Economy & Politics
Nigeria allocates N3.12 trillion to service debt in 2021, as fiscal quagmire undermines ambitious recovery
N3.12 trillion has been budgeted to service debt in 2021, representing a 9.09% rise when compared to N2.86 trillion approved for 2020.
The Nigerian government in an ambitious economic recovery and sustainability agenda has proposed a N13.08 trillion appropriation budget for the year 2021, indicating a 23.3% from the N10.8 trillion budget approved in 2020.
Meanwhile, according to the budget breakdown, a sum of N3.12 trillion has been budgeted to service debt in 2021, representing a 9.09% rise when compared to N2.86 trillion approved for 2020.
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The Budget breakdown
According to the budget speech made by President Muhammadu Buhari, the 2021 Appropriation Bill is designed to further deliver on the goals of the Economic Sustainability Plan (ESC), with a roadmap to initiate post-corona economic recovery.
The breakdown shows that the capital expenditure as a percentage of Non-Debt Expenditure is a meagre 29%, while recurrent expenditure (salaries and overhead) as a percentage of total FGN expenditure stood at 71%.
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Recurrent expenditure – N5.65trn
Capital Expenditure – N3.85trn
Statutory transfer – N484.5bn
Debt service – N3.12trn
Total proposed budget – N13.08trn
Key parameters
Oil production – 1.86 mbpd
Oil Price – $US40p/b
Exchange rate – 379 N/$US
GDP Growth – 3.0%
Inflation – 11.95%
Nigeria to borrow N4.28 trillion to fund budget deficit
The breakdown of the 2021 appropriation budget shows that due to persisting revenue challenge in the country, the total budget deficit rose to N5.19 trillion from N4.97 trillion approved in 2020.
According to the proposed budget, the 2021 budget deficit will be financed majorly by another borrowing of N4.28 trillion from both domestic and foreign sources. Domestic borrowing is estimated at N2.18 trillion, while external debt borrowing has been put at N940.89 billion, with sinking fund to pay off maturing bonds issued to local contractors and creditors put at N220 billion.
READ: FG generates over N1.4 trillion from operating surplus
Other sources include N205.15 billion from privatization proceeds and N709.69 billion drawdowns on multilateral and bilateral loans secured for specific projects and programmes.
While the 2021 proposed budget appropriation will be largely funded by new borrowing, the attendant cost of borrowing new funds takes a sheer part of the total budget. For 2021, the Nigerian government is committed to meet debt service obligations, amounting to N3.12 trillion. This represents 40% of the total budget and an increase of N445.57 billion from N2.68 debt service in 2020.
Explore Data on the Nairametrics Research Website
An ambitious recovery?
The implementation of 2020 budget has largely been undermined by the outbreak of COVID-19 pandemic, driving the government to set a N13.08 trillion 2021 budget. Meanwhile, the proposed 2021 budget maybe an ambitious one to say the least, as key pressure points on Nigeria’s fiscal landscape persist.
A glance at the key parameters underlying the 2021 budget shows that the federal government may be overly ambitious in its drive to initiate the recovery process by 2021. For instance, the government projected the Nigerian economy to bottom out of recession and produce a GDP growth of 3.2% in 2021. Indeed, this may be overly ambitious in an economy already stretched by COVID-19 pandemic amidst a looming recession.
READ: OECD reduces global economic decline to 4.5% from earlier forecast of 6%
In addition, budget deficit continues to snowball, projected to be N5.19 trillion in 2021. This represents 3.62% of estimated GDP, well above the threshold of 3% stipulated in the Fiscal Responsibility Act (FRA), 2007. Unless there are new revenue sources for the country, given the limited scope for cost-cutting, it will not be feasible to keep budget deficits within the 3% target set in the Fiscal Responsibility Act 2007.
Lastly, revenue generation remains government’s main challenge. Despite key revenue management measures introduced in the 2021 budget, which includes deregulation of the price of petroleum products; ongoing verification exercise with IPPIS, and implementation of service-based electricity tariffs; the implementation of the 2021 budget may largely be threatened by the persisting weak global oil price.
