Identifier
Created
Classification
Origin
02ABUJA1807
2002-06-18 14:22:00
CONFIDENTIAL
Embassy Abuja
Cable title:  

NIGERIA: 2002 BUDGET DEBATE

Tags:  ECON PGOV EINV NI 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 001807 

SIPDIS


DEPT PASS TO USTR FOR WHITAKER AND COLEMAN


E.O. 12958: DECL: 06/17/2012
TAGS: ECON PGOV EINV NI
SUBJECT: NIGERIA: 2002 BUDGET DEBATE


REF: ABUJA 1194




C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 001807

SIPDIS


DEPT PASS TO USTR FOR WHITAKER AND COLEMAN


E.O. 12958: DECL: 06/17/2012
TAGS: ECON PGOV EINV NI
SUBJECT: NIGERIA: 2002 BUDGET DEBATE


REF: ABUJA 1194





1. (C) Summary and background. The Financial Year 2002
Budget entered the political spotlight last week as President
Obasanjo met legislators and the Nigerian Federal Executive
Council debated the subject. Obasanjo's original budget for
USD $7.10 billion (848 billion Naira) went to the legislature
last November. The National Assembly nearly doubled capital
expenditures, passing a budget totaling USD $8.83 billion
(1.06 trillion Naira) this March. In April, the Supreme
Court decision on the allocation of oil revenue pronounced
many of the revenue allocation mechanisms unconstitutional.
In response to the Supreme Court decision on revenues, the
GON set up two special committees: one to handle technical
changes mandated by the decision; and a second to reach a
political compromise to alleviate losses that oil-producing
states will experience with their loss of 13% of off-shore
oil revenues. Technical fixes are taking longer than
expected and the latter committee is reportedly deadlocked
because states without oil and other elements in the GON do
not want to restore the losses to the oil-producing in this
zero-sum exercise.



2. (C) Summary continued. On the expenditure side, Obasanjo
has maintained a steady public campaign of refusing to spend
all of the monies budgeted by the National Assembly. For
their part, legislators protest the executive's
"unconstitutional" refusal to execute the budget. A motion
to impeach Obasanjo has been filed in the Senate. In the
meantime, as contractors curtail operation, politicians
within Obasanjo's own government want to open the spigot,
particularly from the capital projects budget. They have
formed a committee within the Federal Executive Council (GON
Cabinet equivalent) purportedly to pressure the president to
spend more. End Summary.


--------------
The FEC Budget Review Panel
--------------



3. (U) The 2002 budget was the subject of discussion at the
weekly FEC on June 5. The group set up seven-person Budget
Review Panel headed by the Minister of State for Finance,
Jubril Martins-Kuye. Ostensibly, the panel would review

shortfalls in revenue earnings that might affect budget
implementation. The GON has been disappointed by the lack of
privatization of government parastatals like the Nigerian
Telecommunications Limited (NITEL) and the National Electric
Power Authority (NEPA),where the GON had budgeted receipts
of USD 1.7 billion. With the NITEL sale going sour and NEPA
not ready to be placed on the auction block, the actual
revenue will be a far cry from the budget projection.



4. (C) Other less charitable sources claim the Ministers are
frustrated by the impasse with the legislature because they
have been unable to spend as much as they would like,
particularly during this election year. GON and donor
sources estimate FY02 Naira 100 billion is available for
capital projects but remains unspent, with Naira 25 billion
still for projects from 2001. While some ministries have
projects waiting for funding, others appear so frustrated by
the time consuming process of gaining due process approval, a
warrant from the Accountant General of the Federation (AGF),
and finally confirmation from the Central Bank that funds are
available in their account that they have been unable to
spend the money that is waiting there for them. As reported
Ref (A),this new process helps to reduce the manner of and
spending on questionable capital projects. It has the
additional effect of slowing down the pace expenditures. A
moderate reduction in velocity of spending or capital project
may have a salutary effect, but too much of a slowdown
encourages perception of inefficiency, may cause a reduction
in social services and economic activity, thus engendering a
degree of political anxiety.


--------------
Let Us Find A Common Ground -- Sounds Good
--------------



5. (U) On June 4, President Obasanjo held a meeting with the
leadership of the National Assembly to resolve differences on
the 2002 budget. President Obasanjo explained to the
legislators that inadequate revenue made implementing the
budget impossible. Obasanjo asked both parties to prioritize
the budget, dropping some items that could be agreed upon
mutually.



6. (U) Media reports the leadership of the National
Assembly and President Obasanjo were not able to agree on
these priority areas. While President Obasanjo wanted to
focus on Energy and Water Resources, the legislators insisted
on Agriculture and the Federal Capital Territory (FCT).
Though both parties were unable to agree on areas of
priority, they agreed to continue meeting.



7. (C) Sources within the GON contend the legislators are
less interested in increasing spending on federal capital
projects than in winning control of special constituency
funds for each member to spend in his or her district. Such
funds -- or a variation of them -- have been proposed by the
legislature continually since the National Assembly first
began meeting in the summer of 1999. As in the past, the
President reportedly opposed this fund.


--------------
Implement As Agreed - or else?
--------------



8. (C) On June 6, several disgruntled senators proposed
formal investigation of budget implementation from May 29,
1999 to the present. Senator Idris Abubakar said that the
Senate would first ascertain whether the constitutional
budget process has been violated, and whether or not
President Obasanjo could be impeached because of such
violations. Hearings on the motion have been fixed for
Wednesday, June 12. (Comment: This is the latest of many
impeachment "scares" Obasanjo has had to face during his
tenure. Most likely this will fail like the others.
However, a new development this time around is the apparent
support Senate President Anyim has lent the proceedings.
Anyim, who has been a staunch Obasanjo loyalist is apparently
bitter that Obasanjo is not fully supporting Anyim,s bid to
run for governor (Ebonyi) of his home state in 2003, instead
Obasanjo seems to be backing the incumbent. End comment.)


--------------
Comment
--------------



9. (C) No experienced political practitioner or observer
expects the 2002 budget to be implemented as passed by the
National Assembly. As in years past, the actual expenditure
will most likely reflect the President,s aims. At the same
time, most observers are surprised by how parsimonious the
president has been, having expected him to loosen the purse
strings more than he has to date. (We are hearing that
government contracts are drying up and construction firms
whose livelihood is government projects are preparing to
lay-off workers and downsize.)



10. (C) Last week's public and private debates on the budget
was the first such discussion since the Supreme Court
Resource Allocation Decision in April. The results confirm
the previous balance of power regarding implementation of the
budget. President Obasanjo is in the driver seat and the
National Assembly is the loquacious back seater. For the
time being, Obasanjo has decided to hold tight the reins of
spending, for commendable as well as baser political reasons.
Capital projects show less expenditure compared to this time
last year, while the unexpectedly high price of oil has
brought in more funds. Thus, the short-term outlook for
containing inflation and stabilizing expenditures has
improved. However, pressure to spend will be unrelenting and
there always exists the possibility that Obasanjo will give
in when he believes the time is right politically. End
Comment.
ANDREWS