Takeaways from revised Medium -Term revenue and Expenditure Framework/Fiscal Strategy Paper (MTEF/FSP)
By In line with current realities, key parameters and macroeconomic projections driving medium-term revenue and expenditure framework of the Federal Government have been revised.
According to the minister of finance, Zainab Ahmed during a virtual consultative public forum in Abuja where she presented the draft 2021-2023 Medium Term Expenditure Framework/Fiscal Strategy Paper, (MTEF/FSP) said the medium-term outlook for Nigeria suggests that fiscal risks are somewhat elevated, largely due to Covid-19 related disruptions which have exacerbated structural weaknesses in the economy.
Here are key takeaways from the new draft.
1. The oil price is projected to remain low and volatile in 2020, and with Nigeria’s compliance to the OPEC+ cuts by reducing base production to between 1.412 mbpd and 1.579 mbpd from June to end of the year, growth in oil GDP is expected to plummet in 2020.
2. Nigeria’s oil GDP is expected to contract by 12.96percent in 2020, year on year, causing an economywide drag resulting in slower growth in non-oil GDP by -3.6percent, year on year. With these, real GDP is expected to decline by 4. 2percent in 2020.
3. The nominal GDP is expected to increase from N130,836.1 billion in 2020 to N132,125.4 billion in 2021 and then up to N138,415.8 billion in 2023. Similarly, consumption expenditure is projected to stay flat at N118,735.2 billion in 2020 and N118,468.7 billion in 2021 and grow to N124,358.5 billion by 2023, reflecting a gradual steadiness in the recovery.
4. Inflation, however, is expected to remain above single digit over the medium term, given the structural issues impacting on cost of doing business, including high cost of food distribution.
5. Weaker-than-expected economic performance is expected to threaten the ambitious revenue growth targets, as seen in the 2020 revised budget and the updated medium-term projections.
6. The projected budget benchmark for 2021-2023 stands at $40 per barrel while revised 2020 budget benchmark is kept at $28 with average exchange rate pegged at N360/$ from 2020-2023.
7. Fiscal deficit of N5.16tn is expected in 20121 because of the government’s projected ability to generate only N6.98tn revenue all in 2021, while aggregate projected expenditure for 2021 is N11.86tn