US embassy cable - 03ABUJA1529

C O N F I D E N T I A L ABUJA 001529 
 
SIPDIS 
 
 
E.O. 12958: DECL: 09/04/2013 
TAGS: EFIN, PGOV, NI 
SUBJECT: NIGERIA SUFFERING CONTINUED BUDGET SHORTFALLS 
 
 
CLASSIFIED BY DCM RICK ROBERTS FOR REASONS 1.5 (b) AND (d). 
 
 
1.  (U)  Nigeria continues to suffer from budgetary 
shortfalls to fund current expenditures, severely limiting 
government operations.  According to the Minister of State 
for Finance, Nenadi Usman, the GON had only Naira 145.9 
billion available for its August obligations totaling Naira 
183.1 billion.  MinState Usman said that the GON again tapped 
into the Central Bank of Nigeria's (CBN) crude oil reserve 
account to make up the Naira 37.246 billion shortfall. 
 
 
2.  (C)  According to a source at the CBN, the central bank 
was "out of funds."  Source told Poloff that the GON was 
shopping a Naira 150 billion bond offering to cover current 
expenditures and expected future shortfalls.  (Note: This is 
the first time in 16 years that the GON has issued long-term 
bonds to service domestic debt.  End Note.)  The CBN official 
claimed that the CBN was under strict orders to limit 
disbursements, and would only fund the following in priority 
order based on the availability of funds: 
 
 
a.  the Presidency, 
b.  the All-Africa Games (COJA), 
c.  the Commonwealth Head of Government Meeting (CHOGM), 
d.  "selected" contractors, and 
e.  salaries and operating expenses. 
 
 
3.  (C)  A source in the Vice President's office confirmed 
these priorities to Poloff in a separate meeting.  He stated 
that, inside the Presidential Villa, the only two things 
currently funded were COJA and CHOGM.  "There is nothing more 
important for Nigeria that a successful COJA," he said. 
According to this source, funding for COJA was a major 
deciding factor in the GON's attempt to raise the price for 
gasoline to Naira 40 per liter in June.  The agreement to 
limit the price hike to Naira 36 per liter, after the strike, 
has created serious cash flow problems for the GON even while 
it attempts to support COJA and CHOGM in the same year it has 
already held presidential, legislative, and gubernatorial 
elections, a summit, and a deployment to Liberia. 
 
 
4.  (C)  COMMENT: We know that the GON is devoting itself to 
putting on COJA and CHOGM, two high-visibility events that 
will be attended by heads of state.  Businessmen and 
politicians have been complaining about the continued lack of 
GON resources for normal government operations since the 
election campaign season began in October, 2002.  There are 
also various "promises" made in the campaign and in labor 
negotiations -- most notably the 12.5 percent pay increase 
for civil servants -- that have yet to be fulfilled.  With 
the overwhelming majority of the budget devoted to paying for 
the GON's day-to-day operations, continuing revenue 
shortfalls will hamper any efforts by the GON to overcome 
Nigerian criticisms of non-performance and insensitivity. 
The long-term bonds will help, as well as deepen the capital 
market, and are less likely to provoke inflation than the 
alternative of CBN sterilizing more of Nigeria's forex 
inflows. 
MEECE