Nige­ri­ans ap­prove mas­sive bud­get to help boost eco­nomic growth

The Star Late Edition - - BUSINESS REPORT - David Mal­ingha Doya and So­lape Ren­ner

NIGE­RIAN leg­is­la­tors ap­proved a 2018 bud­get of 9.1 tril­lion naira (R312 bil­lion), its big­gest yet, to help boost eco­nomic growth less than a year be­fore gen­eral elec­tions. The Se­nate voted to in­crease spend­ing plans by more than a fifth from the pre­vi­ous year, ac­cord­ing to pro­ceed­ings led by chamber Pres­i­dent Bukola Saraki on Wed­nes­day. The House of Rep­re­sen­ta­tives, the Na­tional Assem­bly’s lower chamber, also ap­proved the plans.

The bill comes six months af­ter be­ing pre­sented to law­mak­ers by Pres­i­dent Muham­madu Buhari and is 5.8 per­cent more than the 8.6trln naira bud­get pro­posed in Novem­ber.

The leg­is­la­tors also in­creased the oil-bench­mark price for the bud­get to $51 (R637.30) a bar­rel from $45 pro­posed by Buhari, on the as­sump­tion of crude out­put of 2.3 mil­lion bar­rels daily and an ex­change rate of 305 naira a dol­lar.

Africa’s most-pop­u­lous na­tion and big­gest oil pro­ducer wants to boost eco­nomic ex­pan­sion to about 3.5 per­cent this year, partly by in­vest­ing al­most a third of the bud­get in roads, rail, ports and power. Re­cov­ery Last year, the econ­omy staged a frag­ile re­cov­ery af­ter con­tract­ing in 2016 for the first time in a quar­ter cen­tury.

The plan in­cludes re­cur­rent ex­pen­di­ture of 3.5trln naira, cap­i­tal spend­ing of 2.8trln naira and debt ser­vice of 2.2trln naira. The fis­cal deficit is fore­cast at 1.9trln naira, or 1.73 per­cent of GDP. Buhari will have to sign his ap­proval for the bud­get to be­come law.

It’s im­por­tant for the ad­min­is­tra­tion to con­tinue to boost spend­ing on in­fra­struc­ture, be­cause that’s what will help the rul­ing party to win the next elec­tion sched­uled for Fe­bru­ary, Fi­nance Min­is­ter Kemi Adeo­sun said in a Jan­uary in­ter­view. Buhari said he would seek an­other term.

While fis­cal ex­pan­sion could spur growth, it might in­crease in­fla­tion­ary pres­sures, ac­cord­ing to econ­o­mists, in­clud­ing Razia Khan at Stan- dard Char­tered Bank.

That may limit room for the cen­tral bank to cut its key in­ter­est rate from a record 14 per­cent, where it’s been since July 2016 to curb high in­fla­tion. An­nual price growth slowed to 12.5 per­cent in May, the low­est rate since March 2016. The bulk of the bud­get deficit will be funded by 1.7trln naira of bor­row­ing. – Bloomberg

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