7 things Buhari’s budget speech tells us about Nigeria in 2017

President Muhammadu Buhari presented Budget 2017 to a joint session of the national assembly on Wednesday, seeking its approval  of a N7.298 trillion spending plan for 2017.

TheCable has reviewed the president’s speech, and his spending plan for the nation. We present seven key points that clearly show what 2017 will look like for the Nigerian economy.

THERE WILL BE MASSIVE ECA SAVINGS

According to the president, the 2017 budget is bench-marked at at $42.5 per barrel. This is coming at a time, when oil is trading above $55 per barrel. If we go at this pace, and based on OPEC’s projections, oil may hit $60 by 2017. This effectively means Nigeria would save at least $12.5 on every barrel of crude pumped in 2017.

At 2.2 million barrels per day, and with savings of $12.5 per barrel (if oil sells at $55), Nigeria is expected to have saved ($12.5 X 2.2million X 365 days) $10.04 billion in its excess crude account (ECA) by the end of 2017.

FG TO BORROW N2.32TRN AND PAY N1.6 TRN DEBT

“This fiscal plan will result in a deficit of N2.36 trillion for 2017, which is about 2.18% of GDP. The deficit will be financed mainly by borrowing which is projected to be about N2.32 trillion,” Buhari said.

“The proposed aggregate expenditure of N7.298 trillion will comprise: Debt service of N1.66 trillion.”

Clearly, Nigeria has a relatively large debt problem. As we lend more, we offset more.

NO MORE  PIPELINE VANDALISM?

In the 2016 budget, Buhari slashed the budget for amnesty payment to ex-militants to N20 billion, which was protested by ex-militants, who would  later cut Nigeria’s oil producing capacity to as low as 900,000 barrels per day.

In 2017, however, the president has tripled the amount to N65 billion in a bid to end vandalism in the Niger Delta. Will this stop vandalism in the region? Time will tell.

N305/$1 BENCHMARK, MORE DECEPTION? 

As Buhari presented the budget on Wednesday, the dollar traded for N485 at the parallel market. Meanwhile, the president pegged the benchmark at N305.

This represents a disparity of N185 on every dollar across both markets. This was the case for the 2016 budget, in which official market went for N197 while parallel market plunged to N300. Without unifying both markets, budget implementation may be challenged.

N7.298 TRN: THE BIGGER IT LOOKS, THE SMALLER IT IS

“With regard to expenditure, we have proposed a budget size of N7.298 trillion which is a nominal 20.4% increase over 2016 estimates,” Buhari said, presenting the budget as bigger than 2016 budget.

However, according to Udo Udoma, minister for budget and national planning, this budget is much smaller than 2016’s.

In dollar terms, the 2016 budget was $30.76 billion, while the 2017 budget is only $23.927 billion. The budget, by international standards is 22.2 percent smaller than 2016 budget.

FG EXPECTS N1.985 TRILLION FROM  OIL

“Based on these assumptions, aggregate revenue available to fund the federal budget is N4.94 trillion. This is 28% higher than 2016 full year projections. Oil is projected to contribute N1.985 trillion of this amount,” Buhari said.

This means the government is expecting more than double the revenue it got from oil in 2016. In his 2016 budget speech, Buhari said the country was only expecting N820 billion in oil revenues.

FERTILISER PRODUCTION TO CREATE JOBS IN Q1 2017

“I am pleased to announce today that on 2nd December 2016, Morocco and Nigeria signed an ambitious collaboration agreement to revive the abandoned Nigerian fertilizer blending plants.

“The agreement focuses on optimizing local materials while only importing items that are not available locally. This program has already commenced and we expect that in the first quarter of 2017, it will create thousands of jobs and save Nigeria US$200 million of foreign exchange and over N60 billion in subsidy.”

Nigerians can expect more jobs in 2017!