May 11 Nigeria’s parliament signed off on a record 7.44 trillion naira ($24.4 billion) budget for 2017 on Thursday, aiming to drag Africa’s biggest economy out of its first downturn in quarter of a century, lawmakers said.
The oil producer is in its second year of recession, brought on by low global crude prices that have slashed government revenues, weakened the naira currency and caused chronic dollar shortages. It has also been wrestling with an Islamist insurgency in the north and militant attacks in the Delta crude-producing region.
The budget is based on an assumed oil price this year of $44.5 a barrel, while global benchmark Brent crude is currently trading above $50. The plan also entails foreign borrowing of 175.9 billion naira and domestic borrowing of 1.488 trillion naira.
“We do hope that this budget of recovery…will go a long way to help Nigeria to come out of the economic recession and bring growth,” Senate President Bukola Saraki told lawmakers.
Both chambers of parliament agreed to a bigger budget than the 7.298 trillion naira draft submitted by President Muhammadu Buhari in December.
The budget must now be signed by the president to become law. Buhari is on leave in Britain and on Sunday handed over power to his deputy Yemi Osinbajo, who will sign the budget in Buhari’s absence.
The plan includes 1.84 trillion naira to service loans and projects a deficit of 2.21 trillion naira, implying a deficit equivalent to 2.18 percent of Nigerian GDP.
Last August Nigeria approved a three-year plan to borrow more from abroad so that 40 percent of its loans would come from offshore, compared with the previous 16 percent, and to extend its debt maturity profile.
It planned to borrow as much as $10 billion from debt markets, with about half of that coming from abroad to lower its funding cost, but it has struggled to tap concessionary loans from the World Bank.
The government had initially planned to borrow to 1.25 trillion naira from the local market and 1.067 trillion naira abroad this year.
Economist says the increase in domestic loans was a sign that the country was struggling to attract interest offshore and could mean an about-turn from its foreign borrowing plans which has sent interest rates higher at home.
The government’s local-currency debt spiked to 13.88 trillion naira last year, up from 8.83 trillion in 2015, and is set to rise further.
Last year’s budget – passed in May 2016 – was delayed for months due to disagreements between lawmakers and the presidency, cutting the supply of government money and deepening the economic crisis.
Osinbajo, a lawyer who is seen as more friendly to business than Buhari, chaired cabinet meetings during the president’s previous medical leave and played an active role in driving policy changes. ($1 = 304.60 naira) (Reporting by Camillus Eboh, Alexis Akwagyiram and Chijioke Ohoucha; Writing by Ulf Laessing; Editing by John Stonestreet and Hugh Lawson)