Nigeria’s national budget grows 2,866% in 19yrs on worsening exchange rate, rising deficit

The size of Nigeria’s national budget has grown 2,866 percent from N299 billion in 1999 to N8.6 trillion as proposed in the 2018 budget presented by the president on November 7, 2017.

According to figures gleaned from BudgetIT, the size of the national budget in 1999 was N299 billion, growing to the trillion mark in 2002. It crossed into the N2 trillion mark in 2007 until 2009 when N3.05 trillion was a provision as expenditure plan. Between 2010 and 2015 the budget remained in the N4 trillion band.

However, in 2016 the budget size climbed to N6.06 trillion, thereafter to N7.4 trillion in 2017. With the proposed 2018 budget at N8.6 trillion, it means the budget has grown 2,866 percent since the birth of the current democratic dispensation.

Analysts say the sporadic rise in the size of the budget in the past three accounting years may have to do with the falling exchange rate of the naira, which worsen by about 150 percent since the current administration took over the helms of affairs in 2015. However, see the growth to rising deficits of over two percent of GDP.

Conversely, others argue that budget growth should not be measured by the exchange rate alone but by revenues and that since the government has been complaining of the paucity of funds there is no justification for having such a huge expenditure plan, which often does not get implemented.

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Government revenues in Nigeria decreased to N963.23 billion in the second quarter of 2017 from N1.261 trillion in the first quarter of 2017. Government revenues in Nigeria averaged N823.63 billion from 2010 until 2017, reaching an all-time high of N1.261 trillion in the first quarter of 2017 and a record low of N498.54 billion in the second quarter of 2015.

Nigeria’s national budgets have had a relatively low profile of deficits since 1999 until 2016.

Specifically, Nigeria recorded a budget deficit equal to 2.10 percent of the country’s gross domestic product in 2016. Government budget in Nigeria averaged -2.83 percent of GDP from 1981 until 2016, reaching an all time high of 0.80 percent of GDP in 1996 and a record low of -6.70 percent of GDP in 1990.

Budget deficits are usually funded by either domestic borrowing, foreign borrowing, currency creation and raising of reserve requirements, which occurs when banks are made to hold additional required reserves as cash balances with the Central Bank or eligible government securities.

At a total expenditure estimate of N8.612 trillion, the 2018 budget deficit amounts to 1.77 percent of the nation’s GDP, a 17.3 percentage point drop from 2.14 percent deficit to GDP stated in 2017 budget.