Nigeria parliament increases 2010 budget above proposed $27b

President Umaru Yar'Adua - Nigerian president

Nigeria’s parliament has reached an agreement with the finance ministry to increase planned budgetary spending for 2010 above the president’s proposed $27 billion, two sources involved in talks said on Friday.

President Umaru Yar’Adua in November sent a 4.079 trillion naira budget proposal to parliament, a 32 percent rise from planned 2009 spending which, if approved, will push sub-Saharan Africa’s No. 2 economy to a fiscal deficit of 4.79 percent.

Parliament wants to increase federal spending further to pay for “emerging” projects in power, roads and development in the oil-rich Niger Delta.

It was not clear by how much spending would rise under the agreement, but sources say the bigger budget would be funded by revising the benchmark oil price to $60 a barrel from $57.

“We cannot really say what the actual size of the budget will be, but certainly the aggregate expenditure will increase because the revenue will increase with a new oil benchmark,” said a member of one of parliament’s appropriations committees.

“In various meetings involving the leadership of the two chambers … and the finance ministry, we settled on the $60 benchmark,” he added.

About a third of the planned budget is capital spending on areas including infrastructure, the power sector and development in the Niger Delta, where an amnesty programme last year has so far brought a lull in militant attacks on the oil sector.

An official with the finance ministry’s budget office confirmed the planned increase in spending would be funded by a higher crude oil benchmark price.

“My fear is that the new figures will be a further breach of the medium-term expenditure framework. The picture will be clearer next week,” he said.

The revision reflects the OPEC member’s expectations that global oil prices this year will remain near its current level of around $80 a barrel.

When prices rise above the budget’s benchmark, Africa’s biggest energy producer saves the surplus oil revenue into an excess crude account to protect its finances against the volatile global oil market or a fall in production.

The 2010 budget also assumes oil production of 2.088 million barrels per day and an exchange rate of 150 naira to the U.S. dollar.

Source: Reuters

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