- President Buhari seeks approval for 10% increase in spending
- Government will need to borrow an extra 1.6 trillion naira
Nigerian President Muhammadu Buhari asked lawmakers to approve a 10 percent jump in spending for this year that will double the budget deficit, mainly to pay for fuel subsidies.
In a spending proposal sent to the National Assembly on Wednesday, Buhari requested to increase expenditure by an additional 466 billion naira ($2.4 billion) to 4.95 trillion naira. That will boost the fiscal deficit to 2.2 percent of gross domestic product from an original estimate of 1.1 percent. The government will need to borrow an additional 1.6 trillion naira, he said.
“The implementation of the 2015 budget has been fraught with significant revenue shortfalls due to continuous decline in the oil price, oil production shortfall and non-full realization of non-oil revenue,” Buhari said in a letter to parliament.
Nigeria, Africa’s biggest oil producer, is struggling to cope with an almost 60 percent plunge in crude prices since June last year. Buhari, 72, has been slow to respond to the crisis since he took office in May, appointing his cabinet five months later and providing little clarity on economic policy.
“The additional spending is not a surprise,” Ayo Teriba, chief executive officer of Economic Associates Ltd., an advisory firm, said by phone from Lagos, the commercial capital. The government “took over in the middle of the year, their priority will be different from the government that was voted out.”
Of the extra spending for this year, 413 billion naira is earmarked for subsidies paid to fuel marketers. Nigeria doesn’t have enough oil-refining capacity and subsidizes imports of gasoline. Fuel shortages at filling stations have returned this month as importers claim they haven’t been paid arrears on subsidies.
Buhari also proposed to lower the oil price benchmark in the budget to $48 a barrel from $53. Brent crude was trading as low as $44.27 a barrel in London on Thursday.
Buhari hasn’t yet disclosed his budget for 2016. The deficit for next year will probably reach 2.3 percent of GDP, according to the median estimate of seven economists surveyed by Bloomberg. Spending may climb to as much as 7 trillion naira, Vice President Yemi Osinbajo told a ministerial meeting earlier this month, according to a person who attended.