Nigeria to propose 4.2 trillion naira budget for 2011
Nigeria’s government has proposed a 4.2 trillion naira budget for 2011, most of it for recurrent expenditure, based on an assumed benchmark oil price of $62 a barrel, a presidency source said on Tuesday.
President Goodluck Jonathan is due to present the spending plans to parliament on Wednesday, although final adjustments were still being made, the source said, asking not to be named.
Three quarters of the planned spending — around 3.2 trillion naira — will be earmarked for recurrent expenditure, leaving sub-Saharan Africa’s second biggest economy with relatively little to fund badly-needed infrastructure projects.
“The federal government intends to commence a cut in the recurrent expenditure beginning from the 2012 financial year,” the source said.
Government spending plans in Africa’s most populous nation are fiercely debated and often go through several amendments before being approved in their final form.
If the 4.2 trillion naira budget is approved, it will mark a reduction in overall spending from the 4.6 trillion naira plans passed for 2010, although recurrent expenditure will be up from around 2.8 trillion approved for this year.
“Overall, there seems little attempt to rein in expenditure, if this source is correct. In an election year this is perhaps predictable, but disappointing nonetheless,” said Razia Khan, head of Africa research at Standard Chartered.
Nigeria is meant to save oil revenues above the benchmark price — set at $67 per barrel in 2010 — into an “excess crude account” to protect it against a downturn, although there are plans to replace the account with a sovereign wealth fund.
“Budgeting on a more conservative oil price assumption may help to restore some faith in Nigeria’s strong reform credentials, especially at a time when the FX rate has come under pressure,” Khan said.
RAMPANT SPENDING
Analysts have grown increasingly concerned about the state of Nigeria’s public finances in the run-up to presidential, parliamentary and state governorship elections next April.
Despite higher oil prices and output, its foreign reserves of $33 billion were down almost a quarter on a year ago at the start of December, its budget deficit is expected to widen to 6.1 percent this year, and it has spent billion of dollars of its windfall oil savings.
In October, ratings agency Fitch lowered Nigeria’s sovereign credit outlook to negative from stable, citing the depletion of its reserves as a contributing factor.
The state of the public finances are set to become a political hot potato in the run-up to the April elections.
Central Bank Governor Lamido Sanusi and Finance Minister Olusegun Aganga were summoned by parliament two weeks ago to explain comments attributed to them in local newspapers that too much government revenue is spent on lawmakers.
Sanusi stood by his comments that 25 percent of federal budget overheads — the most inflationary component of spending — are spent on the National Assembly and that they needed to be reduced, especially as they were being financed by borrowing.
Former Vice President Atiku Abubakar, who is challenging Jonathan for the ruling party ticket in the presidential race, has pledged a “return to fiscal discipline” and accused the current administration of profligacy.
Source: Reuters