* Spending plans up by almost half on last year
* Budget plans passed by both houses of parliament
* Domestic borrowing set to rise
(Adds details throughout)
By Camillus Eboh
ABUJA, March 25 (Reuters) - Nigeria"s parliament on Thursdayapproved plans to lift spending by half this year as the countrytries to spend its way out of a downturn, but the expansionarybudget risks raising the deficit to more than 5 percent of GDP.
Both houses of parliament approved total spending of 4.608trillion naira ($31 billion) for 2010, sending the legislationto Acting President Goodluck Jonathan to be signed into law.
Jonathan assumed full executive powers in early Februaryduring the absence for medical treatment of President UmaruYar"Adua, who has since returned but remains too sick to rule.
Jonathan dissolved the cabinet just over a week ago andanalysts expressed relief that the political uncertainty had notdelayed the passage of this year"s spending plans.
"The 2010 budget is based on government"s determination tostimulate the economy out of the recent global economic crisisthrough targeted fiscal interventions," Iyiola Omisore, head ofthe Senate budget committee, told the upper house of parliament.
The budget, which foresees the deficit rising to 1.52trillion naira, lifts planned spending from the 4.079 trillionnaira proposal sent to parliament by President Yar"Adua lastNovember, before he left for treatment in Saudi Arabia.
Although many emerging and frontier market economies arerecovering from the global downturn of 2008/09, Nigeria"srecovery has been delayed partly due to a credit squeeze in thewake of last year"s $4 billion bank bailout.
More than a third of the planned budget is capital spendingon areas including infrastructure, the power sector anddevelopment in the oil-rich Niger Delta.
Analysts welcomed the government"s move to boost the economybut cautioned that the quality of spending would be key, givenNigeria"s reputation for inefficient budget implementation.
"Given the context of a vast overall increase in spending inthe last ten/eleven years, with little to show for it, investorsmay well be concerned," said Razia Khan, head of Africa researchat Standard Chartered.
"Market reaction is unlikely to be resoundingly positive."
Africa"s most populous country is one of the continent"srichest because of its vast oil and gas reserves, and has reliedchiefly on domestic borrowing and its revenues from oil salesabroad.
HIGHER DOMESTIC BORROWING
This year"s budget compares to approved spending of around3.1 trillion naira in 2009, although a supplementary budget ofaround 350 billion naira was subsequently added to coverspending until the end of March 2010.
The bill said the 2010 spending plans included 1.85 trillionnaira for capital expenditure and 2.077 trillion naira forrecurrent, non-debt expenditure.
Total government revenue was seen at 3.086 trillion naira.
Kayode Akindele, director at Greengate Strategic Partners,said there was a "real fear of strong inflationary pressure inthe economy" from the expansionary budget.
"Yet again another budget has a higher recurring expenditurefigure than capex which is disappointing given theinfrastructure deficit that is apparent to all in the country,"he told Reuters.
The budget assumes an average oil price of $67 per barreland oil production of 2.35 million barrels per day. It is basedon an exchange rate at 150 naira to the dollar, an inflationrate of 11.2 percent and growth of 5.47 percent.
The bill said Nigeria expected to fund the deficit witharound 897 billion naira in domestic borrowing, 132 billionnaira from a planned oil licensing round, and 75 billion nairafrom its planned debut global bond. [ID:nLDE62G109]
"I think they will be able to raise the money frominternational sources but ... the cost of funding the budgetdeficit is going to be higher than anticipated," said BismarckRewane, head of Lagos-based Consultancy Financial Derivatives.
"Domestic funding sources are limited. The pricing of thedebt instruments may trigger an increase in interest rates. Ifyou want to get full subscription then you may have to push(coupon rates) up and other rates would follow," he said.
The supplementary 2009 budget has allowed Nigeria tomaintain spending while the 2010 budget is debated, but it mustbe passed and signed into law by the end of the month.
Parliament is expected to send the budget bill to Jonathannext week. Jonathan last month took over executive powers fromailing President Umaru Yar"Adua. (Additional reporting by Chijioke Ohuocha; Writing by RandyFabi; Editing by Nick Tattersall) ($1=150 naira)
Currencies Bonds
No comments:
Post a Comment