Nigeria needs N1 trillion to to finance N1.95 trillion budget deficit for 2018 fiscal year — FSDH Merchant Bank

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THE federal government will borrow N1 trillion from the domestic market and N900 billion from the international market to finance the N1.95 trillion budget deficit for the 2018 fiscal year.

FSDH Merchant Bank made this projection in its monthly financial markets and economic outlook for June presented to journalists last week in Lagos.

Meanwhile the bank has downgraded its Gross Domestic Growth (GDP) growth forecast for 2018 to 2.78 percent from 3.16 percent, saying there is need for expansionary policies to stimulate economic growth, especially in view of the lack-luster GDP growth recorded in the first quarter of 2018 (Q1’18).

Speaking at the presentation, the bank’s head of research, Mr Ayo Akinwunmi, noted that the upward revision of the oil price benchmark by the National Assembly while passing the 2018 Appropriation Bill has led to a drop in budget deficit to N1.95 trillion. He also observed that there is no provision for Premium Motor Spirit (PMS) subsidy in the Budget.

Akinwunmi, however, stated: “The budget deficit will increase when the PMS subsidy is factored in. FSDH Research believes that the federal government will finance the deficit through issuance of bonds (local and foreign) and this may put upward pressure on yields.

FSDH Research estimates that about N1.05 trillion may be sourced from domestic bond market while about N901 billion may be sourced from the international market to fund the budget deficit.”

Speaking on the GDP growth for Q’18, Akinwunmi said: “The recovery path of Nigeria’s economy decelerated in Q1’ 18. FSDH Research however observed steady recoveries recorded in both the manufacturing, and information and communication sectors. Agriculture recorded the lowest growth rate since Q1’ 16.

Our analysis shows that the labour intensive sectors of the economy such as real estate, construction and trade all contracted in Q’ 18. Thus, additional expansionary policies are required for inclusive growth.

According to data from the National Bureau of Statistics (NBS), the real Gross Domestic Product (GDP) grew by 1.95 percent in Q1’18, compared with the growth rate of 2.11 percent recorded in Q4’17.”

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