Cablegate: Nigeria: President Unveils 2004 Budget

Published: Wed 21 Jan 2004 02:54 PM
This record is a partial extract of the original cable. The full text of the original cable is not available.
211454Z Jan 04
E.O. 12958: N/A
B. 03 ABUJA 2086
1. President Obasanjo presented the GON's 2004 budget to a
joint session of the National Assembly in late December 2003.
Total budgetary expenditures were estimated at USD 8.74
billion (naira 1.189 trillion). Total budgetary expenditures
comprised, personnel and administrative charges (USD 3.4
billion - naira 459 billion), debt service (USD 2.8 billion -
naira 379 billion), and capital expenditure (USD 2.2 billion
- Naira 300 billion).
2. The total projected revenue was USD 15.88 billion (naira
2.16 trillion). Total projected revenues comprised of;
non-oil taxes (USD 4.5 biliion - naira 615 billion),
independent revenue (USD 736 million - naira 100 billion),
and oil revenues of USD 10.625 billion (naira 1.445
trillion), predicated on a crude oil price of USD 23 a barrel
and average daily production of 2.24 million barrels
including 150,000 barrels of condensate. The GON retained
revenue was, however, estimated at USD 7.51 billion (naira
1.022 trillion), made up of the Federal Government share of
the Federation Account (USD 6.6 billion - naira 898 billion),
value added tax (USD 176 million - naira 24 billion), and
independent revenue (USD 736 million - naira 100 billion).
3. Macroeconomic targets announced included a budget deficit
of USD 1.2 billion (naira 166 billion) or 1.8 percent of GDP,
inflation at 9 percent and average lending rate at 12
percent. Obasanjo gave major priority in his speech to
education, health, roads, water supply, electricity,
agriculture and security, and fighting financial crimes.
Other priority areas included small and medium enterprises,
solid minerals, tourism and the development of information
How Feasible Are the 2004 Budget Targets?
4. President Obasanjo announced that the budget deficit would
be financed through the "domestic capital markets and other
sources." He has not been explicit since on what the other
sources would be. The GON's issue of bonds in capital market
in 2003 was grossly under-subscribed, and the deficit target
of 1.8 percent of GDP will be difficult given the Obasanjo
administration's average of 4.5 percent deficits since 1999
and high levels of off-budget spending. Expanding the money
supply, however, would further fuel inflation, thereby making
the 9 percent inflation target unachievable. Achieving a
daily oil production target of 2.24 million barrels might not
be possible either, owing to continuing communal unrest in
the Niger Delta.
5. There is also the continuing problem of budget
implementation, the Nigerian term for chronic non-expenditure
of many items allocated in the budget even after it is passed
and signed. The Central Bank did not release funds to
government ministries for many expenditures last year, and
raided capital accounts for other operational expenditures
(Refs A and B). The National Assembly's House Finance
Chairman believes, however, that institutional changes are
being made (septel) that could have a positive impact on
budget implementation.
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