VZCZCXRO3461
PP RUEHMA RUEHPA
DE RUEHUJA #0474/01 0780717
ZNR UUUUU ZZH
P 190717Z MAR 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 5536
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 0985
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHGB/AMEMBASSY BAGHDAD 0115
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 03 ABUJA 000474 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT PASS TO USTR AGAMA AND USAID/AFR FOR ATWOOD 
BAGHDAD FOR DUNDAS MCCULLOUGH 
TREASURY FOR PETERS, IERONIMO AND HALL 
DOC FOR 3317/ITA/OA/KBURRESS 
AND 3130/USFC/OIO/ANESA/CREED 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ENRG ETRD EAID PGOV NI
SUBJECT: NIGERIA: PRESIDENT YAR'ADUA SIGNS 2009 BUDGET 
 
REF:    A. 08 ABUJA 2365 
        ¶B. 08 ABUJA 2225 
        ¶C. 08 ABUJA 882 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR DISTRO OUTSIDE USG 
 
¶1.  (SBU) Summary.  Nigeria's President Umaru Musa Yar'Adua signed 
into law the 3.087 trillion naira ($21.29 billion) 2009 budget 
appropriation bill on March 10, 2009.  The final 2009 budget 
represents a 17% increase (217 billion naira, $1.5 billion) by the 
National Assembly above the 2.87 trillion naira ($19.79 billion) 
budget presented by President Yar'Adua on December 2, 2008.  The 
President raised several public reservations about higher revenue 
projections and financing for the projected lower budget deficit in 
light of the current global economic and financial crisis, but 
signed the bill.  Passage of the 2009 budget in March was a month 
earlier than the 2008 budget, which was not approved until April 14, 
2008 (reftel C).  In addition to quicker budget passage and signing, 
the Executive Branch took several steps to improve implementation by 
increasing threshold limits for administrators to approve 
expenditures.  The 2009 budget's assumptions of a $45 budget 
benchmark price per barrel of oil and daily oil production of 2.209 
million barrels are overly optimistic considering daily oil 
production is currently 1.6 million barrels and global oil prices 
are hovering in the mid to low $40 range.  Regarding other increased 
revenue in the budget, the Budget Office of the Ministry of Finance 
told us they received no explanation from the National Assembly on 
how the deficit will be lower and revenues higher.  The National 
Assembly has not publicly revealed their calculations.  We expect 
that there will be insufficient revenue to support expenditures in 
2009 leading to decreased spending.  End Summary. 
 
¶2. (U) On March 10 President Umaru Musa Yar'adua signed into law the 
2009 budget.  The 2009 budget was passed by the National Assembly on 
February 18 with major capital expenditure items increased by 217 
billion naira ($1.5 billion) from the budget the President submitted 
in late 2008 (reftel A).  The 2009 budget consists of statutory 
transfers - 165.72 billion naira ($1.14 billion); debt service - 
283.65 billion naira (1.956 billion); recurrent expenditure - 1.62 
trillion ($11.158 billion); and capital expenditure - 1.0197 
trillion ($7.032 billion). 
. 
Major Changes 
------------- 
. 
¶3. (U) The assumptions espoused in the budget submitted by the 
President remain unchanged for oil production, joint venture cash 
calls, crude oil benchmark price ($45), and GDP growth; however, the 
signed budget projects a lower deficit of 836.6 billion naira ($5.77 
billion) or 3.02% of GDP as opposed to the President's earlier 
deficit projection of 1.09 trillion naira ($7.52 billion) or 3.95 
percent of GDP.  The Budget Office of the Ministry of Finance told 
us they received no explanation from the National Assembly on how 
the deficit will be lower and revenues higher.  The National 
Assembly has not publicly revealed their calculations on revenue. 
The following breakdown highlights the major increases to the 2009 
budget by the National Assembly compared to the budget the President 
submitted in late 2008: 
 
-- National Assembly appropriation increased to 114.77 billion naira 
($791.51 million) from 64.517 billion naira ($444.94 million). 
 
-- Presidency appropriation increased to 27.63 billion naira 
($190.57 million) from 22.41 billion naira ($154.56 million). 
 
-- Police formations and commands appropriation increased to 199.19 
billion naira ($1.37 billion) from 195.36 billion naira ($1.35 
billion). 
 
-- Ministry of Youth Development appropriation increased to 48.27 
billion naira ($332.90 million) from 43.409 billion naira ($299.37 
million). 
 
