The Federal Government expects its non-oil revenues to double this year as it seeks to offset a slump in oil revenues, according Reuters report.
Funding of the 2016 budget with an expected deficit of N2.2 trillion has been so far unclear. The government expects to generate N3.38 trillion this year from non-oil sources, up by 87 per cent from N1.81 trillion in 2015, the presentation showed.
The government said the N6.06 trillion budget would stimulate the economy, which has been hammered by a fall in oil exports that had made up 70 per cent of state income.
Corporate income tax collection is expected to exceed the N700 billion generated last year, while the government also aims to recover stolen Nigerian assets stashed abroad as part of efforts to crack down corruption, it said.
The government plans to squeeze informal small traders who make up almost half of GDP, this year to boost tax revenues by 33 per cent. Nigeria is also considering the issue of Chinese Panda or Japanese Samurai bonds to help fund the budget.
The government also wants to switch its debt mix so that 40 per cent of loans would be from abroad, compared to 16 per cent now, the presentation showed. Loan repayments will be stretched.
Chief Executive Officer, Nextnomics Advisory, Dr. Temitope Oshikoya, said the government needs to borrow N900 billion through local bond issuance to fund the budget.
He said the DMO would be involved in the exercise, adding that the practice where banks end up buying up the bonds instead of lending their deposits to customers is not the best for the economy.
“It will be good to have more people invest in the local bond market. Banks are expected to lend to the private sector instead of investing so much in the local bonds,” he said.
Oshikoya explained that FGN Bonds serve as risk-free investment with tax-free income. They provide relatively high and stable returns while the principal element (collected at maturity) can be used as collateral for securing credit facilities from banks.
Also, bondholders that want cash can trade the bonds on the floor of Nigeria Stock Exchange (NSE) for immediate cash before maturity even as it qualifies as liquid assets for banks from two years to maturity.
He said if the debts were well spent, it would help to boost liquidity in the economy and investment in key sectors, such as agriculture, mining, among others.