The 2011 budget passed by Nigeria's parliament this month keeps government spending near record highs and undermines efforts to restore fiscal discipline, Finance Minister Olusegun Aganga said on Tuesday. Parliament approved a 4.972 trillion naira ($32 billion) budget two weeks ago, increasing planned spending by close to 20 percent from President Goodluck Jonathan's initial proposal in December and taking it almost up to last year's record level.
Economists have voiced concern, particularly ahead of presidential, parliamentary and state governorship elections next month, a stage in the political cycle which has historically seen spending rise and transparency fall. Aganga said the original 4.226 trillion naira budget was meant to mark the beginning of fiscal consolidation in sub-Saharan Africa's number two economy and would have narrowed the deficit to 3.26 percent of GDP from 6.06 percent in 2010.
"What we have back (from parliament) is something that takes spending back to about 5 trillion naira, which is very close to what it was in 2010," Aganga told a meeting of business leaders in the commercial capital Lagos. He said the spending plans now implied a budget deficit of 4.23 percent, higher than in the president's December proposal despite the fact that the benchmark oil price had also been lifted to $75 a barrel from $65.
"2010 was an expansionary budget ... It was the highest we ever spent in any particular year," he said. "If we go by the budget that was sent back by the National Assembly then we are far off from the start of fiscal consolidation." Nigeria's finance minister draws up the budget before the president presents it to parliament. In theory, parliament's role is simply to pass it into law but in practice it has repeatedly grafted on additional expenditure.
Aganga last week described the budget as "unimplementable", saying he was concerned about the high level of borrowing and pledging to take up the issue with parliament. The monetary policy committee raised its benchmark interest rate by a wider-than-expected full percentage point to 7.5 percent a week after the budget was passed, partly in a bid to ward off the effect of looser fiscal policy.
Aganga won support for his criticism of parliament from business leaders, who said the government's high levels of domestic borrowing would crowd out the private sector and push interest rates up even more quickly. "The private sector will be further crowded out completely from the financial space and for a sector that is already constrained by poor access to finance, I don't see how this is going to work," Frank Nweke, head of business think-tank the Nigerian Economic Summit Group, told the meeting. "The legislature in particular cannot continue to live fat to the exclusion and inconvenience of the entire country."
More than half of the planned spending is earmarked for recurrent expenditure, meaning Africa's most populous nation is spending more on keeping government running than on badly needed new infrastructure and development projects. Nweke and other business leaders questioned whether parliament had the constitutional right to appropriate funds and distort the budget and said they would consider legal action.
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