-- Ministry of Womens' Affairs and Social Development appropriation 
increased to 3.66 billion naira ($25.25 million) from 1.75 billion 
naira ($12.06 million). 
 
-- Ministry of Agriculture and Water Resources appropriation 
increased to 164.949 billion naira ($1.14 billion) from 119.763 
billion naira ($825.95 million). 
 
-- Ministry of Defense and the Armed Forces appropriation increased 
 
ABUJA 00000474  002 OF 003 
 
 
to 215.02 billion naira ($1.48 billion) from 201.41 billion naira 
($1.39 billion). 
 
-- Ministry of Health appropriation increased to 154.29 billion 
naira ($1.064 billion) from 143.11 billion naira ($986.94 million). 
 
-- Ministry of Commerce and Industry appropriation increased to 
10.996 billion naira ($75.84 million) from 8.996 billion naira 
($62.04 million). 
 
-- Ministry of Power appropriation increased to 101.86 billion naira 
($702.49 million) from 93.44 billion naira ($644.39 million). 
 
-- Ministry of Works (public works for roads and highway 
construction) appropriation increased to 242.46 billion naira 
($1.672 billion) from 173.33 billion naira ($1.195 billion). 
 
-- Ministry of Aviation appropriation increased to 33.55 billion 
naira ($231.35 million) from 20.485 billion naira ($141.27 
million). 
. 
Better Budget Execution 
----------------------- 
. 
¶4. (U) On March 5, in a bid to ensure better budget implementation, 
the President approved an upward review of contract approval limits 
for chief executives and accounting officers of ministries, 
departments, and agencies (MDAs).  The policy change should increase 
MDAs' responsiveness.  Under the new guidelines the expenditure 
thresholds that may be ratified by the ministerial tenders' boards 
was increased from 50 million naira ($344,827) to nearly 100 million 
naira ($689,655) for goods and nearly one billion naira ($6.9 
million) for works.  Also, the threshold for tenders' boards of 
parastatals has been raised from 20 million naira ($137,931) to 
approximately 50 million naira ($344,827) for goods and 
approximately 250 million naira ($1.72 million) for works. 
 
¶5. (U) Expenditure approval limits for Permanent Secretaries have 
also been raised from one million naira ($6,896) to five million 
naira ($34,483) for goods, and just under ten million naira 
($68,965) for works.  Moreover, under the new guidelines, Director 
Generals and Chief Executive Officers of parastatals whose earlier 
financial limit was 700,000 naira ($4,827) can now give expenditure 
approvals for 2.5 million naira ($17,241) for goods, and five 
million naira ($34,483) for works. 
 
¶6. (U) Approval limits for the Nigerian National Petroleum 
Corporation (NNPC) were also increased.  Under the new guidelines, 
the NNPC parastatals tenders' boards can approve expenditures 
ranging from $2 million to $4 million, while the NNPC Group 
Headquarters Tenders' Board can approve expenditures from $4 million 
to $10 million.  The NNPC Tenders' Board can approve expenditures 
from $10 million to $20 million, while the Federal Executive Council 
(Cabinet) may approve petroleum industry expenditures of $20 million 
and above. 
. 
Comment 
------- 
. 
¶7. (SBU) Though the President had hoped that the 2009 budget would 
have been signed into law by the end of December 2008, the 
completion during the first quarter of 2009 is a one month 
improvement from 2008.  This additional month leaves more time for 
overcoming implementation and execution issues.  If the increases in 
capital expenditure are implemented successfully there could be 
progress on several infrastructure challenges - new roads, improved 
electricity transmission and distribution infrastructure, in 
addition to other infrastructure projects. 
 
¶8. (SBU) The projected daily oil production of 2.209 million barrels 
per day is very optimistic considering GON officials confirm that 
daily production has fallen to 1.6 million barrels per day since the 
beginning of 2009.  Concomitantly, the situation is worse due to the 
global economic and financial crisis which has brought the 
international price of crude oil to the $40 per barrel range, less 
than the $45 budget benchmark price. 
 
¶9. (SBU) The projected deficit is also unrealistic and may increase 
as a result of possibly dwindling revenue.  Strategies for financing 
the budget deficit are unclear.  A recently planned $500 million GON 
bond issue in the international capital markets was suspended.  The 
most likely outcome will be insufficient revenue in 2009 for planned 
 
ABUJA 00000474  003 OF 003 
 
 
expenditures, which will cause the GON to focus on priorities. 
 
¶10. (U) This cable was coordinated with Consulate Lagos. 
 
SANDERS