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P 041129Z DEC 08
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC 4621
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RUEHOS/AMCONSUL LAGOS 0388
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UNCLAS SECTION 01 OF 03 ABUJA 002365 
 
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: EFIN ECON EINV EPET ENRG PGOV NI
SUBJECT: NIGERIA: PRESIDENT YAR'ADUA PRESENTS THE 2009 BUDGET 
 
REF:  A. ABUJA 2225 
  ¶B. ABUJA 882 
  ¶C. 07 ABUJA 2417 
  ¶D. 07 ABUJA 2227 
  ¶E. 07 ABUJA 1907 
  ¶F. 07 ABUJA 1793 
 
¶1.  (U) Summary.  President Umaru Musa Yar'Adau presented the 2.87 
trillion naira ($24.53 billion), budget for calendar year 2009 to a 
joint session of the National Assembly on December 2, 2008.  The 
2009 budget is a slight increase from the final 2008 budget of 2.7 
trillion naira ($23 billion) reported in reftel A.  It focuses on 
five critical issues: infrastructure, human capital development, 
land reform, security and the Niger Delta.  Notably the proposed 
budget sets crude oil production at 2.292 million barrels per day 
(mbpd) (a reduction from 2.45 mbpd in 2008 budget), a benchmark 
price of $45 per barrel (down from $59 in the 2008 budget), and will 
result in a fiscal deficit of 1.09 trillion naira ($9.3 billion) 
representing 3.59% of the GDP.  The 2009 budget prioritizes the 
completion of ongoing projects, rather than starting new ones.  The 
President's goal is to reduce poverty and achieve Nigeria's 
Millennium Development Goals by concentrating on his Seven Point 
Agenda.  The following information on the budget is based on the 
President's speech.  Copies of the budget have not yet been released 
and when they are, the Mission will provide an update by septel. 
Past experience has demonstrated the road to budget passage has been 
long and treacherous and decreasing revenues may lead to increased 
tensions.  End summary. 
 
Budget 2009 
----------- 
 
¶2.  On December 2, 2008, President Yar'Adua presented the 2.87 
trillion naira ($24.53 billion) budget to the National Assembly for 
¶2009.  The 2009 budget consists of statutory transfers (140.7 
billion naira = $1.20 billion); debt service (283.6 billion naira = 
$2.42 billion); recurrent expenditure (1.649 trillion naira = $14.09 
billion); and capital expenditure (796.7 billion naira = $6.81 
billion). 
 
¶3.  The 2009 budget espouses the following key assumptions: 
-- Oil production at 2.292 million barrels per day; 
-- Benchmark price of crude oil at $45 per barrel; 
-- Joint venture cash call at $5 billion; 
-- GDP growth at 8.9%; 
-- Inflation at 8.2%. 
 
Fiscal Balance 
-------------- 
 
¶4.  A deficit of 1.09 trillion naira ($9.3 billion) representing 
3.59% of GDP is expected.  According to the President, the deficit 
will be financed from the following sources: outstanding signature 
bonuses from oil blocks sold in prior bid rounds; recall of $200 
million from the Nigerian Trust Fund of the African Development 
Bank; domestic borrowing; $500 million bond issue from the 
international financial markets; privatization proceeds; and unspent 
funds from the 2008 budget.  The fall in the international crude oil 
price is the main course of the budget deficit. 
 
Priority Projects 
----------------- 
 
¶5.  The following seven paragraphs list the key projects that will 
be funded by the 2009 budget.  These are President Yar'Adua's 
priorities in power, petroleum resources, public works, 
transportation, health, agriculture/water resources and Niger Delta 
development. 
 
¶6. Power Sector: 3.5 billion naira ($29.9 million) for the Mambilla 
hydro power generation project; 21.5 billion naira ($183.76 million) 
for other power generation projects; 32 billion naira ($251 million) 
for transmission projects; and 19.25 billion naira ($151 million) 
for distribution projects. 
 
¶7. Petroleum Resources: 903.9 million naira ($7.1 million) for the 
Trans-Sahara Gas Pipeline; 6.7 billion naira ($52 million) for the 
Calabar-Umuahia-Ajaokuta Gas Pipeline; 10.3 billion naira ($81 
million) for the Ajaokuta-Abuja-Kano pipeline; and 1.1 billion naira 
(8.6 million) for the Gas Supply Pipeline to Power Holding Company 
of Nigeria Delta IV; 
 
¶8. Public Works: 10.7 billion naira ($84.2 million) for roads to 
access refineries and ports; 56.86 billion naira ($ 447 million) for 
highway construction and repairs; 4.3 billion naira ($36.7 million) 
 
ABUJA 00002365  002 OF 003 
 
 
for the construction of the second Niger bridge; and 3.6 billion 
naira ($28.3 million) for the Guto/Bagana bridge. 
 
