President Muhammadu Buhari on Wednesday 19 December presented a N8.83 trillion ($28.80 billion) budget for 2019 to the National Assembly, a budget he termed Continuity Budget, in which he laid out his plans to drive economic growth.
The budget presentation which is coming just less than two months to general elections next year met a mostly hostile parliament, although the president also had huge support in the assembly.
Nigeria, Africa’s top oil producer – still a mono-economy inspite of the President’s pre-election vows to diversify the economy – depends on oil sales for 90% of its external revenues. The president’s 2019 budget assumes crude oil production of 2.3 million barrels a day, an oil price of $60 per barrel, exchange rate of N305 to the dollar, real GDP growth and inflation rate projections of 3.01 percent and 9.98 percent respectively.
The budget is the fourth and perhaps the last Buhari will present to parliament since taking office in 2015 but, unlike the others, did not set record high levels of spending as government revenue dwindles and it is trying to reign in borrowing in response to criticisms of over-borrowing.
Buhari’s handling of the economy – which sunk into recession first time in 25 years under his watch and only beginning a sluggish recovery – is now a topical issue for opposition candidates in the campaign trail for next year’s election.
In his budget speech to the assembly, which critics said was a campaign speech, the President reeled out positive sides of his economic management drawing a rowdy response of boos and cheers from the legislators.
“The last three and a half years have been challenging both at home and abroad. Commodity prices, both oil and non-oil, have been volatile. Global trends, be it security, trade or politics have also been unpredictable. Here in Nigeria, we have had to cope with disruptions in oil production and exports, security challenges and devastating floods.
The president gave himself pass mark in his “efforts to fight grand corruption” and claimed his government has “done more work with less resources in agriculture”, saying “Nigeria was spending $5 million dollars a day on rice importation. Today rice imports have virtually stopped”. In social services, the president claimed “297,973 households in 26 states across the country are benefitting from the Conditional Cash Transfer program.” In power sector he said “we are working on over 90 transmission projects across the country” and railways, that he “completed and commissioned the Abuja-Kaduna Rail”.
Most of these claims were disputed by some of his critics. For example, Reno Omokri, a strong critic of the administration tweeted from the United States regarding the president’s claim on completing the Abuja-Kaduna rail,
And the president’s claim on virtually ending rice importation.
And from Donald Duke, SDP presidential candidate,
In core economic indicators, the president continued, “We also recorded several successes in economic management. Real Gross Domestic Product growth stood at 1.81 percent in the third quarter of 2018 compared to 1.17 percent in the third quarter of 2017. We have had a sustained accretion to foreign exchange reserves from a low of $28.57 billion in May 2015 to $42.92 billion by mid-December 2018. This has contributed to exchange rate stability and will provide a buffer against any unanticipated external shocks. Inflation has also declined from a peak of 18.72 percent in January 2017 to 11.28 percent in November this year.”
Here Are Some Key Insights Of The Speech
- President, cabinet members reviewed and approved next year’s spending plan on Dec. 7.
- Nigeria’s budget has more than doubled since 2015 to 9.1 trillion naira this year and the spending cuts come as the country prepares to hold presidential vote in February.
- The plan forecasts gross domestic product will expand 3 percent next year. It assumes oil output of 2.3 million barrels daily and crude at $60 per barrel, and is based on an exchange rate of 305 naira per dollar.
- “At $60, the benchmark price could be ambitious,” said Bismarck Rewane, chief executive officer of Financial Derivatives Co., a risk advisory group based in the commercial hub of Lagos. “It means there could be a shortfall. A shortfall would lead to a deficit and a supplementary budget would then be imminent.”
- The budget seeks to cut the fiscal deficit to 1.86 trillion naira, or 1.3 percent of GDP. “This reduction is in line with our plans to progressively reduce deficits and borrowings over the medium term,” Buhari said.
- Nigeria, which depends on crude exports for two-thirds of government revenue, has budgeted 65 billion naira for an amnesty program that provides training and rehabilitation for former armed militants in the oil region.
- Chances of the budget proposal being passed before the Feb. 16 general election are “virtually nil,” New York-based risk-advisory group Teneo said in a Dec. 17 note. “Past budgets presented by the Buhari administration were only approved in the second quarter of the following year, and the incentive for the opposition to delay the process this time around is particularly high.”
The main opposition candidate, businessman and former vice president Atiku Abubakar, has criticised Buhari’s economic policies and has promised to double the size of the economy to $900 billion by 2025 if elected.
The budget must still be approved by parliament before it can be signed into law, a process that can take many months.
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