President Muhammadu Buhari presented a record 8.6 trillion naira ($28.16 billion) budget for 2018 on Tuesday to foster shaky growth in Africa’s largest economy as it emerges from its first recession in 25 years.
Buhari said, to help plug that gap, the government would borrow 1.699 trillion naira, half of it from overseas.
Debt costs are, however, already high in Nigeria and he also said almost a quarter of the budget’s expenditure would go to servicing debt.
Economists have also noted that while the budgets reach new highs, they have risen at a slower clip than inflation. The new budget is about 16 percent higher than the previous year‘s, while Buhari said inflation for 2018 is expected to be 12.4 percent.
He told parliament that the budget was based on an exchange rate of 305 naira to the dollar, and a projected oil output of 2.3 million barrels per day at an assumed price of $45 per barrel.
The president added that he was targeting Jan. 1, 2018 for passage of the new budget and that the deficit is expected to be 2.005 trillion naira, with real economic growth estimated at 3.5 percent for 2018.
But previous budgets have been beset by wrangling with lawmakers over line items. The 2017 budget was not signed into law until halfway through this year, and even then, some spending was still being debated.
John Ashbourne, Africa economist at Capital Economics added that the federal government falls short on its revenue and expenditure targets every year, and Buhari always responds by writing an even more ambitious target into the budget for the following year.”
With 2.4 trillion naira of intended capital spending, the budget forecast a deficit of 2.005 trillion naira ($6.56 billion), down from last year’s 2.36 trillion naira.
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