Fears of inflationary pressure as N/Assembly tops 2010 budget by N500bn

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•Cash calls increased to $7 billion   Four months after the 2010 budget proposal was presented to the National Assembly by the presidency, the lawmakers yesterday passed it but with an additional N500 billion expenditure raising concerns of strong inflationary pressure on the economy.  The additional expenditure effectively raises deficit to more than five percent of Gross Domestic Products (GDP). Iyiola Omisore, chairman, Senate appropriation committee, who presented the harmonized budget of both arms of the National Assembly, alluded to the frequent alterations made by the executive branch as reason for the delay in passing the budget, explaining that amendments were still being made even two weeks ago.  "Whilst the exercise was going on, the executive drew our attention to additional funding requirements. The additional requests came by way of amendments and replacements of existing figures and new allocations," he said. The budget figures show that the new executive requests added another N336 billion to the budget.  In the budget passed by the National Assembly, there are dramatic differences between it and the one sent by President Umaru Yar'Adua last year. The oil price benchmark has been increased by $10 per barrel to $67 per barrel. The benchmark looks reasonable going by the current oil price of about $80 per barrel in the international market, but analysts suggest the outlook for demand will be weakened by continuous high unemployment in the US and Europe.  Oil production is also expected to reach 2.3 million barrels per day, as against the 2.0 million barrels in the proposal sent by the president. The new volume expectation is at odds with the quota agreed with the Organisation of Petroleum Exporting Countries (OPEC) last year, if the 600,000 barrels produced a day as condensate is included in the National Assembly plans.  In what many oil analysts may consider as a significant shift in approach to exploration and production investment, the National Assembly proposed a $7 billion cash calls for Joint Ventures. Past JV cash calls have always been limited to $5 billion, resulting in under investment in the oil and gas sector in the last few years.  The deficit of N1.5 trillion is a reflection of the necessary fiscal stimulus due to the current macroeconomic conditions, but will in turn reflect the increasing growth in government debt, albeit a manageable growth. It is also a reflection of a pre-election year and the pursuit of electoral reforms with the Independent National Electoral Commission (INEC) getting N10 billion ahead of the 2011 elections. It is expected that the fund will be used for the updating of voters register.  The Niger Delta and power - priorities of the acting president - were also reflected in the passed budget figures. N90 billion will be made available for capital projects in the Niger Delta, in addition to the N35 billion allocated to the Niger Delta Development Commission (NDDC).   Power got N189 billion, showing that the government will expend just over a $1 billion on the sector which is much in the context of all allocations, but significantly inadequate in the context of the nation's power needs.

Fears of inflationary pressure as N/Assembly tops 2010 budget by N500bn

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