Nigeria Content Online

Nigeria expects its
budget deficit to widen to 6.1 percent of GDP this year, more than
double the level set under a fiscal responsibility act three years ago,
as government spending rises ahead of elections next April.

Revenue shortfalls
from the oil and gas sector, unexpected wage increases, and election
costs will contribute to the widening deficit, Finance Minister,
Olusegun Aganga, said in an annual briefing on sub-Saharan Africa’s
second biggest economy.

Government revenue
is projected at 3.18 trillion naira, with expenditure expected to be
5.16 trillion, Mr. Aganga said in the review, released on Monday.

Analysts have
expressed concern about the state of public finances in Africa’s most
populous nation, as presidential, parliamentary, and state governorship
elections approach.

Recurring
expenditure accounts for more than half of the country’s overall
spending, meaning it is paying more to keep government running than it
is investing in badly-needed infrastructure and other capital projects.

Government
borrowing has risen sharply, increasing by more than 50 percent since
the start of the year, compared to private sector credit growth of just
three percent over the same period.

The government has
said it will also issue bonds to pay workers at former state telecoms
company, Nitel, and to fund part of the electoral commission’s budget,
further increasing domestic debt.

Still, the head of
the debt management office has pointed to a debt-to-GDP ratio of 16
percent that is expected to remain stable next year, depending on the
rate of economic growth, suggesting Nigeria could easily raise more
debt if needed.

But authorities
have also spent billions of dollars of oil savings since the start of
the year alone, and seen foreign exchange reserves fall 20 percent
year-on-year by mid-November to $34 billion.

Ratings agency,
Fitch, last month, cited those factors when it cut its sovereign credit
outlook for Nigeria to negative from stable.

Oil savings dwindle

The Excess Crude
Account (ECA), into which Nigeria saves revenues above a benchmark oil
price, has dwindled from $20 billion at the start of late President
Umaru Yar’Adua’s term in 2007, to around $4.4 billion when President
Goodluck Jonathan took over in May, and less than $1 billion now.

The government says
the ECA has served its purpose as an account to be used to protect
Nigeria against a fall in commodities prices or a global downturn.

But analysts say
the reduction is alarmingly sharp during a period of relatively high
oil prices – Thursday’s price of $85 a barrel is a 40 percent premium
on the $60 assumption in the 2010 budget – and a recovery in Nigerian
oil production.

Mr. Aganga said
last week Nigeria’s foreign reserves were well below where they ought
to be, and that a plan was in place to restore them.

He has also said
spending for next year will be capped at 4.56 trillion naira, as the
government seeks to rein in expenditure over the next three years.

Parliament approved spending of more than 4.8 trillion naira for 2010, up more than 50 percent on the previous year.