Budget: Initial Thoughts
Finance Minister Ngozi Ikonjo-Iweala presented the 2014 federal budget on December 19 2013. In a break from tradition, President Goodluck Jonathan delegated the task to his finance minister rather than doing it himself - only the second time since the onset of civilian rule in 1999 that a sitting president has not delivered the budget. The other occasion was in 2010 when illness prevented the late President Umaru Yar'Adua from undertaking the task. Although no official reason has been given for Jonathan's absence, the fact it coincided with the defection of 37 legislators from Jonathan's ruling People's Democratic Party (PDP) to the opposition All Progressive Congress (APC) has raised suspicions that the president was avoiding what was likely to be a hostile House. The defections mean that the PDP has lost its majority in the lower House although it retains control of the Senate.
Looking at the budget itself, the authorities are planning to spend NGN4.6trn (US$28.8bn) over the course of the year, NGN100bn lower than the amount laid out in the 2013 budget. NGN3.37trn of this will be financed by budgeted revenue with the remaining shortfall to be covered by the issuance of NGN571bn in new debt, according to the government's plans. Below are our initial thoughts on the key assumptions underpinning the budget:
Cautious growth forecast: The budget is underpinned by the assumption that the economy will grow by 6.8%, below our forecast for growth of 7.0%. We believe that the crucial agriculture sector will provide more of a boost to headline growth than the authorities are anticipating following the implantation of key reforms.