Budget and Plans | |
Budget and Plans | |
1604 VIEWS | |
![]() | |
PROSHARE | |
PROSHARE |
Wednesday, March 11, 2020 / 09:50
AM / FBNQuest Research / Header Image Credit: Vanguard News
Before and again following the rout in global markets on Monday, the
federal finance ministry indicated that it would revisit the approved 2020
budget for the FGN. Unfortunately, due to the success of its rapid
passage, a reworking is now essential with the crash in the crude price. The
assumption of an average price of US$57/b now appears overoptimistic even if
the world could somehow overcome the impact of the coronavirus by mid-year. At
the same time, the ministry may care to tweak the assumption of average crude
production of 2.18mbpd for the year.
The projection of oil revenue of N2.64trn therefore
looks too high. The FGN can push up revenue forecasts from other sources to
reach the total of N7.60trn (vs N4.77trn achieved in 2019) or, reluctantly,
trim its spending plans. The second course of action would hit capital items
above all since no government anywhere will delay salary and pension payments
lightly.
We still think that there is some headroom in the
budget projection of N2.45trn for total debt service excluding sinking fund
contributions. Rates have moved up sharply since the rout but we should
remember that the budget was presented to the National Assembly in early
December and that the budget office would have been working on it several weeks
beforehand.
The other projections for revenue collection by the
FGN in 2020 are mixed. While we are not wholly convinced by the N1.31trn inflow
from special accounts, we are comfortable with the projection of N850bn in FGN
independent revenue, given the outturn in 9M 2019 (Good Morning Nigeria,
06 February 2020).
FGN finances (N bn) |
|
Sources:
CBN; FBNQuest Capital Research |
We would not expect a reworked/supplementary budget for 2020 to make
marked changes to the assumed exchange rate of N305 per US dollar (although
N307 would reflect the current preferential rate).
Related News