Nigeria Parliament Hikes Spending in 2013 Budget

altWhile other countries are seeking ways to be fiscally prudent, Nigeria's parliament pn Thursday approved a 4.9 trillion naira 2013 budget, increasing planned spending above levels recommended by President Goodluck Jonathan and reducing the amount of oil revenue put into savings.

Jonathan, who sent the national assembly a 4.92 trillion naira budget proposal in October, will need to sign the budget that was read aloud on the floors of both houses of parliament on Thursday before it can become law.

Africa's second biggest economy and top oil producer is growing in popularity as an investment destination, offering the promise of high economic growth and a consumer market of 160 million people. Its sovereign debt has soared since JP Morgan added it to its emerging market bond index this year.

But investors remain wary of the government's tendency to squander oil revenues through a combination of reckless spending and corruption.

The parliament's budget was based on an assumption of a $79-per-barrel oil price, higher than the $75-per-barrel proposed by Jonathan's team and up from $72 for this year's budget.

Any money earned from oil over and above the benchmark price is deposited into a savings facility called the Excess Crude Account. Any increase in the benchmark price therefore reduces savings and makes Nigeria less resistant to oil price shocks.

The global oil price is at almost the same level as a year ago, leaving little justification for increasing the benchmark by $7 a barrel, economists say.

Finance Minister Ngozi Okonjo-Iweala is on an austerity drive and wants Nigeria to become more fiscally prudent.

But lawmakers, who have been unhappy about delays in their allowances set out in the 2012 budget and who want more money freed up for their constituencies, were unlikely to accept such a slight increase in the benchmark price.

In the past, parliament has usually prevailed in such disagreements.

A sovereign wealth fund, aimed at better ring-fencing Nigeria's oil savings, is due to be launched in March, the Finance Ministry said on Thursday.

The budget assumes oil production of 2.53 million barrels per day (bpd), up slightly from 2.48 million bpd in the 2012 budget and at the top end of actual output this year.

It also assumes economic growth in 2013 will be 6.5 percent, inflation 9.5 percent, and assumes an exchange rate of 160 naira to the dollar.