Economy & Politics
FEC approves $40 oil benchmark for 2021 budget
The FEC has approved a $40 oil benchmark for the 2021 budget.
The Federal Executive Council has approved a $40 oil benchmark for the 2021 budget, and also FX target of N379/$ for the budget which will be presented to the National Assembly in October.
This was disclosed by the media aide to the President, Tolu Ogunlesis after the FEC meeting on Wednesday. He disclosed that the Ministry of Finance said the first-half performance of the budget hit 68% of revenues while 92.3% was spent on salaries, pensions, debt service and statutory transfers.
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Budget Proposal for 2021, approved today at FEC
Oil benchmark: $40
Oil Production: 1.86m bpd (incl 400k of condensate)
FX: N379/$
GDP growth target: 3%
11.95% inflation target
N13.08 trillion total aggregate expenditure (29% Capex), with a deficit of N4.48 trillion
— tolu ogunlesi (@toluogunlesi) September 30, 2020
Nairametrics reported in July that the National Assembly passed a revised budget of N10,805,544,664,642 on the 11th of June after the Federal Executive Council (FEC) approved a revised budget of N10.523trillion in May, which was signed by President Muhammadu Buhari.
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President Buhari announced that the budget was revised due to the effect of the COVID–19 pandemic on the economy, and disclosed that all MDAs will be allocated 50% of their capital allocation by the month’s end.
The Oil benchmark in the revised budget was reduced from $57 per barrel to $25 and crude production was reduced from 2.18 million to 1.94 million barrels per day in the new revised budget which was disclosed by Zainab Ahmed, the Minister of Finance.
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In today’s announcement, the Federal Government stated:
“Budget Proposal for 2021, approved today;
FEC Oil benchmark: $40
Oil Production: 1.86m bpd (incl 400k of condensate)
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FX: N379/$ GDP growth target: 3% 11.95% inflation target N13.08 trillion total aggregate expenditure (29% Capex), with a deficit of N4.48 trillion.”
The Ministry of Finance added that the FX benchmark moved from N360 to N379, and that the National Assembly will be presented with the budget.
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Business
IMF lifts 2021 global GDP growth to 6%
The group also warned that economic recoveries are diverging dangerously across and within countries.
The International Monetary Fund has lifted its global growth outlook to 6% in 2021 (0.5% point upgrade) and 4.4% in 2022 (0.2 percentage point upgrade), after an estimated historic contraction of -3.3% in 2020 due to the effects of the COVID-19 pandemic. This disclosure was made on the organisation’s website on Tuesday.
The group also warned that economic recoveries are diverging dangerously across and within countries, as economies with slower vaccine rollout, more limited policy support, and more reliance on tourism do less well.
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What the IMF is saying
“The upgrades in global growth for 2021 and 2022 are mainly due to upgrades for advanced economies, particularly to a sizeable upgrade for the United States (1.3 percentage points) that is expected to grow at 6.4 percent this year.
This makes the United States the only large economy projected to surpass the level of GDP it was forecast to have in 2022 in the absence of this pandemic.
China is projected to grow this year at 8.4 percent. While China’s economy had already returned to pre-pandemic GDP in 2020, many other countries are not expected to do so until 2023.”
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On divergent recoveries
The IMF stated that divergent recovery paths are likely to create wider gaps in living standards across countries compared to pre-pandemic expectations.
“The average annual loss in per capita GDP over 2020–24, relative to pre-pandemic forecasts, is projected to be 5.7 percent in low-income countries and 4.7 percent in emerging markets, while in advanced economies the losses are expected to be smaller at 2.3 percent,” they said.
“Faster progress with vaccinations can uplift the forecast, while a more prolonged pandemic with virus variants that evade vaccines can lead to a sharp downgrade. Multispeed recoveries could pose financial risks if interest rates in the United States rise further in unexpected ways.“
For Africa, IMF forecasts economic growth of 3.4% in 2021 and 4% by 2022, Nigeria is expected to grow by 2.5% in 2021 and 2.3% by 2022, while South Africa is projected to hit growths of 3.1% and 2.0% for the respective years in focus.
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In case you missed it
The International Monetary Fund (IMF) identified some factors that hamper the economic recovery of low-income countries from the devastating impact of the coronavirus pandemic, factors including access to vaccines, limited policy space to respond to the crisis, the lack of means for extra spending, pre-existing vulnerabilities such as high levels of public debt in many low-income countries and sometimes weak, negative, total factor productivity performance in some low-income countries. These factors continue to act as a drag on growth.
