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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.  

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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.

READ: Stamp Duty Non-remittance: RMAFC to probe banks over N100bn

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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READ: Buhari earmarks N420 billion for N-Power, GEEP and others under NSIP in 2021 budget

Recurrent expenditure – N5.65trn 

Capital Expenditure – N3.85trn 

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Statutory transfer – N484.5bn 

Debt service – N3.12trn 

Total proposed budget – N13.08trn 

Key parameters 

Oil production – 1.86 mbpd 

Oil Price – $US40p/b 

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Exchange rate – 379 N/$US 

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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.

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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.

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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.

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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.

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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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.

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WTO, Okonjo-Iweala joins South Africa's presidential economic advisory council as nation struggles with recession, Dr. Okonjo-Iweala officially 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.

READ: Trans-Nationwide Express Plc suffers N79 million loss in Q3 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.

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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.

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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.

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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.”

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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.

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WTO, Nigeria’s former finance minister, Okonjo-Iweala, gets IMF appointment

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.

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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.

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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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Economy & Politics

Kano State presents N147.9 billion budget for 2021 fiscal year

Governor Ganduje has presented the total sum of N147.9 billion as Kano State’s proposed budget for 2021 fiscal year.

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Dala Inland Dry Port set to take off after N2.3 billion investment - Kano Govt., DB to support 1.26 million farmers with $95 million

Kano State Governor, Abdullahi Ganduje has presented the total sum of N147.9 billion as its proposed budget for 2021 fiscal year before the Kano State House of Assembly today.

Presenting the budget tagged “Budget for Economic Recovery and Sustainable Development,”Governor Ganduje said the budget is in furtherance of his administration’s vision for diversification of the state sources of revenue which will engineer development in the future.

Backstory: Recall that Nairametrics had earlier reported the drive and optimism by Kano State government to boost its Internally Generated Revenue. This might probably explain why IGR increased by almost 10% between 2020 allocations and proposed estimates for 2021.

What you should know: The breakdown of the budget verified by Nairametrics showed the following key highlights:

  • The total budget increased by approximately 7.0% from N138.279 billion in 2020 to N147.935 billion in 2021.
  • Capital expenditure for the periods under view increased by 10.93% from N60.485 billion to N67.095 billion.
  • Recurrent expenditure also increased from N77.79 billion to N80.839 billion, indicating a 3.92%. increase for the periods under view.
  • Internally Generated Revenue (IGR) increased by approximately 10% from N24 billion to N26.395 billion during the period under view.
  • A breakdown of the budget showed that the Education sector has over N37 Billion representing 25% of the total budget while the health care delivery service has over N25 Billion representing 17% of the total budget.

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