Nigerian President Muhammadu Buhari asked lawmakers to approve the country’s biggest ever budget on Tuesday as he looks to revive an economy hit by collapsing oil prices.
Buhari outlined plans for the government to spend 6.08 trillion naira ($30.8 billion) in 2016, an increase of about 20 percent from this year. The deficit will more than double to 2.2 trillion naira, or 2.16 percent of gross domestic product.
“The 2016 budget is designed to ensure we’ll drive our economy, deliver inclusive growth and create a significant number of jobs,” Buhari, a 73-year-old former general who last ruled Nigeria in the mid-1980s, told lawmakers in Abuja, the capital. It “seeks to stimulate the economy, making it more competitive by focusing on infrastructure.”
Growth is set to ease to 3.2 percent this year, the slowest pace since 1999, according to a Bloomberg survey of economists. The government expects it to accelerate to 4.37 percent in 2016, Buhari said.
The budget will be based on an oil price of $38 a barrel, while the deficit will be plugged with 1.84 trillion of borrowing, 900 billion of which will come from international debt markets, Buhari said. The country will consider tapping the Eurobond market early next year for the first time since 2013, Finance Minister Kemi Adeosun said in an interview on Dec. 16.
Capital expenditure, as opposed to recurrent spending on public sector salaries and pensions, will more than triple to 1.8 trillion naira in 2016, meaning its proportion of the budget will rise to 30 percent from about 15 percent this year.
Oil revenues will make up 820 billion naira of the government’s income, less than the 1.45 trillion naira projected for non-oil revenues such as corporate taxes and customs duties, Buhari said.
Almost 1.4 trillion naira will be spent on debt service. That’s more than threefold the 370 billion naira set aside for education and six times the expenditure on health of 222 billion naira.
As well as raising non-oil revenue, Buhari will aim to cut overhead costs such as travel and entertainment across all levels of government and ensure state agencies don’t withhold income that should be sent to the government.
“This budget will provide optimum value by ensuring that every naira spent by this government counts,” Buhari said.
He also said the central bank would introduce “some flexibility” to the foreign-exchange market, in which trading curbs have all but fixed the local currency at 197-199 per dollar since March. That’s left the naira overvalued, deterring foreign investment and preventing businesses from buying essential imports. Prices of forwards suggest it will weaken 11 percent to 223 in three months and 24 percent to 260 in a year.