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Cablegate: Nigeria: Making Sense of the 2008 Budget

VZCZCXRO9970
PP RUEHMA RUEHPA
DE RUEHUJA #2225/01 3181244
ZNR UUUUU ZZH
P 131244Z NOV 08
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 4433
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHOS/AMCONSUL LAGOS 0252
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 ABUJA 002225

SENSITIVE
SIPDIS

DEPARTMENT PASS TO USTR AGAMA
TREASURY FOR PETERS, IERONIMO, HALL
DOC FOR 3317/ITA/OA/KBURRESS
DOC FOR 3130/USFC/OIO/ANESA/DHARRIS

E.O. 12958: N/A
TAGS: EFIN ECON EINV PGOV NI
SUBJECT: NIGERIA: MAKING SENSE OF THE 2008 BUDGET

REF: A. ABUJA 882
B. 07 ABUJA 2417
C. 07 ABUJA 2227
D. 07 ABUJA 1907
E. 07 ABUJA 1793

SENSITIVE BUT UNCLASSIFIED-HANDLE ACCORDINGLY

1. (U) Summary. The 2008 amended and supplemented budgets were
finally passed in October after much back and forth between the
executive branch and the National Assembly. A reluctant compromise
was reached, but the key remaining issue is implementation. This
poor budget process between the executive and legislative branches
calls into question whether the federal government will reach its
goals of fulfilling the President's Seven Point Agenda or move
toward becoming a top 20 economy by 2020. End summary.

Budget 2008 Background - Slow Process
--------------------------------------

2. (U) In November 2007, President Yar'Adua presented to the
National Assembly a 2.4 trillion naira budget ($20.5 billion) for
calendar year 2008 (reftel A). Due to a difference in budget totals
between the executive and the legislative branch, the National
Assembly did not pass the budget until April 2008. The delay was
caused by the National Assembly increasing the budget from 2.4
trillion naira to 2.9 trillion naira ($24.8 billion). In addition,
the National Assembly increased the budget benchmark price for crude
oil from $53.83 per barrel to $59 per barrel at 2.45 million barrels
a day, recurrent expenditure (salaries and overheads) by 78 percent
and the capital budget by 285.3 billion naira ($2.4 billion).

3. (U) President Yar'Adua responded by requesting that recurrent
expenditure be increased by 20 percent, rather than 78 percent. In
addition, he wanted money accrued from the increased benchmark price
to be used to eliminate the country's deficit. The National
Assembly agreed to some of the president's concerns but eventually
passed a budget totaling 2.7 trillion naira ($23 billion). Yar'Adua
initially refused to sign the budget but signed it on April 14, 2008
(reftel A); however, he signed it under the condition that it would
be later amended, to which the National Assembly agreed.

Budget Amendment Passes
-----------------------

4. (U) In early July, a budget amendment was forwarded to the
National Assembly with a reduction from 2.7 trillion naira ($23
billion) to 2.6 trillion naira ($22.2 billion). Amounts for
statutory transfers (162 billion naira; $1.4 billion), and for debt
service (372 billion naira; $3.2 billion) were left unchanged.
Recurrent expenditure was also left unchanged at 1.3 trillion naira
($11.1 billion), while capital expenditure was decreased from 860.3
billion naira ($7.3 billion) to 714 billion naira ($6.1 billion).
The National Assembly passed the amended budget with modifications
on October 21. On November 4, Dr. Bright Okogu, Director General of
the Budget Office of the Federation, informed EconSpecialist that
the differences in passed and proposed budgets were not large enough
to warrant the president not signing and the executive branch was
satisfied with the final version of the amended budget passed by the
National Assembly.

Supplementary Budget Passage
----------------------------

5. (U) On October 23, President Yar'Adua proposed a 683 billion
naira ($5.8 billion) supplementary budget to the National Assembly.
Out of $5.8 billion, 463 billion naira ($3.9 billion) is allocated
for capital expenditure, and 220 billion naira ($1.9 billion) for
recurrent (non-debt) expenditures. A significant proportion of the
capital expenditure, 324 billion naira ($2.8 billion), is earmarked
for the power sector to boost Nigeria's electricity supply (septel).
The supplementary budget was passed by the Senate on October 30 and
by the House of Representatives on November 4.

Poor Execution
--------------

6. (SBU) Comment: The puzzling budget process and back and forth
between the two branches of government shows lack of communication
between the President and the National Assembly. It also
demonstrates that methods and procedures for the federal budget are
not clearly defined. Recurrent expenditures (salaries and
overheads) are usually implemented entirely, but problems arise at
the effective implementation stage with the capital budget. Too

ABUJA 00002225 002 OF 002


often the federal government does not release funds on time,
resulting in many projects left unfinished or significantly delayed.
At this same stage, corruption at all levels of the government
appears to be widespread. If the federal government can not work
with the National Assembly to prepare, pass and implement the budget
in a timely and efficient manner than it makes it very difficult for
the administration to accomplish President Yar'Adua's Seven Point
Agenda and for Nigeria to become one of the top twenty economies in
the world by the year 2020. End Comment.

7. (U) This message was coordinated with ConGen Lagos.

SANDERS

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