Real GDP to decline by 4.2%
Nominal GDP to hit N132.1bn by 2021
The Federal Government has said inflation is expected to remain above single digit over the medium term. It said this is giving the structural issues impacting on the cost of doing business, including high cost of food distribution. The July inflation rate stood at 12.5 per cent. Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed disclosed this yesterday while presenting the draft 2021-2023 MTEF/FSP to the House of Representatives Committee on Finance. Represented by the Minister of State for Budget and National Planning, Mr. Clement Agba, she noted that “the draft 2021-2023 MTEF shows that there are continuing global challenges due to the COVID-19 pandemic.” “The medium-term outlook for Nigeria suggests that fiscal risks are somewhat elevated, largely due to COVID-19 related disruptions, which has exacerbated structural weaknesses in the economy.
“Nigeria faces significant medium-term fiscal challenges, especially with respect to its revenue, which if not addressed could snowball into a debt sustainability crisis,” the minister said. Given the key assumptions and macro-framework, the minister said oil GDP is expected to contract by 12.96 per cent in 2020, year-on-year, causing an economy-wide drag resulting in slower growth in non-oil GDP by 3.6 per cent, year-on-year. According to her, “real GDP is expected to decline by 4.2 per cent this year.” She also disclosed that nominal GDP is expected to increase from N130.836 billion in 2020 to N132.125 billion in 2021 and then up to N138.415 billion in 2023.
“Similarly, consumption expenditure is projected to stay flat at N118.735 billion in 2020 and N118.468 billion in 2021 and grow to N124.358 billion 2023, reflecting a gradual steadiness in the recovery,” she said. The minister informed that “with oil price projected to remain low and volatile in 2020, and Nigeria’s compliance with the OPEC cuts by reducing base production to between 1.412mbpd and 1.579mbpd from June to end of the year, growth in oil GDP is expected to decline in 2020. “Although, Nigeria’s total production capacity is 2.5mbpd, current crude production is about 1.4mbpd (in compliance with the OPEC production quota), and an additional 300,000bpd of condensate, totalling about 1.7mbpd.
“World Bank forecasts that crude oil prices will rise gradually from an average of $42pb in 2021 to $44.5pb in 2022, and $47pb in 2023,” she said. Ahmed also revealed that “EIA expects crude oil prices to average $41pb during the second half of 2020 and $50pb during 2021, reaching $53pb by the end of 2021” The minister explained that the government is putting in place measures to manage the country’s fiscal crisis, stating the measures are geared towards improving government revenue and entrench “a regime of prudence with emphasis on achieving value for money.
“The goal of fiscal interventions will be to keep the economy active through carefully calibrated regulatory/ policy measures designed to boost domestic value-addition, at-risk the enterprise environment, attract external investment and sources of funding.” She added that the government intends to improve the tax administration framework to optimize government revenue has been a major thrust of the administration’s strategic revenue growth initiative (SRGI). “We have included in the 2021-2023 MTEF/FSP, a tax expenditure statement (TES) overview, which seeks to dimension the cost of tax waivers/concessions, and evaluate their policy effectiveness.
“To enhance independent revenue generation and collection, government will aim to optimize the potentials, operational and collection efficiency of GOEs with a view to generating significantly higher revenues required to fund the FGN budget.” On the performance of the 2020 budget, the minister revealed that as at July, 2020, about N1 trillion was released for capital expenditure, adding that as at end of June 2020, FG-retained revenue was N1.81 trillion, 68 per cent of prorate target. She said FG’s share of oil revenue was N859.1 billion, representing 169.48 per cent performance over and above the prorated sum in the revised 2020 budget, while non-oil tax revenues totalled N581.23 billion. According to her, companies’ income tax and value added tax (VAT) collections were N301.06 billion and N85.4 billion, representing 73 per cent and 60 per cent respectively of the prorate revised targets for the period.
“Customs collections was N184.36 billion (82 per cent of revised target); other revenues amounted to N372.05 billion, a lowly 28 per cent of target, NLNG dividends, recoveries and stamp duty collected during the period are, however, yet to be booked in the fiscal accounts.”