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Bloomberg: Nigeria’s Yar’Adua Announces Budget Aimed at Boosting Growth

By Paul Richardson

Nov. 8 (Bloomberg) — Nigeria’s government said it plans a budget deficit of 2.5 percent of gross domestic product next year as it raises spending on key industries, including energy and transport, to accelerate economic growth.

Higher oil prices will help boost economic growth in the west African nation to 11 percent, President Umaru Yar’Adua told lawmakers today in the capital, Abuja. Growth has averaged 3 percent over the past two decades.

“We are inexorably committed to pursuing the goal of making our economy one of the 20 biggest economies in the world by the year 2020,” Yar’Adua said. “In order to meet our growth and development targets by 2020, it is imperative that our economy grows at an even faster rate.”

Nigeria is Africa’s largest oil producer and the continent’s most populous nation. The country derives 80 percent of its government revenue and 90 percent of its export earnings from crude shipments. The government is trying to decrease its reliance on oil by encouraging growth in industries including mining and agriculture.

Spending next year was estimated at 2.45 trillion naira ($20.5 billion), while revenue was forecast at 1.9 trillion naira, leaving a deficit of 2.5 percent of GDP that will be financed from the sale of government properties and other assets, oil blocks and domestic borrowings. Yar’Adua didn’t provide a deficit figure for 2007.

Spending Increases

Nigeria will spend 90 billion naira on agriculture and water resources next year, while increasing spending on energy infrastructure, including power plants and transmission projects, to 140 billion naira, Yar’Adua said.

In addition, 94.4 billion naira will be spent on the transport industry, including 73.1 billion naira on highways. Private companies will be invited to help build roads, he said.

The 2008 budget is based on an oil price of $53.83 a barrel, compared with $40 a barrel in 2007, and an exchange rate of 117 naira to the dollar, Yar’Adua said. The government reduced its estimates for crude production to 2.45 million barrels a day in 2008, from 2.5 million barrels a day this year.

Attacks and kidnappings by militants in the Niger River delta in southeastern Nigeria have forced oil companies including Royal Dutch Shell Plc to halt output totaling 500,000 of oil a day, a fifth of the nation’s output.

The disruptions in the region are likely to result in Nigeria’s projected revenue for 2007 being about 796 billion naira short of expectations, Yar’Adua said.

Next year the government plans to spend 444.6 billion naira on security and the Niger Delta, up 6.5 percent from this year, Yar’Adua said, without providing more details.

Inflation Target

The government will spend 25.3 percent servicing debt in 2008, up 25 percent from this year, Yar’Adua said. Domestic debt is expected to reach 1.9 trillion by the end of this year.

“Based on our strong fiscal position, the government intends to remain active in the debt market,” he said.

Nigeria’s total foreign debt stock now stands at $3 billion, compared with $32 billion in 2005 after international lenders wrote off much of the debt, Yar’Adua said. The country’s debt to GDP ratio is below 20 percent.

The nation will target an inflation rate of 8.5 percent in 2008, he added.

To contact the reporter on this story: Paul Richardson in Johannesburg at [email protected] .

Last Updated: November 8, 2007 12:24 EST

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