¶9. Transportation: 12.4 billion naira ($105.9 million) to complete 
the rail line from Ajaokuta to Warri port; 8.3 billion naira ($65.3 
million) for modernization of railway equipment; and 8.4 billion 
naira ($71.8 million) for dredging of the lower Niger River. 
 
¶10. Health: 6.5 billion naira ($54.7 million) for HIV/AIDS; 3 
billion naira ($25.6 million) for midwife services; 7.7 billion 
naira ($65.8 million) for maternal and child healthcare; and 6 
billion naira ($51.2 million) for polio eradication. 
 
¶11. Agriculture and Water Resources: 4.6 billion naira ($39.3 
million) for infrastructure development for livestock production; 
6.5 billion naira ($55.5 million) for tractor services; 15 billion 
naira ($118.1 million) for fertilizer supply; and 11.6 billion naira 
($91.3 million) for water supply and sanitation. 
 
¶12. Niger Delta Development: 28.4 billion naira ($223.6 million) for 
the east-west road project; 92.8 million naira ($730,708) to improve 
and sustain the environment; and 18 million naira ($141,732) to 
establish skills acquisition centers. 
 
Special Projects 
---------------- 
 
¶13.  President Yar'Adua announced that in 2009 the Nigerian Police 
will invest 5.738 billion naira ($49.04 million) in community 
policing in Lagos, Abuja, Port Harcourt, Kano, Onitsha, and 
Maiduguri, with the target of reducing crime by 40% in one year.  He 
also reported that the Ministry of Interior will spend 1.8 billion 
naira ($15.38 million) to improve prison infrastructure. 
 
¶14.  In a bid to improve power generation and achieve a 6,000 
megawatts electric supply target by the end of 2009, the Nigerian 
National Petroleum Corporation's ability would be enhanced to supply 
1.2 billion square cubic feet of natural gas. 
 
¶15.  In the health sector, the President said that tertiary 
hospitals in Calabar, Awka, and Ile Ife will be completed, while 
other hospitals in various parts of the country will also be 
refurbished and equipped. 
 
¶16.  In the Federal Capital Territory, Abuja, the following projects 
will be implemented: 11.3 billion naira ($96.58 million) for the 
completion of the Ministry of Foreign Affairs Headquarters; 5.1 
billion naira ($43.59 million) for the construction of water plants; 
10 billion naira ($85.47 million) for road construction; 3.5 billion 
naira ($29.91 million) for the Abuja Technology Village project; and 
11 billion naira ($94.02 million) for the Abuja metro rail project. 
 
 
Policy Measures 
---------------- 
 
¶17.  In light of the current global financial crisis and declining 
revenues, the Government of Nigeria (GON) decided to take measures 
to increase efficiency in public expenditure management such as: 
freezing recurrent expenditure at 2008 levels; suspending 
acquisitions of new vehicles; suspending construction and furnishing 
of new office buildings; reducing by 50% funds for foreign training 
and travels; and a 20% reduction in government travel within 
Nigeria.  Concomitantly, information technology platforms will be 
installed in all ministries, departments, and agencies (MDAs) to 
monitor salary administration in order to eliminate ghost workers. 
Also to combat fraud, payment for MDAs goods and services will be 
done electronically. 
 
Better Late than Never 
---------------------- 
 
¶18.  Comment: The President postponed budget presentation on three 
different occasions due to further consultations with the 
legislative branch.  The GON says these delays were to ensure smooth 
and timely passage of the budget because the drop in crude oil price 
posed a dilemma in setting the parameters for the 2009 budget. 
Based on oil production problems in 2008 and 2007 within the Niger 
Delta region the oil production target seems ambitious. 
 
¶19. In addition, the $45 crude oil benchmark price may be high 
because of international downward trends in the price.  If the 
international price continues to fall then there will be significant 
revenue shortfalls for the GON. 
 
 
ABUJA 00002365  003 OF 003 
 
 
¶20.  Another likely problem could be the slow passage of the budget 
by the legislature.  As seen in 2008 budget process, the executive 
and legislative branch went back and forth many times until a 
compromise was reached.  With the potential for less revenue to be 
shared this year, there could be extended discussion and delays 
before we see a final 2009 budget.  End Comment. 
 
¶21. (U) This message was coordinated with ConGen Lagos. 
 
SANDERS