Nigeria President Proposes $24 Billion 2009 Budget

Economists warned of a widening deficit.

Nigerian President Umaru Yar'Adua proposed a 2.87 trillion naira ($24 billion) 2009 budget on Tuesday, a slight increase over actual spending for this year despite falling revenues due to lower world oil prices.

The 2009 draft budget, which can be amended by legislators, assumed federal government revenues in the world's eighth biggest oil exporter of 1.778 trillion naira in 2009, compared to 2.59 trillion originally projected for this year.

"The changing international oil market poses great concerns for our fiscal outlook," Yar'Adua told parliament.

"The international financial crisis has led to slowing growth across the world economy, resulting in lower demand for our commodities, in particular crude oil," he said.

The budget proposal made conservative assumptions on oil revenues, setting the benchmark oil price at $45 against $59 this year and forecasting oil output of 2.29 million barrels per day down from 2.45 million bpd in the 2008 budget.

But economists warned of a widening deficit.

"The authorities have taken a very prudent approach on the revenue side, which should provide more protection against volatile global markets," said Mike Hugman, emerging markets strategist at Standard Bank.

"However, with spending being kept roughly flat versus 2008 in order to avoid a negative fiscal shock, this will involve a much larger deficit," he told Reuters.

"The increased level of bond issuance that may be required could push up interest rates in 2009."

Total approved government spending for 2008, including a supplementary budget signed into law last month, is around 3.3 trillion naira, but not all of those funds have been used.

Yar'Adua said the budget proposal was based on economic growth of 8.9 percent in sub-Saharan Africa's second-biggest economy and inflation of 8.2 percent.