(Updates with comments from minister in second paragraph.)
Oct. 20 (Bloomberg) -- Nigeria’s planned government spending cuts will be difficult to achieve initially because it will require a reduction in wages, Finance Minister Ngozi Okonjo-Iweala said.
While debt levels are “relatively good” at 20 percent of gross domestic product, the government aims to lower that, the minister said at a conference hosted by the Economist magazine in the capital, Abuja, today.
Okonjo-Iweala, who took office on Aug. 17, has vowed to cut government wages to reduce recurrent spending, which accounted for about 74 percent of this year’s budget, to 70 percent within four years. The government of Africa’s biggest oil producer may lift spending by 7 percent to 4.8 trillion naira ($30 billion) in the 2012 budget, according to the Budget Office.
Lowering spending is “going to be very hard in the short- term because you are talking about people and salaries,” Okonjo-Iweala said. “This administration is determined to move this economy forward, but it’s going to be a tough fight.”
Nigeria is facing fiscal liquidity pressures as oil prices drop and spending increases, central bank Governor Lamido Sanusi said yesterday. Crude oil has slumped 22 percent in New York in the past six months, reaching as low as $85.27 a barrel today.
“We see a lot of volatility in the horizon” because of “uncertainties in the global environment,” Okonjo-Iweala said.
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