On Tuesday, January 12, 2021, the Ministry of Finance, Budget, and National Planning presented the approved 2021 budget to the public via a virtual conference call. If you missed it, here are a few things we think you will be interested in.
1. How will Nigeria finance the budget deficit?
Finance Minister Zainab Ahmed said that the ₦4.686T budget deficit will be financed by external and domestic borrowing, and the government will decide to go to the international capital markets to source for funds if the conditions are right.
The DG, Debt Management Office, Patience Oniha added that domestic funding of ₦2.343T will start from January 2021 as the government continues to monitor the trends in the International Capital Market and the probability of issuing a Eurobond.
2. What’s the government plan for funds from unclaimed dividends and dormant accounts they intend to “borrow”?
The finance minister reveals that they estimate funds in dormant accounts and unclaimed dividends to be up to ₦850B. The plan is to put the funds in a special trust fund where it will be available as special credit to the government. However, the owners of the money get their money back at any time.
3. Is inflation ever going down?
The DG of the Budget Office, Ben Akabueze, when answering a question on the feasibility of reducing inflation from 14.89% to 11.95% noted that the country has been through worse and bounced back, especially during the 2016-2017 recession when inflation rates hit over 18%. Therefore, the target to bring inflation down to 11.95% by the end of 2021. There will be active collaboration between fiscal and monetary policymakers to make it happen.
4. On the economic effect of another lockdown.
According to the finance minister, the federal government hopes that there won’t be a fresh lockdown. However, if the health challenge becomes too much to bear and the government has no other option, then it might be something to consider.
5. Will COVID-19 vaccines ever reach Nigeria?
Minister Zainab Ahmed confirms that the government is working on the type and quantity of vaccines to procure, and the ministry of finance and the ministry of health will meet within two weeks to finalise the amount that will go into getting these vaccines. She added that if the provisions in the budget are not enough for the vaccines, the government is ready to work on a supplementary budget to cover the cost of vaccines.
Nigeria expects to receive vaccine donations that will cover 20% of the population, although 70% of the population needs to be vaccinated to achieve herd immunity. The government will therefore procure the remaining 50% vaccine herd immunity requirement for the population.