President Buhari presented the 2018 Budget of 8.6 trillion naira to the National Assembly earlier.
Key assumptions of the budget include benchmark oil price of $45/barrel, FX rate of 305 naira/$, crude oil output of 2.3 mbpd, an inflation rate of 12.4 percent and GDP growth of 3.5 percent. However, the 2017 budget is yet to complete its 12 months cycle.
Tagged the budget of consolidation, total expenditure which is estimated at 8.6 trillion naira represents a 16 percent increase from 7.3 trillion naira in 2017.
Tagged the budget of consolidation, total expenditure which is estimated at 8.6 trillion naira represents a 16 percent increase from 7.3 trillion naira in 2017.
Capital spending is to increase 8 percent to 2.4 trillion naira, compared with recurrent spending which will rise faster by 38 percent to 3.5 trillion (vs. 2.6 trillion naira in 2017).
Revenue is projected to jump 34.7 percent to 6.6 trillion naira, with an ambitious non-oil revenue of 4.2 trillion naira, up 40 percent from 3.0 trillion naira in 2017.
Oil revenue projection is modest at 2.4 trillion naira, while borrowing is expected to slow to 2.0 trillion naira from 2.4 trillion naira in 2017.
We note that total borrowing equates debt service cost at 2.01 trillion naira amid a sharp increase in FGN's debt profile since 2016.
Optimist assumption for oil output at 2.3mbpd offsets modest assumption for oil benchmark price even as FX rate and GDP growth assumptions appear pushy in the context of current realities. Delayed passage and poor implementation have marred budget performance in Nigeria over the years.
(C) United Capital
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