As the 2020 budget awaits scrutiny by the National Assembly, its final implementation may be decided by both domestic and external borrowings as well as all manner of risks.
According to London-based senior Research Analyst with FXTM, Lukman Otunuga, who warned that the observation that the budget’s revenue target is highly optimistic should be taken seriously.
“ It will be interesting to see how Nigeria is able to meet those goals” considering the last June’s revenue target of N8.8trillion as spelt out in the 2019 budget, noted Otunuga who stated this Wednesday in Lagos.
His words: “Now we are going to have record spending , N10.33 trillion, to make all spending go round. Government revenue is projected to be around N8.3155 trillion. And that leads Nigeria to deficit of N2.18trillion. To plug that hole, Nigeria is going to have to continue external and domestic borrowings. It will be interesting to see how Nigeria is able to meet those goals.
“When we break it down, the government projected oil prices to be about $57 per barrel; oil production at 2.18 million barrels; Naira exchange rate at N305 per dollar. $57 per barrels will go for oil. it will be very interesting what (price) will trade above (the target) oil (price) next year if the US –China trade uncertainty remains. If the demand is not there, if demand is missing from oil, oil price, for all I can tell you, would trade below $55 per barrel.
“Secondly, Can Nigeria produce 2.18 million barrels a day? In August, Nigeria’s oil production was around 1.87 million barrels a day. Nigeria promised OPEC that they were going to keep their oil production cap at 1.774 million barrels per day. The last time Nigeria was able to pump over two million barrels a day was in 2013. Almost six years. So I want to see how government can achieve that target and for how long.
“The revenue target in the budget is going to be exposed to external risks! And another thing is that it is very important that the budget is passed by December 2019 because, looking at what happened in 2019, thecommonly repeated delays happened until the budget was implemented. I think the quicker this budget is implemented, the better it will be for Nigerian economy.”
On the 2019 revenue target alluded to, the Executive Chairman of Federal Inland Revenue Service (FIRS), Mr Babatunde Fowler, commenting on it early in the year had said:
“This unprecedented figure may look ambitious! It means we have a lot of work to do in 2019 as we aim for the set target of N8.8 trillion. It reflects the faith reposed in us by our leaders.We have been given this target because our leaders believe we can meet this target and even surpass it”.
On the global outlook for 2020, Otunuga reasoned that the world outlook for 2020 remains clouded by uncertainty. “Until we see changes; until we see changes in the United States and China, until there is a resolution to the trade developments, we won’t see the economic conditions improving any time soon.”