October 10, 2019 10:00 AM / United Capital / Header Image Credit: Channels TV
Recently, the Nigerian President, Muhammadu Buhari, presented both the 2020 Budget estimates to the joint session of the National Assembly.
According to the report, Nigeria plans to spend N10.3tn in 2020 while revenue is expected to come in at N8.1tn -17.0% higher than the proposed estimates for 2019, respectively. Notably, oil revenue was revised downward to N2.6tn as crude oil price and production were reviewed lower to $57.0/b and 2.18mbpd (2019: $60.0/b and 2.3mbpd).
Meanwhile, when compared to 2019 projections, non-oil and revenue estimates spiked 30.6% and 95.7% to N1.8tn and N3.7tn, respectively. The non-oil revenue growth is to be financed by a proposed increase of VAT rate from the current 5.0% to 7.5%.
Disaggregating the component of the gross expenditure plan, c. 71.0% earmarked for recurrent expenditures (recurrent non-debt expenditure: 47.2%; and debt servicing: 23.7%). Built into the recurrent non-debt expenditure is the new minimum wage as well as the proposed expenditure to improve remuneration and welfare of the Police and Military. Meanwhile, allocation to capital projects (N2.5tn) constitutes 23.8% of the proposed budget-short of the 30.0% target in the Economic Recovery and Growth Plan (ERGP).
While we observe a few concerns in the budget numbers, we are of the view that early presentation of the budget by the President is positive for the overall economy as it could see Nigeria return to its normal financial cycle (Jan - Dec). Additionally, this should give businesses and organizations enough time to plan and make good inputs in their 2020 budgets.