Nigeria plans to increase its budget to a record 8.6 trillion naira ($27.34 billion) in 2018, up 15.5 percent from this year to stimulate growth, according to a draft budget document seen by Reuters on Thursday.
The country, which has Africa’s biggest economy, emerged from its first recession in 25 years in the second quarter and has trimmed its forecast for 2017 growth to 1.5 percent from 2.19 percent, according to the document.
The draft figures must be approved by the Senate before a budget is submitted. The document was prepared by the budget ministry, dated in August and titled 2018-2020 Medium Term Expenditure Framework and Fiscal Strategy Paper.
Nigeria has increased its budget each year under President Muhammadu Buhari, who took office in May 2015, in a bid to spend its way out of a downturn caused by low oil prices but struggles to fund it completely or increase revenues.
“Aggregate expenditure is estimated at 8.60 trillion naira. This provision exceeds 2017 aggregate expenditure estimate of 7.44 trillion by 15.5 percent,” the document said.
“Of the total expenditure estimates, up to 2.60 trillion naira is targeted at capital expenditure, representing 30 percent of the budget,” it went on.
Nigeria’s government has increased spending on infrastructure in the last few years in an attempt to diversify the OPEC member’s oil-dependent economy.
The document said fiscal policy will be geared towards accelerating the pace of growth, intensifying economic diversification and social inclusion. It said the economy needs higher private investment levels to achieve broad-based growth.
“Although the amount of spending increases, yet again, in Nigerian naira terms – it is by less than the rate of inflation,” said Razia Khan, chief economist Africa at Standard Chartered Bank. Annual inflation in Nigeria was at 15.98 percent in September.
“What matters more, however, is Nigeria’s poor rate of budget execution, especially on the capital expenditure budget,” she added.
The government expected to boost oil production, which makes up about two-thirds of government revenues, to 2.3 million barrels per day (mbpd) in 2018. The document said production was at 1.9 mbpd for 2017, as of July, against an estimated 2.2 mbpd.
The document said government borrowing has significantly increased in recent years as it tries to fund its budget deficit and debt to revenue levels posed a substantial risk.
Nigeria has a total debt of 19.16 trillion naira ($62.9 billion) as of the first quarter 2017, the document said, adding that the government would favour foreign financing over domestic borrowing to lower interest rates at home.
Earlier this month, Buhari sought approval from lawmakers for $5.5 billion of foreign borrowing which would include $2.5 billion for plugging part of this year’s deficit.
The document also said the government was considering plans to raise taxes on luxury goods to 15 percent by 2018 from 5 percent.
“This should be complemented by measures to broaden the tax base,” said Khan.