Wednesday, March 30, 2016 8:50AM /FBNQuest Research
The Senate approved the N6.06trn (US$30.8bn) budget for 2016 before the long holiday weekend. The approval came a little earlier than in recent years, and the Debt Management Office (DMO) will be able to work with a little more certainty in the preparation of its issuance calendar for Q2 2016.
That said, the aggregate figures are barely changed from those proposed by the FGN. There had been talk that the legislature would want to trim the oil price assumption of US$38/b but the international price has since recovered to a little above the threshold, raising the prospect that oil receipts could marginally exceed the projection.
The approved budget is also based on an average oil production assumption of 2.20 mpbd. Emmanuel Kachikwu, the group managing director of the NNPC and minister of state for petroleum resources, indicated earlier this month that the corporation’s own target for this year is 2.40 mbpd, of which 200,000 bpd is for allocation to domestic refining.
What marks Nigeria out from most developing countries with straitened public finances is its “counter cyclical”, expansionary budget, upon which the success of the administration’s agenda rests. That depends in turn on the realization of its aggressive projections for non-oil revenue generation without planned tax increases (Good Morning Nigeria, 19 February 2016).
The version of the budget approved last week has a FGN deficit of N2.20trn (US$11.2bn). The small reduction from the initial proposal of N2.22trn will be welcomed for the easing of the said “crowding out” effect.