By Michael Eboh
Professor of Finance and Capital Market at the Nasarawa State University, Keffi, Uche Uwaleke, Thursday, described as worrisome, Nigeria’s decision to borrow additional N4 trillion to partly finance the deficit in the 2021 budget.
Commenting on the budget proposals, which was presented to the National Assembly by President Muhammadu Buhari, Uwaleke, however, commended the timely submission of the budget by the president.
He noted that the executive should have kept the deficit in the budget within the three per cent stipulated in the Fiscal Responsibility Act, 2007, while he cautioned the National Assembly against increasing the value of the budget.
Uwaleke added that the projected Gross Domestic Product, GDP, growth rate of three per cent was over-ambitious; noting also that the N379 to a dollar benchmark was unrealistic.
He said: “I commend the executive arm for submitting the budget proposal in good time that allows the National Assembly sufficient period to consider and pass the appropriation Bill.
“I think the assumptions and budget parameters are realistic except for the Exchange rate of N379 to the dollar that may not hold due to the on-going process of unifying Exchange rates across all foreign exchange windows by the Central Bank of Nigeria, CBN, consistent with the International Monetary Fund, IMF, prescription.
“I also think the real GDP growth rate projected at three per cent is a little ambitious in view of the impact of COVID-19 on the economy, expected to linger till next year. This is why the recent Fitch report on Nigeria projects a GDP growth rate of 1.3% for the country in 2021.
“I wish to note that the budget proposal seems to have set the right priorities with the bulk of capital spending going to Works and Housing, Power and Transport. For the first time in many years, the capital allocation to education and health are above that of defense.
“I must add, however, that new borrowings of over N4 trillion to part-finance a deficit of over N5 trillion is worrisome given the already huge amount of over N3 trillion allocated to debt servicing alone.
“COVID-19 notwithstanding, the deficit to GDP should have been kept within the 3% threshold stipulated in the Fiscal Responsibility Act 2007.
“I hope the National Assembly will consider any amendment within the budget envelope of N13.08 trillion and not end up jerking up the figure.”
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