic savings to finance domestic capital stock rather than external debt.
November 6, 2020
Nigeria Economic Update (Issue 41)
Crude oil price experienced a mixed week from November 18 to November 25, 2016. Specifically, OPEC basket price and Brent crude price fluctuated, to a daily average of $44.6 (from $42.33)and $48.3 (from $46.86)per barrel respectively. The present oil volatility is as a result of sell-offs, attributable to speculations/fears of an insufficient production cut by OPEC (in its bid to control oversupply) - a deal scheduled for its next meeting on November 30th 2016. This speculations have arisen due to the reluctance of major OPEC member country (Saudi Arabia) to participate in the potential oil cut dealwhich could exert a downward pressure on oil prices. However, oil prices should rise if OPEC members agree to the oil cut deal. Irrespective of the outcome of the meeting, Nigeria is exempted from the potential crude oil cut. Thus, it will be optimal for the government to act quickly to address the insurgence in the Niger Delta region, in order to raise domestic oil production as much as possible.
Nigerias Bonny light price declined by 7.1 percent from $40.19 per barrel on March 24, 2016 to $37.32 per barrel on April 1, 20162. OPEC weekly basket price also decreased by 3 percent from $35.81 per barrel to $34.74 per barrel within the same period3. The remerged downward trend in crude oil price is traceable to concerns over the likely failure of the oil production freeze deal between Saudi Arabia and Iran4. The outcome of the oil production freeze meeting which is scheduled to hold on April 17, 2016, will give further direction for oil supply regulation.