Following the Federal Executive Council (FEC) approval of a revised 2020 Budget and Medium Term Economic Plans (MTEP) last Wednesday, the initial budget deficit of N2.18 trillion has ballooned to N5.36 trillion or 145.87 per cent.
The review saw the 2020 budget slashed by N75.1 billion to N10.52 trillion from N10.59 trillion earlier passed by the National Assembly and signed by President Muhammadu Buhari last December.
The review followed the sharp decline in oil revenue occasioned by the effects of the COVID-19 pandemic on the global economy.
The
development led to government revising downward the revenue expectations from
oil exports and exchange rate for calculating incomes from the country’s
external earnings.
Similarly,
the government reviewed the MTEP which resulted to the cut in benchmark crude
oil from $57 per barrel to $25 per barrel and production output to 1.9 million
from 2.25 million barrels per day.
The
government has also reviewed its foreign exchange rate to N360 to the dollar as
against the N307 per dollar used in the calculation of the approved 2020 budget
by the National Assembly.
The document
has N5.36 trillion budget deficit to be financed through borrowing from local
and external sources and using proceeds from privatisation to bridge the gap.
Analysts
said the devaluation of the local currency two months ago by the Central Bank
of Nigeria (CBN) may have provided a cushion effect for the naira size of the
spending plan.
The government had considered a major restructuring of the budget to align with the reality of possible fall in oil revenue and the impact of COVID-19 pandemic.
It could be recalled that the CBN technically devalued the naira on the official window to N360 to the dollar from N307 per dollar it had traded for over three years and N380.25 to the dollar on the Investors’ and Exporters’ (I&E) forex window.
The parallel market rate was also adjusted from N378 to N380 to the dollar.