Budget deficit jumps to N3tr… before passage

Owing to overly optimistic benchmark of the federal government and the low oil prices, Nigeria’s 2016 budget deficit has been raised from N2.2 trillion to N3 trillion.

When the budget was presented to a joint session of the national assembly on December 22, the benchmark for the budget remained at an optimistic price of $38 per barrel, about $8 less than the market price at the time.

With the current realities, the deficit gap will increase to N3 trillion ($15.1 billion), or three percent of gross domestic product, Kemi Adeosun, minister of finance, has told Bloomberg.

The budget will remain within the “comfort zone for the international rating agencies” and help the government boost growth to 4.2 percent this year, she said.

Adeosun added that the government will borrow about N1.8 trillion in 2016 to plug the deficit, with about 56 percent of that, coming from the foreign market.

By doing so Nigeria will keep its promise to raise spending on transportation, housing, roads and power despite the drop in crude prices, she said.

“We are firmly committed to the counter-cyclical budget expenditure model. Therefore, we will not reduce our investment in infrastructure,” she said.

As the oil prices bite on the economy, Vice-President Yemi Osinbajo believes the developments can be positive too.

Osinbajo said the low oil prices would ensure that Nigeria does not have to pay N1 trillion in fuel subsidy as it did in 2015.

Adeosun emphasized that if the price of crude oil falls further, Nigeria will “bridge the revenue shortfall by sale of non-strategic assets and increasing the participation of the private sector in delivery of key projects.”

Despite all controversies, the minister assures that the budget will be at N6.1 trillion for 2016 – an increase of about 20 percent from 2015.