Nigeria 2016 Budget: the Naira, the CBN, and National Priorities

As it worked on its first full budget, the Buhari administration had to contend with two unfavourable factors inherited from the previous administration.

First, was the unusual, and ultimately deleterious management of the economy during President Goodluck Jonathan’s five years in office. Then there was the drop in oil prices, which accounts for a disproportionately high portion of government’s revenue, beginning mid-2014, which reduced by half the country’s earnings from the sector.

Given this, the challenge for the 2016 budget is how to revamp the economy via increased government spending in the light of dwindling official government revenues.

The new budget seeks to do exactly that. Of the proposed N6.08tn, N3.86tn is revenue projected to come from the much-diminished crude oil sales and what to us seem like excessively optimistic earnings from “non-oil taxes” and “independent revenue”.

In the budget, the administration has allocated N4.28tn for recurrent expenditure and N1.8tn for capital investments. PREMIUM TIMES note that the budget proposal breaks with a long-standing harmful tradition that has seen daily spending consume more of the national budget than the economy’s need for infrastructure and productivity-enhancing spending would suggest.

With 30% of the budget, the capital allocation makes the right nod to infrastructure, and the need to secure the parts of the country currently ravaged by an insurgency-induced war, both of which are necessary if business is to thrive. The 9% drop in recurrent expenditure, while sufficiently indicative of a more prudent approach, does however raise the question of the large portion of the budget (N1.36tn) dedicated to debt servicing. In terms of the economy’s overall size, this remains a piffling sum.

However, against the expected revenue streams, there is much to be worried about what is in absolute terms the country’s largest allocation for debt service.

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