US embassy cable - 04ABUJA678

UNCLAS ABUJA 000678 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV, EFIN, ECON, NI 
SUBJECT: NIGERIA'S BUDGET BATTLE: NATIONAL ASSEMBLY'S 
COMPROMISE 
 
REF: ABUJA 537 
 
1.  Summary:  On April 15, Nigeria's National Assembly (NA) 
made a key concession to President Obasanjo in the 2004 
budget battle.  Obasanjo had requested in late March that the 
National Assembly amend several clauses they had inserted 
into the 2004 appropriation bill as a condition for his 
signing the budget into law.  On Thursday, the NA dropped 
requiring the Finance Ministry to seek a waiver from the NA 
if it could not fund salaries and projects appropriated in 
the budget. The NA retained, however, a requirement that oil 
revenues in excess of the budget target price be deposited in 
an account at the Central Bank of Nigeria (CBN) that the NA 
could monitor.  President Obasanjo had described these 
various clauses in the budget as unconstitutional, saying 
they encroached on his executive powers.  Neither side seems 
likely to give in soon on excess oil revenues, and Nigeria 
may continue under last year's budget for rather longer than 
expected earlier.  End Summary. 
 
2. The NA dropped the clause it had attached to Nigeria's 
2004 budget bill which required the Minister of Finance to 
gain an NA waiver when projects and salaries appropriated in 
the budget could not be funded by the GON.  The NA kept, 
however, a clause requiring Nigeria's Accountant General to 
establish a special fund at the Central Bank of Nigeria for 
crude oil revenues in excess of the NA-proposed benchmark of 
USD 25 per barrel (up two USD from Obasanjo's proposed 
budget).  In 2003, according to National Assembly members, 
less than 40 percent of the appropriated budget was actually 
implemented and millions of USD were used instead to pay for 
the All Africa Games and the Commonwealth Heads of Government 
Meeting, both held in Abuja. 
 
3. Dr. Bright Okogu, a special adviser on oil and gas to the 
Minister of Finance, told Econoffs April 13 that the GON's 
present accounting system for monitoring crude oil revenues 
is poor and easily manipulated by GON officials.  He admitted 
that the Ministry of Finance has no system in place to 
account accurately for oil revenues received by the 
Accountant General or the Nigerian National Petroleum 
Corporation (NNPC).  Dr. Okogu, on a two-year leave from the 
IMF in Washington, added that there is certainly stiff 
political opposition to the Ministry's attempts to monitor 
crude oil revenues, and claimed there are vested interests -- 
such as the oil extractors themselves -- who benefit from the 
lack of transparency in the GON's accounting system. 
 
Background 
---------- 
 
4. President Obasanjo has refused to sign the 2004 
appropriation bill into law because the NA had added three 
clauses to the bill in mid-March.  The first required that 
the Ministry of Finance only release money appropriated in 
the budget; i.e. funds could not be used for off-budget 
items.  The second clause required that the Ministry of 
Finance receive a waiver from the NA to divert funds from 
appropriated items to non-appropriated projects. The third 
clause mandated that Nigeria's Accountant General pay any 
excess oil revenues (over the USD 25 per barrel benchmark 
price mandated by the Assembly) into a special account at the 
Central Bank of Nigeria. 
 
5. President Obasanjo's two-page letter to the NA of March 30 
bristled at the Assembly's amendments.  Obasanjo said certain 
clauses amounted to unconstitutional usurpation of his 
executive powers, as they would grant powers to the NA to 
halt payment from the Central Bank of Nigeria to GON 
ministries that the Executive had the right to authorize, and 
vest the Assembly with executive or quasi-executive functions 
not envisaged by the Nigerian Constitution and the NA's own 
Appropriation Act. 
 
6. Comment:  The Nigerian Constitution provides that the 
previous signed budget continues in effect until a new one is 
signed, effectively letting the GON operate under a 
continuing resolution without needing such a resolution to be 
passed by the legislature.  While many Nigerian observers had 
thought Obasanjo would sign the budget sooner rather than 
later (reftel), as he had been cooperating more with the NA 
on the budget process this year, much of that amity seems to 
have disappeared.  Both sides now are remembering each 
other's failings, and the budget battle may go on for some 
time. 
ROBERTS