Nigeria’s 2021 Proposed Budget: Realistic or Optimistic?

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During the previous week, the President presented the 2021 Appropriation Bill (themed, Budget of Economic Recovery and Resilience) to the National Assembly.

Nigeria’s 2021 Proposed Budget: Realistic or Optimistic?

Some of the major assumptions of the budget were; Brent price at $40/b, oil production at 1.87/mbpd (inclusive of condensates), Exchange rate of N379/$, GDP growth projected at 3.0% and Inflation rate pegged at 12.0% for the fiscal year of 2021. Overall, the spending plan for 2021 was pegged at N13.1tn for 2021 implying a 21.3% increase from 2020 (N10.8tn revised budgeted).

Nigeria’s 2021 Proposed Budget: Realistic or Optimistic?
Sources: MTEF, United Capital Research

Taking a look at the revenue projection, the federal government expect the revenue to become at N7.9tn, with oil revenue and non-oil revenue estimated at N2.0tn and N1.5tn, respectively and the balance is expected to come from Grants & Aid and revenue from MDAs.

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Thus, leaving a budget deficit of N5.2tn (3.6% of GDP). Notably, the current COVID-19 health crisis pave way for the health sector as we observed a whopping 157.0% increase in the allocation for the sector. Also, the Education sector saw a significant 65.0% increase in allocation on y/y basis.

Furthermore, Capital expenditure jumped 54.0% relative to last year’s projections.

Read Also:  A Look into Ghana's 2020 Budget Numbers

Overall, while the fiscal plan of the government mirrors the need to reflate the economy following a most devastating effect of the COVID-19 pandemic, we think the 2021 budget is very optimistic. This is clearly reflected in the revenue, GDP Growth and exchange rate assumptions when compared to current and projected realities.

United Capital Research

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