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Analysis: Nigeria’s total fiscal deficit at N3.01 trillion, 29.1% above the prorated budget deficit

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Minister of Finance, Budget and National Planning Mrs Zainab Shamsuna Ahmed

SAT 10 JULY, 2021-theGBJournal- During the public consultation of the draft 2022-2024 Medium-Term Expenditure Framework (MTEF), the Minister of Finance Budget and National Planning Mrs Zainab Shamsuna Ahmed gave an update of the FGN’s fiscal performance in 5M-21.

Based on the presentation document, Nigeria’s actual revenue (NGN1.84 trillion) in 5M-21 grossly underperformed the prorated budgeted revenue (NGN3.33 trillion) by 44.6%, largely due to a 49.5% decline in oil revenue (NGN423.00 billion vs prorated budget: NGN837.92 billion) as lower oil production volume capped the gains from oil prices during the period.

Meanwhile, actual expenditure (NGN4.86 trillion) underperformed by 14.2% compared to the prorated budget (NGN5.66 trillion) with recurrent non-debt expenditure (NGN1.87 trillion or 38.5% of total expenditure) and debt service (NGN1.80 trillion or 37.0% of expenditure) contributing the most significant chunk of total spending.

Accordingly, the total fiscal deficit printed NGN3.01 trillion – 29.1% above the prorated budget deficit. Based on our H2-21 domestic macroeconomic outlook report, we expect a 75.6% performance ratio for 2021E actual revenue (vs 2020FY: 73.4%) and assume a budget implementation rate of 90.5%. Accordingly, we expect the fiscal deficit (excluding GOEs and project-tied loans) to range between NGN5.01 trillion and NGN6.51 trillion in 2021E.

On 7th July, the Senate approved the FGN’s request to borrow NGN2.34 trillion (or USD5.72 billion using the NAFEX rate of NGN410.00) to fund the 2021FY budget in line with the 2021 Appropriation Act.

We understand that the Senate Committee on Local and Foreign Loans recommended that the Eurobond issuance be USD3.00 billion but not more than USD6.18 billion in the international capital market to finance part of the 2021E deficit (NGN4.89 trillion excluding GOEs and project-tied loans).

We note that the Senate also approved that the amount authorised may be raised from multiple sources, including the International Capital Market and any other Multilateral or Bilateral sources as may be available.

Overall, we see scope for reduced domestic borrowings over the rest of the year if the (1) Eurobond sale covers the amount the FGN expects to raise (USD5.72 billion), (2) World Bank approves the pending USD1.50 billion loan and (3) the government successfully borrows c.NGN900.00 billion from unclaimed dividends and dormant account balances.-Analysis provided by Cordros Research

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