ABUJA (Reuters) – Nigeria’s President Goodluck Jonathan on Wednesday presented a 4.93 trillion naira budget to parliament for 2013, but lawmakers immediately disputed it, calling for a formula that would put less oil cash in the savings pot.
Jonathan’s proposal increased spending by 5 percent from this year’s 4.697 trillion naira, but shrunk the deficit and cut the share taken by recurrent expenditure.
The plan saw the fiscal deficit coming down to 2.17 percent of GDP, from 2.85 percent previously, assuming the economy grows at 6.5 percent, he said — a lower projection than this year’s expected 6.85 percent growth.
Africa’s second biggest economy and top oil producer is growing as an investment destination, offering enviably high economic growth and a huge consumer market from a 160 million population. It’s sovereign debt has soared since JP Morgan added it to its emerging market bond index this month.
But investors remain wary of the government’s tendency to squander its oil windfall on reckless spending or corruption.
The budget assumed 2.53 million barrels per day (bpd) oil output, up slightly from 2.48 million bpd this year, and a global oil price of $75 a barrel, up from $72 a barrel in 2012.
Signalling an impending showdown over the bill, parliament’s speaker Aminu Tambuwal said the house had proposed to inflate cabinet’s oil price assumption in the 2013 budget to $80 barrel, triggering cheers from fellow legislators.
Money earned from oil over the benchmark price is deposited into a savings mechanism called the Excess Crude Account (ECA). Any increase in the benchmark price will therefore reduce savings and make Nigeria less resistant to oil price shocks.
Finance Minister Ngozi Okonjo-Iweala is on an austerity drive and wants Nigeria to be more fiscally prudent with its oft-squandered oil windfall.
But lawmakers, who have been grumbling about delays in their allowances in the execution of the 2012 budget, were in no mood to accept such a slight increase in the benchmark.
In past such disagreements parliament usually wins.
In his speech, Jonathan urged legislators to accept a tight budget because of ongoing uncertainty over oil prices. Oil makes up around 80 percent of Nigeria’s revenues.
“This threat of oil price volatility remains constant and forces us to rely on a prudent methodology when calculating the benchmark price,” he said.
“These are uncertain times in the world economy. We’ve taken necessary steps to mitigate possible negative effects … of a global recession.”
Even before he delivered it, signs of rebellion were clear. Opening the session, Senate President David Mark told Jonathan that his numbers were “mere estimates, not immutable figures”.
“We do not think that the constitution intended to turn the National Assembly into a mere mechanical rubber-stamp that must robotically pass budget estimates as presented,” he said.
The budget proposed cutting recurrent expenditure — the cost of running the government — to 68.7 percent of the total budget, from its current 71.47 percent. Economists have long urged Nigeria to slash what they say are extortionate costs.
The rest is on capital expenditure, most infrastructure.
Jonathan added that the government would issue a $1 billion Eurobond next year to finance a gas pipeline for domestic use.
Economists such as central bank governor Lamido Sanusi have urged parliament not to inflate the benchmark oil price, fearing a credit crunch if global crude prices suddenly fall.
“Given global risks … the priority for Nigeria has got to be increasing its rate of saving,” Razia Khan, head of Africa research at Standard Chartered said, reacting the budget.
“Were oil prices to fall, Nigeria would be left very vulnerable … There is a need for much more fiscal conservatism and the signals from the house are a considerable concern.”
Some analysts also said cabinet’s production assumptions might be too optimistic. Up to a fifth of Nigeria’s oil is lost to theft, according to official figures.
Culled from af.reuters.com