Otunuga: On paper, 2020 budget can improve Nigeria’s economy

Lukman Otunuga, a senior research analyst at global forex trading firm, FXTM, says the 2020 budget as presented by President Muhammadu Buhari has the ability to elevate Nigeria’s economy — on paper.

Otunuga said some of the revenue targets set by the executive arm of government are quite ambitious, running the risk of falling short and affecting budget implementation as seen in previous years.

Speaking with journalists in Lagos, Otunuga said the last time Nigeria consistently produced more than two million barrels of oil per day was 2013, hence setting the budget target at 2.18 million barrels per day was overly optimistic.

“When we look at the 2020 budget, looking at the numbers, government expenditure is going to be N10.33 trillion, revenue target N8.155 trillion, that leaves a deficit of N2.18 trillion, already, that alone,  Nigeria will have to finance that debt domestically or externally — that’s the first weight on the economy,” he said.

“Secondly, I feel the major talking point is oil because if you look at the numbers, Nigeria is projecting $57 oil in 2020 average and to pump 2.18million barrels a day, if you look at the oil market, you will know that it is very difficult for oil to push high due to demands side dynamics.

“Concerns of slowing global growth, rise in production from US shale, rise in crude oil inventories in the United States, you know when you put all of these together, 57 is quite ambitious for oil.

“At the same time, if you look at Nigeria’s oil production, in August, Nigeria produced about 1.86 million barrels roughly, but Nigeria pledged OPEC to keep oil production down around roughly 1.7 million barrels per day and if you look deeper, the last time Nigeria was able to produce over two million barrels a day according to OPEC was back in 2013.

“We haven’t seen over two million barrels a day for almost six years, so how are we going to get that amount in 2020. So when you look at the figures, oil revenue accounts for N2.6 trillion, already if you are unable to meet the revenue, it is going to impact the implementation of the budget.”

‘WHERE IS THE DIVERSIFICATION?’

Speaking on the diversification of the economy, Otunuga said

“On diversification, it is so bad that even IMF is telling Nigeria that they need to do more with it; the fact that 90 percent of foreign exchange is still from oil and 70 percent of government’s expenditure is still from oil.

“So where is the diversification? I think when we start seeing less foreign exchange earnings coming from oil and government being less reliant on oil, then we can say diversification is kicking in.

“The budget itself on paper has the ability to elevate Nigeria’s economy but meeting those spending targets is the question. If Nigeria is able to meet the targets, the outlook is positive.

“But let me say the repeat of 2019 budget, where even recent reports have shown that government’s spending target is only about 58 percent, it is still going to be the same; we have a budget and it is not reflecting on the economy.”

With the 2020 budget, the executive and the legislative arms of government are seeking to reset the budget cycle to run from January to December 2020, away from the irregular budget cycles of the past.