Nigeria: 2015 Budget Snapshot

The Nigerian Federal House of Representative on Thursday passed the sum of N4.5tn budget for the 2015 fiscal year with an increase of N135.4bn over initial proposal submitted in November 2014. In addition, the House has adopted an oil benchmark of US$53.0, daily oil production of 2.3mbpd, exchange rate of N190.00/US$1.00 and fiscal deficit/GDP ratio of 1.1%. Surprisingly, no provision for fuel subsidy was made in the approved 2015 Appropriation Act.

A further review of the 2015 proposed budget shows a 4.3% decrease in total expenditure to N4.5tn in 2015 from N4.7tn in 2014. In the same vein, capital expenditure dipped significantly by 50.3% from N1.1tn in 2014 to N0.6tn in 2015 despite the infrastructural deficit in the country. In spite of the acclaimed plan of the Federal Government to reduce overheads, recurrent expenditure (non-debt) increased 5.6% from N2.5tn in 2014 to N2.6tn in 2015, accounting for 58.8% of the total expenditure.

Debt service now accounts for 21.2% of the total expenditure on the back of the persistent Y-o-Y increase in debt service (+33.9%). This will continue to be a sting in the tail for the government in coming years. A further breakdown of the debt service shows that about N894.6bn and N59.0bn will be used for domestic and foreign debts respectively. Nevertheless, as a result of the rebasing of the GDP, fiscal deficit to GDP stayed flat at 1.1% in 2015.

Consequently, the new Government will be confronted with the challenge of implementing the 2015 budget in view of the current economic realities of lower oil proceeds. Meanwhile in anticipation that the Transition budget would likely become law before the eventual take-over by the new Government, the Buhari led incoming administration has highlighted avenues to increase the country’s revenue sources. As a result, the next Government has proposed to run a lean government whilst blocking the various revenue leakages. Although, we believe the execution of the 2015 budget may pose a challenge for the incoming administration, we believe savings from the various leakages and cost reduction may go a long way in supporting the successful implementation of the 2015 budget.