(Adds funding plan, deficit, analyst comment, background)
By Chijioke Ohuocha and Camillus Eboh
ABUJA, Oct 8 (Reuters) - Nigerian President Muhammadu Buhari
presented a record 13.08 trillion naira ($34.4 billion) budget
for 2021 to lawmakers on Thursday, an increase from last year as
the country tackles the crisis brought about by the coronavirus
pandemic.
The budget is a 21% rise from the revised 2020 spending plan
of 10.8 trillion naira, though economists say budget
implementation may differ from the figures unveiled.
The plan for Africa's top oil exporter assumes crude
production of 1.86 million barrels a day and an oil price of $40
per barrel, Buhari said.
Nigeria's economy has been hobbled by the pandemic that
triggered a crash in the price of oil, its main export, and an
exodus of foreign investors leading to higher inflation,
contracting growth and larger funding gap.
The West African nation now faces a possible recession in
the third quarter after its economy contracted 6.1% in the
second quarter. The government expects the economy to shrink by
as much as 8.9% this year.
Buhari told lawmakers at a joint session of the upper and
lower chambers of parliament that the economy could relapse into
a second recession in four years unless it acts quickly. He said
he wanted to finish old projects rather than start new ones.
FISCAL CONSTRAINTS
Nigeria revised its 2020 budget in June, as the government
made plans to respond to the virus amid lower oil prices. But it
has struggled to fund the spending plan due to low revenues.
The government decided to shelve a eurobond issue this year
as the impact of the pandemic rattled markets. It has approached
concessionary lenders for a budget support loan, but the World
Bank has asked for reforms as part of its requirement.
Government spending plans provide direction for the local
debt markets. However, treasury yields are at historic lows due
to excess liquidity on the money markets after foreign investors
dumped local assets as oil prices crashed.
Amaka Anku, Africa director at Eurasia Group, said in a note
that the government had made incremental fiscal and regulatory
reforms over the past year, including removing petrol and
electricity subsidies.
But she added: "...Without visionary leadership at the top,
the administration will struggle to make progress addressing
more difficult challenges such as export diversification,
productivity growth, and expansion of the revenue base."
Nigeria expects a deficit of 3.64% of GDP in 2021, breaching
its statutory limit of 3%, Buhari said as the country battles
increased costs brought about by the virus. The government aims
to fund the gap through new borrowings and privatisation.
Buhari said the government was targeting a return to growth
in 2021 with inflation moderating. He expects the currency to be
stable at 379 per dollar after the naira was devalued twice this
year to adjust to the lower oil price environment.
($1 = 380.50 naira)