Nigerian President Goodluck Jonathan asked parliament to cut planned spending in the 2010 budget and revise its key assumptions to reflect a fall in global oil prices.
Oil’s sudden drop from over $87 to briefly below $70 last month CLc1 has forced the OPEC member, which depends on oil sales for more than 80% of its government revenue, to reconsider its expansionary spending plans of 4.6 trillion naira ($31 billion).
The finance ministry warned last month that revenues were not enough to cover monthly budgetary allocations and could force Nigeria to use all of its windfall oil savings.
“Recent revenue developments indicate significant shortfalls in both oil and non-oil revenue, which may well continue for the rest of the fiscal year, with adverse implications for the financing of the budget,” Jonathan said in a letter sent to both houses of parliament.
“On the expenditure side, it is necessary to revise downward the aggregate level of expenditure from the 4.608 trillion (naira) approved in the 2010 Appropriation Act,” he added.
But the president also asked parliament to consider a supplementary budget for debt service and “certain unanticipated key expenditure items,” such as the 50th anniversary celebration of Nigeria’s independence coming up in October. Details on the amount of the budget were not immediately given.
The 2010 budget, signed into law last month, assumes a global oil price of $67 a barrel, crude oil production of 2.35 million barrels per day and an exchange rate of 150 naira to the US dollar.
The finance ministry and the House of Representatives are in talks to lower the benchmark to as low as $55 a barrel.
“Given the recent drop in international oil prices from $80 a barrel to under $70 a barrel, it is prudent to revise the oil benchmark price to a more realistic level,” Jonathan said.
Africa’s biggest energy producer saves revenues above the budget’s oil benchmark figure into an excess crude account, a pillar of IMF-backed reforms launched in 2003 to help insulate Nigeria from volatility in global oil prices.
The account has dwindled to less than a quarter of the $20 billion it held three years ago due to monthly withdrawals to the three tiers of government.