UNCLAS ABUJA 000455

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: ECON EFIN EINV ENRG EPET PGOV NI
SUBJECT: NIGERIA: STATES SEEKING MORE DISBURSEMENTS FROM THE
EXCESS CRUDE ACCOUNT

REF: A. ABUJA 263

B. 08 ABUJA 1191

SENSITIVE BUT UNCLASSIFIED - PLEASE HANDLE ACCORDINGLY


1. (SBU) Summary. The Government of Nigeria (GON) plans to share
$1.5 billion from the Excess Crude Account (ECA) among the three
tiers of government to make up for shortfalls in government revenue.
Revenues from the sale of crude oil have dwindled due to the fall
in the international price of crude oil. The present situation
poses a challenge to infrastructure project implementation and
paying salaries to public workers. The Minister of Finance Minister
told the Ambassador on February 5 that he was reluctant to tap into
the ECA, but admitted that the political pressure to do so from the
states may win out, which apparently is the case (reftel A). End
Summary.


2. (U) On March 10, the National Economic Council (NEC) approved the
sharing of $1.5 billion among the three tiers of government from the
ECA to augment revenue shortfalls accruing to the GON. The state
and local governments are concerned that dwindling revenue is making
it difficult to pay salaries of public servants and implement
infrastructure projects. The media reports that the ECA currently
has a balance of $15 billion. (Note: The NEC consists of the state
governors and economic managers appointed by the president. The
president and the vice-president attend the meetings with the
president chairing, and in his absence, the vice-president chairs
the meetings. End Note).


3. (U) The agreed sharing formula is 52.68% to the federal
government; 26.72% to the states; and 20.6% to the local councils;
while 13% will be disbursed to the oil producing areas in line with
the derivation principle. Though most of the states have tried to
increase internally generated revenue to solve the challenge of
falling revenues, the NEC agreed that it was necessary to augment
revenue shortfalls from the ECA to the states at this point given
their budgetary pressures.
.
Comment
--------------
.

4. (SBU) Dwindling revenues resulting from falling international
crude oil prices pose a major challenge to implementing various
government programs at the different tiers of government. Despite
the Finance Minister's preference (on macroeconomic grounds) to not
tap into the ECA, pressure from the states has won this round. As
recession pressures increase on the GON we can expect that the ECA
will be used again to relieve budget pressures on the states.


5. (U) This cable was coordinated with Consulate Lagos.

SANDERS