This is coupled with the economic contraction Nigeria has been experiencing in recent months, linked to the fall in the global prices of oil.
In the back of recent challenges, the government has announced an extra US$180 million in spending on capital projects as part of the 2016 budget in a bid to boost the economy.
It will also review its tax policies to improve collection to gain more revenue, make its import tariffs more competitive and cut costs to boost the economy.
According to Rand Merchant Bank (RMB) with oil prices dropping, the government has struggled to fund the budget.
“It will be forced to undertake sizeable external borrowing to bridge the budget shortfall,” RMB stated.
The financial firm said despite the finance ministry’s intention to borrow US$5 billion from a host of creditors, its budget expectations are still unfeasible given the demands on the government’s coffers by Nigeria’s cash-strapped states that remain highly indebted despite a series of loan restructurings.
RMB pointed out the proposed budget assumes a deficit of 2,2 percent of gross domestic product.
“We believe this to be an optimistic estimate,” RMB stated.
“Not only will the pace of economic contraction demand additional spending, but a substantially weaker exchange rate and upheaval in the Niger Delta will undermine expected revenue earnings.”
RMB placed the budget deficit at 4 percent of GDP in 2016/17.
In recent months, there has been a spike in militancy in the Niger Delta.
The Niger Delta Avengers has been carrying out attacks on oil facilitities while oil theft has been prevalent.
– CAJ News