Nigeria slashes 2015 budget

06 February 2015

Nigeria has more than halved capital expenditure to less than 10% of 2015 spending, axing badly needed infrastructure investment due to the collapse in the price of oil, the country’s main source of revenue, according to the full budget submitted to parliament.

Shelving projects such as port upgrades and roads will only perpetuate the inefficiencies that have plagued Africa’s most populous nation and biggest economy for decades.

The document puts capital expenditure at 387-billion naira ($2-billion), or 8.9% of total spending of 4.35-trillion naira – a significant drop from the 2014 spending plans when capex, or capital expenditure, accounted for 23.7% of projected government outlays.

Budget office director general Bright Okogu said the reductions were the direct result of the halving in the last six months of the price of crude, which normally accounts for 80% of the cash flowing in to state coffers.

Spending on military equipment was set to rise slightly, reflecting the need for weapons to counter Boko Haram Islamist militants in the northeast.

The oil-price slump has hammered Nigeria, whose currency has hit a series of record lows against the dollar in the last three months despite the central bank using 20% of its reserves to prop it up.

As well as knocking this year’s overall growth forecast, the impact is being felt in the construction sector. Construction firms have halted work on roads, railways and bridges, firing up to a third of workers and maintaining only skeleton crews.

Ministry of Works disbursements for a major highway were said to be less than 3% of the project’s value. Layoffs nationwide were said to be 20,000.
Despite 60% of total spending being ear-marked for the cost of running the government, there are doubts that government will be able to meet even its day-to-day obligations should crude prices remain low.

By: Reuters

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