Abuja Nigeria's 2012 budget allocation to pay fuel subsidies will run out before the end of the year, risking Africa's second biggest economy raiding its oil savings and borrowing more, the central bank governor told Reuters.
Nigeria scrapped subsidies on gasoline imports on January 1, potentially saving the country more than 1 trillion naira (Dh23.3 billion). But more than a week of strikes and protests erupted across the country against the higher cost of motor fuel, forcing the government to partially reinstate them.
The 2012 budget signed by President Goodluck Jonathan last week allocated 888 billion naira for fuel subsidy payments. If this is insufficient they will have to find more money or stop paying, which is unlikely given public reaction in January.
"With oil prices where they've been since the beginning of the year I'm sure that we will be exposed to that amount long before the year runs out," Central Bank Governor Lamido Sanusi told the Reuters Africa Investment Summit.
"If I was asked for advice I'd simply say pay what you have in the budget and simply stop paying. [If not] They take the money from the excess crude account [or] you've got to borrow money."
Jonathan came to power last April promising to tackle Nigeria's wasteful governance, and Sanusi praised the budget last month for being more fiscally disciplined. Africa's biggest crude oil exporter is supposed to save money over a benchmark price, which was $72 a barrel in the 2012 budget, into an excess crude account to cushion the economy against potential oil price shocks.
Raided account
But the account has been repeatedly raided by politicians and despite record high oil prices it contained only $3.5 billion earlier this year, down from some $20 billion in 2007. It won't last long if subsidy payments overshoot.
Nigeria's total debt is about 20 per cent of GDP, which is comfortable compared with other African countries, but, Sanusi argues, poor for a country pumping as much oil as Nigeria.
Debts are rising despite high oil revenue and economists are concerned that borrowing is increasingly internal, which means from banks and pension funds. If the government fails to pay then other parts of the economy are at risk.
"[The output] assumption was too optimistic... based on the most rosy forecasts of operating environment," Sanusi said.
"When you've got militancy, you've got production shortages, you've got natural operational failures, a more conservative output figure to begin with would have been better."
High oil prices have enabled Nigeria's economy to grow at more than seven per cent a year but poverty is rising.
Jonathan pledged before his election last year to improve Nigeria's woeful electricity system by privatising the power sector and to reform the oil sector, to weed out corruption and save the indebted national oil firm NNPC.
The ambitious Petroleum Industry Bill (PIB), which was supposed to change everything from taxes to the structure of the NNPC, has been stuck in parliamentary dispute for years.
Reforms are running months behind schedule and risk being blocked off by politicians who benefit from the status quo.
"Clearly we should have made much more progress than we've made," Sanusi said. "The PIB is a major disappointment... after several years [it] is about to start again its tortuous path through the national assembly.
Shortfall: May need to borrow
Nigeria relies on crude exports for more than 80 per cent of government revenues and budgets for this amount based on the benchmark oil price and assumed production, which was set at 2.4 million barrels per day this year.
This is at the top-end of actual production last year and if there are any output shortfalls, which have been common in the past, government will have to borrow to cover any shortfall.
