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