NIGERIA ADJUSTING OIL REFERENCE PRICE IN 2008

UNCLAS ABUJA 002177 SIPDIS SENSITIVE SIPDIS DEPARTMENT PASS TO USTR LAGAMA TREASURY FOR RICHARD HALL/DAN PETERS USDOC FOR 3317/ITA/OA/KBURRESS AND 3130/USFCS/OIO/ANESA/DHARRIS E.O. 12958: N/A TAGS: EFIN EPET ECON PGOV PREL NI SUBJECT: NIGERIA ADJUSTING OIL REFERENCE PRICE IN 2008 BUDGET REF: A. ABUJA 01954 ¶B. ABUJA 01973 SENSITIVE BUT UNCLASSIFIED -- PLEASE HANDLE ACCORDINGLY. ¶1. (SBU) The GON has announced that it plans to use an oil reference price of USD 53.8 per barrel in the upcoming 2008 Budget for allocations to the Excess Crude Account (ECA). The upcoming budget will make more conservative assumptions regarding oil production to take into account supply disruptions in the Niger Delta. The GON's goal is to ensure adequate support for government expenditures while contributing to the ECA. The Finance Minister has admitted that Nigeria's ECA is "Extra-Constitutional." Nonetheless, for the moment state governors are not actively challenging the ECA contributions (which otherwise would go in part to them). ¶2. (SBU) The Central Bank of Nigeria announced October 2 that foreign currency reserves had reached USD 46.7 billion. The CBN considers that level of reserves adequate for up to 25 months of imports. Using a different set of measures for oil industry-related imports, the IMF considers Nigeria's reserves adequate for 13 months. Both IMF Rep and World Bank Country Director told Econcouns that they consider the current pace of reserves accumulation to be healthy and on track. PIASCIK