Nigeria Passes High-Spending Budget Despite Oil Price Woes

 

Nigeria has passed its budget for 2016 after months of political wrangling, pushing through record federal spending even as low oil prices have brought the worst economic slowdown in 15 years.

 

President Muhammadu Buhari in December submitted his blueprint for his first budget since taking office last year but later withdrew it to tweak the oil benchmark figure after crude prices fell further. Bukola Saraki, the Senate president, later promised that the budget would be passed in February, but legislators could not agree on spending plans.

 

 

The Senate on Wednesday passed a budget of 6.06tn naira for Africa’s largest crude producer, slightly down from the N6.08tn ($30bn) proposed by the president. The oil benchmark figure in the budget is $38 per barrel, slightly below current prices and sharply down from last year’s benchmark of $52 per barrel.

 

 

The prolonged and dramatic process has fuelled concerns that Mr Buhari’s government is not responding quickly enough to the economic problems caused by the collapse in oil prices. The president sacked the director-general of the budget office last month after lawmakers exposed errors in his proposals.

 

 

Financing the high spending — and dealing with a deficit of N3tn ($15bn) — will be a challenge. Nigeria’s government is in talks with the World Bank and the African Development Bank over $3.5bn in loans, but it is not clear where the rest of the funds needed will come from.

 

 

Mr Buhari’s proposed budget in December included cautious expectations for oil revenues “but the problem at the time was there was not a great deal of detail about where the rest of revenues were going to come from”, said Razia Khan, chief Africa economist for Standard Chartered.

 

 

“Where that revenue comes from and what measures are going to be driving it are the key questions,” Ms Khan added.

 

 

Nigeria’s economy grew about 2.8 per cent last year, its slowest rate since 1999, as lower crude prices took their toll. Nigeria has traditionally earned 70 per cent of its revenue from crude exports and has few other sources of foreign exchange earnings.

 

 

 

The Buhari administration argues that heavy state spending is needed to cut oil dependency in the long term, adding that such a move has been put off for too long.

 

 

“[This budget] empowers us to invest in the infrastructure needed to unlock our non-oil economy and reduce our vulnerability to the oil price”, Nigeria’s finance minister, Kemi Adeosun, told the Financial Times.

 

 

 

Mr Buhari was elected last year on a pledge to tackle crippling corruption and improve transparency in public finances. But Oluseun Onigbinde, co-founder of the Nigerian civil society organisation BudgIT, said the budget showed that there was still a long way to go.

 

 

The national assembly, comprising the Senate and the House of Representatives, was allocated the equivalent of $600m — higher than Nigeria’s expenditure on its universities, said Mr Onigbinde.

 

Nigerian lawmakers may be the highest paid in the world, according to BudgIT, which has lobbied lawmakers to release the breakdown of how that money will be spent. It says their annual salary is the equivalent of $150,000 to $190,000, or about 50 times gross domestic product per capita.

 

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