Nigeria enters second economic recession in four years, plans $34 billion budget for 2021

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    • President Buhari presents 13 trillion-naira budget to assembly
    • Fiscal deficit seen at 3.6% of GDP in 2021 on GDP rebound
    • Plan based on oil output of 1.86 million barrels a day
    • Average crude price seen at $40 per barrel through 2021

    With third quarter manufacturing contract expected, Nigeria has entered second recession in four years as Africa’s largest oil exporter unveiled record spending plans for next year as it bets that a swift recovery in Africa’s biggest economy will help keep its budget deficit stable.

    President Muhammadu Buhari presented a budget of 13.1 trillion naira ($34 billion), up 25% from this year. The government expects the fiscal deficit to remain steady at about 3.6% of projected gross domestic product

    The spending plan provides for an estimated deficit of 5.16 trillion naira and total expenditure of 13.08 trillion naira. The government has retained an exchange rate of 379 naira to the dollar “given the determination of the Central Bank of Nigeria to pursue unification” of rates, according to the document.

    Debt service is projected to take 3.12 trillion naira, slightly less than the 3.58 trillion naira planned for infrastructure development.

    Africa’s largest crude producer sees daily crude production of 1.86 million barrels a day in 2021  at an average price of $40 a barrel.

    The economy of Africa’s biggest oil producer is likely to have contracted in the third quarter and entered its second recession in four years, Buhari told lawmakers Thursday in the capital, Abuja. Next year, it’s likely to expand 3%, he said.

    The government plans to plug the budget shortfall by borrowing as much as 4.28 trillion naira from domestic and foreign markets. That’s less than the 5.4 trillion naira approved for this year that consisted mostly of domestic bond sales and concessional loans from abroad.

    While the coronavirus pandemic has hit domestic demand and capital inflows, the worst may be over for the West African nation, according to Fitch Ratings. The company last month revised its outlook for Nigeria’s credit rating to stable from negative, citing more stable oil prices and easing global conditions.

     

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