http://www.bloomberg.com/news/2011-03-22/nigeria-can-t-sustain-revised-budget-deficit-aganga-says-1-.html

Nigeria’s budget deficit, raised by parliament last week to 1.3 trillion naira ($8.3 billion) for 2011, is unsustainable, Finance Minister Olusegun Aganga said in an interview in London today.

The Senate of Africa’s most populous nation increased the deficit from 857 billion naira when it passed a 4.97 trillion- naira budget, 17 percent more than President Goodluck Jonathan had proposed for spending in December.

Africa’s top oil producer is basing its new spending plans on crude output of 2.3 million barrels a day, an oil price of $75 a barrel, $10 more than in Jonathan’s budget, and an exchange rate of 150 naira to a dollar. Jonathan must sign the plan before it becomes law.

“We hope to talk” to the national assembly about the budget, Aganga said. The oil price increase proposed by parliament is “quite high,” he said.

The government is aiming to reduce the inflation rate to below 10 percent after state, parliamentary and presidential elections next month, said Aganga, adding that it was “difficult to say” exactly when that would happen.

Nigeria’s central bank raised its benchmark interest rate today for the second time this year as it tries to stabilize the naira and slow inflation.

Interest Rate Rise
The monetary policy rate was lifted to 7.5 percent, from 6.5 percent, Bank Governor Lamido Sanusi said today in Abuja, the capital. Four economists surveyed by Bloomberg had forecast an increase of between 25 and 50 basis points.

Nigeria’s inflation rate was 11.1 percent in February, above the central bank’s target rate, and is being fueled by government spending ahead of the elections and food costs, Aganga said.

“The fiscal stance is unduly expansionary,” Sanusi said. There is “serious concern of the heightened inflation risk” related to rising government spending.”

Nigeria’s economy is forecast to expand 7.43 percent in the first quarter and the outlook for growth in 2011 is “generally good,” said Sanusi.

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