Nigeria’s budget deficit is set to rise by N1.01 trillion to N7.40 trillion or 4 percent of GDP as the government eyes new domestic borrowing to fund extended petrol subsidies, President Muhammadu Buhari said in a letter to parliament.
The deficit was originally set at 3.42 percent of GDP in the approved budget for the fiscal 2022.
Buhari signed a N17.13 trillion budget into law in December, with N443 billion provided for subsidy payments up to June, when they were due to be ended.
But last month, the government reversed its pledge to end the subsidies then, and extended them by 18-months to avert possible protests in the run-up to presidential elections next year.
At the same time, the price of oil has soared. The West African country depends almost entirely on imports to meet its domestic gasoline needs. It is also facing shortages after taking delivery of some unusable substandard gasoline.
“It has become necessary to present this amendment proposal considering the impacts of the recent suspension of the (petrol) subsidy removal,” Buhari said.
The IMF this month warned that Nigeria’s 2021 deficit was expected to widen to 5.9 percent of GDP despite a recovery in international crude prices, partly due to the subsidy on petrol. That compares with 5.7 percent in 2020.
Buhari said the extra provisions will reinstate some expenses that were removed from the original budget and deleted capital projects that were duplicated.