Nigeria’s finance minister on Wednesday downgraded growth forecasts for 2015 and proposed a modest cut in spending as Africa’s top economy tries to respond to plummeting global crude prices.
Finance Minister Ngozi Okonjo-Iweala said an earlier estimate for 2015 gross domestic product growth of 6.35% had been lowered to 5.5%. Based on the revised growth forecast and a reduced benchmark oil price of $65 (€52) per barrel — down from $78 earlier this year — Ms Okonjo-Iweala called for a reduction in government spending next year.
“We have an expenditure of 4.3-trillion naira ($24bn) for 2015, down from 4.6-trillion naira in 2014,” she said after presenting the measures to both houses of parliament. The minister’s proposals, which must be approved by MPs, were the latest sign that Nigeria is facing an acute revenue crunch caused by the collapsing global oil market.
“This budget really focuses on moving us to diversify the economy and raise non-oil revenue,” Ms Okonjo-Iweala said. She urged Nigerians “to begin thinking of the country (as) a non-oil country”.
Nigeria, one of Africa’s largest oil producers, depends on crude exports for 70% of government revenue and about 90% of its foreign exchange earnings. Brent crude closed below $60 per barrel on Wednesday in its lowest range since 2009.
Economists have broadly applauded Nigeria’s dramatic moves in responding to the crisis, including a devaluation of the naira, new taxes on luxury items and cutting the benchmark oil price used to guide spending. But some political watchers see trouble ahead for ruling People’s Democratic Party, with presidential and primary elections set for February 14.
Analysts say the PDP has won every election since democracy was restored in 1999 partly by using public money to fund its campaigns and that depleted government coffers could hurt the party’s political fortunes. The finance minister has previously described the falling oil market as “a serious challenge”.
President Goodluck Jonathan has tried to tell voters that he is the best candidate to sustain economic growth and is facing an opposition party led by former military dictator Muhammadu Buhari, whose economic credentials have been questioned.
Graft scandals, most recently a claim by a former central bank governor that between $10bn-$20bn owed to state coffers by the national oil company were not remitted, have fuelled public anger. The government has promised an audit.
Mr Buhari has growing appeal among an intellectual class in whose minds he has taken on almost messianic qualities as the man who can save Nigeria. Others remember less celebrated bits of his past — like crackdowns on press freedom and detaining political opponents without charge. Either way, he will also prove a divisive figure in a vote in which ethnic and religious sentiments remain paramount.
“People love him or they hate him. There’s no middle ground,” said Kayode Akindele, CEO of consultancy 46 Parallels.
His image as a sandal-wearing ascetic has appeal in a nation where power and champagne-swigging wealth often go hand in hand.
“He does not love money. He does not care about making money. This is what Nigeria needs of a leader,” said Haruna Mohammed Yogara, an opposition All Progressives Congress (APC) official who voted for Mr Buhari to represent the party in the primaries.
At the same time, the government’s failure to quell an Islamist uprising in the northeast has heightened the former general’s appeal as a military strongman, a type Nigerians were sick of when democracy returned in 1999 after decades of army rule.
Mr Buhari’s message is simple: Nigeria’s two biggest ills are corruption and insecurity, and he cracked down on both in 1983.
“He’s been tested on both issues before and he passed,” APC Senator Babafemi Ojudu said.