During the 2015 fiscal year, Nigeria's budget totalled about N4.4trn (£13.3bn) or $20bn but with the new government faced with infrastructure decay and limited opportunities for the youth, President Buhari is looking to double expenditure. Government officials believe there is a need for an economic stimulus in the face of the current revenue crisis largely accentuated by the fall in crude oil prices.
In a recent document put together by vice president Professor Yemi Osinbajo, the federal government is proposing a capital expenditure of N2trn next year, up from N1.3trn in 2015. Also, with about 70% of Nigeria's population under 40, the government is looking at ways of engaging them and making them economically productive.
Professor Osinbajo's document was used during a presentation to the new cabinet during a two-day retreat last week. It outlined the need for a massive infrastructure building programme for roads, rail and power, along with expansionist fiscal and monetary policies.
According to Professor Osinbajo, the infrastructural projects would be paid for by a N25bn infrastructure fund and a N2.5trn special intervention fund. He added that the budget process will be zero-based, a method of budgeting by which all expenses must be justified for each new budget year.
Already President Buhari has begun a series of interactive sessions with Nigeria's youth as part of a programme to engage them. During the elections, the ruling All Progressives Congress promised to pay N5,000 (£16.6) every month to 25m vulnerable youths but so far has not been able to implement the policy as it was not contained in the 2015 budget.
Professor Osinbajo said: “For the medium term expenditure framework, the actual 2015 budget is N4.4tn, while the proposed 2016 budget will be N7tn to N8tn. Fixing the transitional electricity market is currently the most important priority area, so this administration will have a strong focus on solar energy, most especially for the provision of power for social services like health and education.”
He added that a partnership agreement had been signed with the British government to assist with driving the Nigerian solar revolution. In addition, Professor Osinbajo pointed out that agriculture, mining and manufacturing were listed as key areas to develop in order to diversify the economy.
Collaboration with China's Exim Bank to develop 40 rice milling plants was among the specific plans highlighted in the document. Bismark Rewane, the managing director of the Financial Derivatives Company, said that if the rumour that Nigeria plans to spend N8trn in 2016 is true, it will be 100% higher than the 2015 level and a major macro-economic stimulant.
He added: “This could be the much needed tonic that Nigerians have been waiting for but in life there is nothing like a free lunch. The true cost of the economic stimulus is an increased level of borrowing and compliance with the terms of a responsible debtor and it also means that the economic managers will have to accept that monetary and exchange rate adjustments are inevitable.
"This will be followed by fiscal consolidation. Businesses in Nigeria are confounded by exchange rate uncertainty and policy vagueness, therefore a categorical position on government spending is great news.”
He noted that the development would be taking place when gross domestic product growth in the third quarter of 2015 will come in at a disappointing 2% and inflation creeps up to 9.5%. According to Mr Rewane, a continuation of stagflation and the need for a counter-cyclical boost has become compelling.
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