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Budget: FG to save less on oil revenue, deficit falls to 1.85% of GDP

By on March 7, 2013

Nigeria’s budget deficit is set to fall to 1.85 percent of gross domestic product in 2013, the budget office said on Thursday, as government opted to save less of its oil revenue.

A finance ministry document circulated after his remarks put last year’s budget deficit at 2.85 percent of GDP.

President Goodluck Jonathan approved a N4.99 trillion budget last month for 2013, after it was passed by parliament, ending two months of disputes over the spending plans.

It was an increase on last year’s N4.7 trillion budget.

“There’s has been a trending downwards of the fiscal deficit,” Budget Office Director General Bright Okogwu told journalists in the capital Abuja. “We have a deficit of about 1.85 percent of GDP. I think this is very good going.”

The document released by the ministry showed total revenue collected by the federal government is projected to increase to N4.1 trillion, from N3.56 trillion in 2012.

But that projected increased was partly a function of a higher benchmark oil price assumption — $79-per-barrel, compared with $72 in the 2012 budget. It was also owing to a projected increase in oil production to 2.53 million barrels per day, compared with 2.48 million bpd in 2012.

Oil industry experts think the figure may be too optimistic – national statistics bureau figures show oil production averaged around 2.34 million bpd last year.

When Jonathan presented the budget late last year the national assembly passed it but increased spending. Members wanted more spending for projects and their constituencies.

In the end, the administration backed down: spending rose to N4.99 trillion from the N4.92 trillion proposed by Jonathan’s team, funded by an increase in the benchmark price.

“It all depends on what the reason are behind the fall in the deficit,” said Razia Khan, Head of Africa Research at Standard Chartered Bank. “If it’s due to that increase in the benchmark price, which increased spending levels, then it’s not necessarily good news because it means Nigeria is actually saving less oil money.”

She added that oil output assumptions in Nigeria were “becoming increasingly optimistic over time.”


[Business Day]