Written by Lukman Otunuga, Senior Research Analyst at FXTM
If you thought that Nigeria spent big on its 2021 budget, just take a look at how much is being splashed for the 2022 budget tagged – Economic Growth and Recovery.
Nigeria President Muhammadu Buhari revealed a record 16.39 trillion-naira budget for 2022 this week, with a forecast 25% year-on-year increase in government spending as the economy nurses’ wounds inflicted by Covid-19. In regards to the deficit, this is projected to rise to 6.26 trillion naira. Interestingly, the budget is based around Nigeria producing 1.88 million barrels a day with oil prices of $57. Given how oil is trading around multiyear highs with the fundamentals favouring further upside, this could be an encouraging development for the budget. In regards to economic growth, Nigeria is projected to expand by 3% this year after growing by 5% in the second quarter of 2021 while growth is seen expanding 4.2% in 2022.
Speaking of GDP, the world bank projected Nigeria to expand 2.4% this year from 1.8%. The semblance of normality from easing lockdown restrictions, vaccine rollouts, and declining trend of covid-19 cases continue to support the outlook. One external factor that could play a key role in the country’s outlook will be oil prices. With a handsome chunk of Nigeria’s export earnings and government revenues from oil sales, the rally in oil could aid Nigeria’s long and fragile road to economic recovery.