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DE RUEHUJA #2227/01 2921303
ZNR UUUUU ZZH
O 191303Z OCT 07
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1231
INFO RUEHOS/AMCONSUL LAGOS IMMEDIATE 8102
RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 ABUJA 002227 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT PASS TO USTR AGAMA 
TREASURY FOR PETERS, RHALL 
USDOC FOR 3317/ITA/OA/KBURRESS 
USDOC FOR 3130/USFC/OIO/ANESA/DHARRIS 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EINV PGOV PREL NI
SUBJECT: NIGERIA 2008 BUDGET 
 
 
¶1.  Summary:  The GON proposes a budget of $18.66 billion (Naira 
2.37 trillion) for the year 2008, 7 billion naira less than 2007 
budget.  The budget is scheduled to be presented by President 
Yar'Adua to a joint session of the National Assembly on Thursday, 
November 8.  Total revenue accruable to the Federation Account in 
2008 is projected at USD 36.58 billion (4.646 trillion naira) while 
the benchmark oil price is U.S dollar 53.8 per barrel, with a gross 
production target of 2.44 million barrels per day with 1.55 million 
barrels per day from Joint Venture (JV) production contributing to 
the budget.  The projected budget deficit is USD 2.32 billion (295 
billion naira) representing 1.6 percent of the Gross Domestic 
Product (GDP).  The Government of Nigeria has capped the excess 
crude account at USD 8 billion yearly starting from 2008.  End 
summary. 
 
. 
---------------------- 
Budget 2008 Parameters 
---------------------- 
. 
 
¶2. The 2008 budget is based on the following assumptions and 
targets: 
 --Crude oil benchmark price of USD 53.8 per barrel; 
 --Crude oil production of 1.55 million barrels per day; 
 --Joint Venture Cash Calls of USD 5 billion; 
 --GDP growth of 10 percent; 
 --Value Added Tax rate of 5 percent. 
 
. 
---------------------- 
Budget 2008 Highlights 
---------------------- 
. 
 
¶3. It is projected that U.S dollar 36.58 billion (Naira 4.646 
trillion) would accrue to the Federation Account to be shared by the 
three tiers of government.  Federal Government's total revenue would 
be USD 16.35 billion (Naira 2.076 trillion), comprising oil revenue 
of USD 12.42 billion (Naira 1.577 trillion); Value Added Tax of USD 
338.58 million (Naira 43 billion); Companies Income Tax of USD 1.33 
billion (Naira 169 billion); Customs and Excise Duties of USD 960.63 
million (Naira 122 billion); and Federal Government independent 
revenue of USD 944 million (Naira 120 billion) accruable from 
investments in commercial enterprises. 
 
¶4. Federal aggregate expenditure is projected at USD 18.32 billion 
(2.327 trillion naira), representing a marginal reduction of 2.3 
percent from 2007.  The total expenditure is composed of: 
--recurrent non-debt expenditure of USD 9.26 billion (1.18 trillion 
naira); 
--capital expenditure of USD 4.47 billion (567.7 billion); 
--statutory transfers of USD 1.35 billion (171.5 billion naira); and 
 
--debt service of USD 3.25 billion (412.3 billion naira) 
 
. 
----------------- 
Deficit Financing 
----------------- 
. 
 
¶4. Total projected Federal expenditure is USD 18.31 billion (Naira 
2.327 trillion), and would result in a projected budget deficit of 
USD 2.32 billion (Naira 295 billion) or 1.6 percent of GDP.  The 
projected deficit would be financed through USD 236.22 million 
(Naira 30 billion) expected proceeds from the sale of federal 
government properties; U.S dollar 590.55 million (Naira 75 billion) 
privatization proceeds and signature bonuses; and USD 1.57 billion 
(Naira 200 billion) from the domestic bond market. 
 
. 
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Debt Service 
------------ 
. 
 
¶5. At the end of June 2007 the total debt stock was USD 19.69 
billion (2.4 trillion naira), comprising domestic debt of U.S dollar 
16.2 billion (2.06 trillion naira, and external debt of USD 3.49 
billion (443.23 billion naira).  Total projected debt service is USD 
3.25 billion (Naira 412.3 billion), a 38.8 percent increase relative 
to the figure in 2007.  The debt service is made up of USD 2.41 
billion (Naira 306.2 billion) for domestic debts, USD 472.44 million 
(40 billion naira) for liquidity management, and USD 519.69 million 
 
ABUJA 00002227  002 OF 002 
 
 
(Naira 66 billion) for foreign debt service. 
 
. 
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Statutory Transfers 
------------------- 
. 
 
¶6. Total estimated statutory transfers in 2008 are USD 1.35 billion 
(171.5 billion naira). 
-- USD 466.14 million (59.2 billion naira) to the National Judicial 
Council, a 38 percent increase. 
-- USD 564.6 million (71.7 billion naira) to the Niger Delta 
Development Commission, a 300 percent increase. 
-- USD 319.66 million (40.6 billion naira) to the Universal Basic 
Education Commission, representing a 15 percent increase. 
 
. 
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Excess Crude Account 
-------------------- 
. 
 
¶7. The Presidential Committee on the Excess Crude Account (ECA) has 
proposed that from 2008, any balance in the ECA above USD 7.87 
billion (1 trillion naira) be shared in the following year.  A total 
USD 3.60 billion programmed sharing from the ECA is expected in 
¶2008. 
--USD 1.65 billion (209 billion naira) to the Federal Government; 
--USD 834.65 million (106 billion naira) to states; 
--USD 645.67 million (82 billion naira) to local government 
authorities; 
--USD 464.57 million (59 billion naira) as derivation funds for oil 
producing states. 
 
. 
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Comment 
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. 
 
¶8. The proposed budget is more realistic in addressing problems of 
over-estimation of crude oil production and poor forecasting of oil 
revenues.  However, revenue from oil still constitutes the major 
source of government revenue at 82 percent, with 6 percent from 
Value Added Tax (VAT), 5 percent from custom duties, and 7 percent 
from company income tax (CIT).  Though a little less ambitious in 
capital projects for development than in 2007, the new 
administration has promised to implement the capital budget fully. 
As a developing nation with decaying infrastructures, Nigeria needs 
to do better at executing its capital expenditures.  We expect the 
National Assembly to subject the 2008 Budget to much greater 
scrutiny than in past years.  End comment. 
 
PIASCIK