Nigeria to borrow $14bn to fund the 2021 budget as collapse in oil demand depletes state revenue

NIGERIA's federal government is planning to borrow an extra N5.6trn ($14.6bn) during the course of this year to help fund the 2021 budget as the economic meltdown precipitated by the coronavirus pandemic has made it impossible to raise the N13.59 ($35.4bn) budgeted.

Faced with an impossible economic situation, Nigeria's budget is predicated on the federal government selling 2.1m barrels of crude oil at benchmark price of $40 per barrel. With demand for petroleum in the doldrums as global industrial output plummets in the wake of the lockdown that has resulted from the virus, Nigeria is in big trouble.

Last year, Nigeria had to borrow about $11bn from bodies such as the World Bank, International Monetary Fund and African Development Bank to fund its $28bn budget. With there being no hope of a recovery in global crude oil demand, Nigeria has no choice but to resort to more borrowing in 2021 as she is a mono-economy wholly dependent on one commodity.

Finance minister Zainab Ahmed, revealed that the federal government will borrow the N5.6trn from domestic and foreign sources to support the implementation of the 2021 budget. She added that N5.6trn is the total deficit of this year’s N13.59trn budget and other plans to raise funds include borrowing about N850bn from unclaimed dividends and dormant bank deposits.

She added that un addition, the privatisation of some public assets valued at N205.15bn might take place this year to help raise funds.  According to Ms Ahmed, the government will raise N2.34trn each from domestic and foreign sources and multi-lateral and bi-lateral loan drawdowns will provide N709.69bn.

Ms Ahmed said:  “We are working with the Central Bank of Nigeria (CBN) to regularise previous borrowing that has been made to turn them into formal borrowing by the Nigerian economy. To this extent, the CBN and I need to agree on the rates and the tenures and the cost of the borrowing.

"We would be formally doing that in the early 2021 on the previous borrowing that has been made and also projected borrowings in 2021. So, we will design special instrument that limits what is done in terms of domestic borrowing from the CBN.”

In addition, the minister disclosed that the government was assessing existing tax waivers to some organisations/companies. On the budget proper, Ms Ahmed stated that in 2020, government over-spent what the National Assembly appropriated by 101%.

Attributing the excess spending to  unforeseen circumstances brought about by Covid-19, she added that expenditure approved totalled N9.97trn while N10.08trn was spent. According to Ms Ahmed, N3.27trn was spent on debt servicing and N3.19trn on personnel costs, including pensions which cost N6.46trn.