The severity of the COVID-19 pandemic as well as the shock in the crude oil market is likely to portend great danger for the Nigerian economy by the end of 2020.
According to economic experts, it is pertinent that the Nigerian government embraces the crisis as a window of opportunity to push ahead with reforms that place the economy on a solid footing over the long run.
This was even as they called for recurrent spending to be kept at bay, and productive capital expenditure, prioritised.
According to a report titled; Adjusting for the Times: An Analysis of Nigeria’s Revised 2020 Fiscal Budget, which was released by Agusto & Co, the nation’s overall fiscal revenue for 2020 is estimated at N5.84 trillion in the revised budget from N8.42 trillion reflecting a drop of 31 per cent due adjustments made in key parameters of the economy.
President Muhammadu Buhari had signed the Revised 2020 Fiscal Budget into law on July 10, 2020, following several weeks of deliberations and negotiations with the National Assembly.
The research and credit risk management firm noted that the fiscal revenue estimates reflect oil revenue constituting approximately N1 trillion; tax revenues N1.6 trillion; and other revenue sources accounting for N3.2 trillion.
“The government projects a debt service to revenue ratio of 32 per cent, and a capital expenditure to aggregate government spending ratio of 23 per cent. Given the tight fiscal space, the former is an unrealistic projection, and the expectation is that debt service will gulp a substantially larger chunk of revenues.
For context, debt service as a proportion of the Federal Government’s retained revenue was approximately 60 per cent for the fiscal year 2019. Likewise, capital expenditure is expected to underperform severely, as the government only achieved a meagre 14 per cent capital spending to aggregate expenditure in 2019”, they said.
The report further stated that nation’s coffers are fast depleting, given minimal public savings and persistent budget deficits over the years without a concomitant improvement in fiscal revenue generation and added that the confluence of a low, undiversified fiscal revenue base, a heavy central government that’s expensive to run, and structural bottlenecks all act to hamper public finances and national savings.