National Budget 2017 (Nigeria)
Nigeria has been experiencing economic turbulence since late 2014. The country’s annual gross domestic product (GDP) growth rate dropped from 6.22 percent in 2014 to 2.79 percent in 2015, before plunging into recession in 2016, ending the year at about negative 2 percent growth1. Inflation, unemployment, underemployment and exchange rates also rose significantly in 2016. The ₦6 trillion 2016 budgetary expenditure of the Federal Government (FG) and its related policy measures and interventions have not realised the intention to improve the nation’s economic situation.
The economic downturn can be traced to a myriad of factors – the fall in global crude oil prices being, perhaps, the most prominent. The vandalisation of oil and gas facilities by militants in the Niger Delta also contributed in no small measure to the economic upheaval, as crude oil production and power generation witnessed lows of 1.468 million bpd2 and 1.4 GW3 in 2016. The delay in the passage of the 2016 Appropriation Bill, the hike in electricity tariffs and the prices of petroleum products, the controversial management of the exchange rate policy by the Central Bank of Nigeria (CBN), and the insurgency in the North East are some of the other factors that pushed Nigeria into the throes of stagflation.
Amidst the grim state of the nation, President Muhammadu Buhari presented the 2017 Budget of Recovery and Growth (“2017 Budget” or “the Budget”) to the National Assembly (NASS) on 14 December 2016. The FG is optimistic that the implementation of the Budget will ensure that the Nigerian economy grows by 2.5 percent in 2017. This optimism is mainly hinged on:
- stable oil prices, benchmarked at US$42.5 per barrel;
- increased oil production of 2.2 million bpd (mbpd);
- improved domestic production and processing of agricultural and petroleum products;
- better efficiency in the running of Ministries, Departments and Agencies (MDAs) of Government; and
- the ability of the Federal Inland Revenue Service (FIRS) and Nigeria Customs Service (NCS) to ramp up revenue collection.
There is no proposal to change tax rates or impose new taxes in 2017. This reflects current realities and the Government’s focus on broadening the tax base rather than increasing tax rates. Accordingly, non-oil revenue is expected to account for 28 percent of total budgetary revenue in 2017, compared to 38% in 2016.
There is no doubt that there are high expectations of a more stable and business-friendly economic climate, which will help reduce poverty and inequality levels in the country. One can therefore hope that the budget proposals will be better administered relative to 2016; even though the NASS is yet to pass the 2017 Appropriation Bill.
This Newsletter reviews the FG’s budget proposals for 2017, and highlights how policy changes – particularly tax and regulatory changes – will affect the Nigerian business environment. We hope this will enable you to plan appropriately in 2017.
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KPMG in Nigeria