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Page last updated at 17:11 GMT, Friday, 20 June 2008 18:11 UK

Nigeria launches $10bn oil spree

By Andrew Walker
BBC News website, Abuja

Nigerian oil pipes
Despite its abundant oil wealth, Nigerians remain poor

The Nigerian government has decided to go on a spending spree with $10bn from its windfall from the rising oil price, despite warnings of inflation.

It will spend just over $5bn fixing the country's woeful power supply which has become the administration's priority.

The rest will be shared among the 36 state governments.

Critics say state governments are not trustworthy enough to spend the money wisely, but Nigerians also want the money spent on vital infrastructure.

It is believed the total reserve is about $18bn, up from $5.1bn in 2004.

The announcement came after weeks of negotiation between the federal government and state governors, finance ministry sources said.

Inflation risk

There have been fierce arguments over how the money should be spent, or if it should be saved.

Economists warn that a government spending spree could stoke inflation, currently at 8.2%.

The Maikafi family

We see government people drive past in flashy cars, but I cannot get good medical treatment for my son

Sarkin Maikafi
Traditional leader

But the Nigerian constitution says the windfall must be shared out between the federal, state and local governments.

Non-governmental organisations have also warned of rampant corruption in state and local governments.

Accounting is not transparent, and the money risks being wasted or stolen, they say.

Among Nigerians there is a great demand for the money to be spent.

"I know this country is very wealthy," said Sarkin Maikafi, a traditional leader in Massaka, Nasarawa state.

"Every day, we see government people drive past in flashy cars, but I cannot get good medical treatment for my son."

He was waiting in a private clinic for Babangida, his three year old son by his youngest wife, to be treated for malaria.

To get treatment at the government-run hospital down the road, you have to bribe nurses and doctors, he says, and it can be cheaper to go to a private clinic where he can get credit.

"The government doesn't run the hospitals properly. They're not well funded," he said.

But the real push to spend such a large chunk of money from the nation's oil coffers came not from the public, but from state governors.

Haggling

Nigeria's power grid has all but totally collapsed.

Investment and job creation are almost impossible without a reliable electricity supply. The government promised to repair it, and said it needs to spend some of the nation's savings to do so.

But state governors refused to allow funds to be withdrawn without getting a share.

"It was necessary to carry the state governments along," a Ministry of Finance spokesman said.

"They have to plug holes in their budgets or deliver programmes they have promised their people."

But civil society activists say there might be a more sinister outcome - the money might be frittered away or stolen.

Jibrin Ibrahim of the Centre for Democracy and Development said state governors' record on public spending was "scandalous".

"Their accounting procedures are totally opaque. State governors usually have total control of any institution that might check if the money is being stolen."


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