2017 budget in real danger if Nigeria can’t borrow again as oil cut looms
Putting it in perspective; First of all, the Organization of Petroleum Exporting Countries (OPEC) on July 24 will decide whether Nigeria and Libya will join other 12 member nations in observing oil production cut as part of the cartel’s effort to maintain good global oil price.
Secondly, if the decision goes contrary to the hope of the government which is joining cut instead maintaining statuesque, it means that the budget is in trouble because income target may not be met.
Thirdly, and currently, Nigeria is on a growing daily output of 2.05mbpd whereas the budget was built on 2.2mbpd calculations, it means that Nigeria may not be allowed to produce up to where it is now and that will spell doom in driving the budget.
Fourthly, and now, if revenue target based on the benchmark is not met at a time the federal government may have met its borrowing threshold, the question remains how the magic of implementing the 2017 budget will be met within the circumstance.
Business Hilights gathered that the government decision to forego all pending borrowing plans and stick to internally generated revenue (IGR) plus oil sales against the backdrop of the nation’s rising debt profile.
The Minister of Finance, Mrs. Kemi Adeosun, has said the Federal Government must not borrow more to fund its budget.
Before the drop of further borrowing as announced by the Minister, it was on the verge of accessing some foreign loans valued to about $2bn from lenders like the World Bank to help the economy spend its way out of its first recession in 25 years.
Analysts observed that the idea to dump borrowing plans was not necessarily that of the federal government, but clear body language of the World Bank and the African Development Bank who felt that Nigeria was not serious in implementing given terms and conditions for the facility. One of their key conditions for the $2bn loan to Nigeria was to impose key fiscal reforms such as allowing its foreign exchange rate to float freely.
The desire to end borrowing also cut across an additional $1.5bn it had planned to raise from international debt markets.
According to Adeosun, “We cannot borrow any more, we just have to generate funds domestically enough to fund our budget and mobilise revenue to fund the necessary budget increase”.
In May, the head of budget office, Mr. Ben Akabueze had said the country had a shortfall of $7.5bn for the 2017 budget expenditure, and added that would be addressed with $3.5bn from the aforementioned loans and debt.
Other affected borrowing plans include government move to raise $4bn from the local debt market.
It is important to recall that the Presidency had after weeks of silence and double mindedness, signed off the record N7.44tn budget for 2017 in June. The budget is being run with a whooping deficit financing of N2.21tn, implying a deficit equivalent to 2.18 per cent of the country’s Gross Domestic Product (GDP), a situation that may further extend recessionary trend if not well managed.