Economy & Politics
WTO: Okonjo-Iweala declared candidate with the largest and broadest support among members
Okonjo-Iweala has announced her excitement about being declared candidate with the largest and broadest support among members.
In an optimistic outlook, Dr. Ngozi Okonjo-Iweala has been declared the candidate with the largest, and broadest support among members of the World Trade Organisation (WTO) and most likely to attract consensus.
This was revealed by the former coordinating minister of the Economy herself, through her verified Twitter page.
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Happy for the success & continued progress of our @wto DG bid. Very humbled to be declared the candidate with the largest, broadest support among members & most likely to attract consensus. We move on to the next step on Nov 9, despite hiccups. We're keeping the positivity going!
— Ngozi Okonjo-Iweala (@NOIweala) October 29, 2020
Backstory: Recall that Nairametrics had earlier reported that Okonjo Iweala is close to being appointed as the new Director-General of the World Trade Organization.
This is after a rigorous selection process that has seen the former minister of Finance scale through a lot of hurdles, making it to the top two.
READ: Why Okonjo-Iweala should win the WTO DG role – Prof. Moghalu
What you should know: According to a press release by the Ministry of Foreign Affairs, the third and final round of the selection process of the Director-General of the World Trade Organization (WTO) was concluded on Tuesday, 27 October 2020 and the result was announced on Wednesday, 28th October 2020.
Dr. Okonjo-Iweala secured the support of the majority of the member-countries but is yet to be declared and returned the winner.
This is because apart from winning the election, all 164 member-states of WTO were expected to adopt the winner by consensus, in accordance with the rule of procedure of the WTO.
It is important to highlight that Dr. Okonjo-Iweala has secured cross-regional backing with only the United States opposing the consensus.
(READ MORE: WTO accepts nomination of Okonjo-Iweala as DG despite opposition from Egypt)
A meeting of the General Council of the WTO has been scheduled for 9th November, 2020 for the final decision on the election process.
What they are saying: Expressing her optimism in winning the race, Dr. Okono-Iweala said: “Happy for the success & continued progress of our @wto DG bid. Very humbled to be declared the candidate with the largest, broadest support among members & most likely to attract consensus. We move on to the next step on Nov 9, despite hiccups. We’re keeping the positivity going.”
Explore some Advanced Financial Calculators on Nairametrics
Economy & Politics
Nigeria’s Ngozi Okonjo-Iweala close to being announced as new DG of WTO
Ngozi Okonjo-Iweala is expected to be announced as the new DG of the World Trade Organisation.
Nigeria’s former Finance Minister, Dr Ngozi Okonji-Iweala, is close to being appointed as the new Director-General of the World Trade Organisation (WTO).
READ: Okonjo-Iweala gets Organised private sector’s endorsement for WTO job
According to Reuters, a group of ambassadors also known as “troika” has proposed Ngozi Okonjo-Iweala to lead the WTO giving her a clear path to becoming the first woman to head the WTO since it started 25 years ago. The three ambassadors are thought to wield significant powers in determining what is a very “intricate and opaque” process.
READ: Buhari assures Okonjo-Iweala that the country will push until she emerges WTO DG
Most Nigerian Media houses have already announced NOI as the winner of the process even though this is yet to be made official by the WTO.
The winner for the role of DG of WTO is expected to be announced formally by the WTO later today.
However, there appears to be a new twist, in the expected announcement of her emergence as the new Director-General of the WTO.
The United States through its representative at the WTO has insisted that the South Korean candidate is still in contention and that Washington will not recognize Okonjo-Iweala as the consensus candidate for appointment as Director-General.
As a result, the General Counsel of WTO, postponed the announcement of a new Director-General until November 9, after the US presidential election, after further consultations would have been made.
The announcement of Okonjo-Iweala, who is reported to have gotten the support of a vast majority of members states, including the EU, Japan and China, as the new boss of the World Trade Organization, would have been a huge boost for Africa
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WTO: Okonjo-Iweala declared candidate with the largest and broadest support among members
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