Nigeria Government submitted a revised budget of NGN10.27 trillion, against NGN10.60 trillion previously approved.
Thank you for reading this post, don't forget to subscribe!In the new budget, the deficit level is at a historical high of NGN5.2 trillion (previously NGN2.18 trillion), due to the downward revision in revenue estimates.
While revenue was previously estimated at NGN8.42 trillion, the revised estimate is now NGN5.08 trillion.
Oil revenue projection was the largest revision, with the estimate reviewed downwards by NGN254.2 billion (NGN2.64 trillion previously).
The revision to the oil revenue estimate follows the sharp decline in the price of Brent crude oil and lower production expectation given the OPEC agreement (Nigeria’s quota: 1.4mb/d vs. 1.75mb/d previously).
The FGN is now expected to raise c.NGN4.43 trillion in borrowings as against NGN1.59 trillion previously approved.
While OPEC+ has agreed to cut output by 9.7mb/d, the oil market appears to be unmoved since the cut isn’t significant enough relative to the decline in demand.
In our view, the FGN’s oil production and price benchmarks of 1.80mb/d (including condensates) and USD30.00/bbl.
respectively, might still be ambitious. We expect the budget deficit to touch NGN6.5 trillion if FGN were to implement c.90.0% of the budget.
The National Bureau of Statistics is expected to release data for Nigeria’s consumer price index for the month of March early next week and our view for March inflation trajectory hasn’t changed much since our last update.
We recall that headline inflation rose by 7bps to 12.20% y/y (Cordros’ est.: 12.30% y/y) in February.
We attribute the uptick to the unfavourable base from the corresponding period of last year.
For the sake of clarity, lower energy prices, especially in H1-19, had driven focal temperance across both the food and core baskets.
For March, softer price increase expectations from robust market supply underpin our slower food inflation forecast (-4bps to 0.83% m/m).
Elsewhere, the recent naira weakness is not expected to impact either the core or food basket in the short term. Thus, core inflation is expected to print 0.71% m/m; 2bps lower than the previous month.
Tying this all together, headline inflation is expected to print 1.79% m/m, which translates to 12.20% y/y.