The 2005 budget is based on the following assumptions:

a)Crude Oil production of 2.71 million barrels a day (including 150,000 barrels of condensate)

b) NLNG and upstream gas revenues of N53 billion.

c) A prudent oil price of $27 per barrel.

d) The continuation of a fiscal rule in which revenues above the $27 a barrel price will be saved for the rest of the year.

e) Joint venture cash calls of $4.23 billion

f) A target inflation rate of no more than 10%; a GDP growth rate of 7%, and reserves at $15 billion or eleven months of imports.

g) Additional 2004 Oil Income (excess crude revenues) for financing purposes for the Federal Government of N158 billion

The crude oil price of $27 per barrel is 8% higher than last year’s budget price of $25 a barrel. This is to take into account spending for key infrastructure and Millennium Development Goals (MDGs) related priorities, areas of importance to the National Assembly and feedback from the public consultations.

At the same time, the price has been kept prudent because of the uncertainties linked to a volatile oil market and OPEC price windows decision coming up in December 2004. Based on these parameters, we estimate federally collectible revenue for the year ending Dec 31st 2005 at N3,619 billion of which N 2,902 billion is oil revenues, N563 billion of non-oil taxes, and N100 billion of independent revenue. Federally retained revenue under the existing revenue sharing formula is estimated at N1,304 billion made up of Federal government share of the federation account of N1,179 billion, share of VAT of N25 billion and independent revenue of N100 billion. An aggregate expenditure ceiling of N1,618 billion is being proposed. This results in a deficit of N314 billion or 2.9 % of GDP. The deficit will be financed with the excess crude savings of 2004 —N158 billion; privatization proceeds: N4 billion, sales of government property in Abuja and around the federation: N 15 billion, looted fund recovery: N10 billion, access to long term funds from the capital market: N 70 billion. This modest borrowing is really to help develop Nigeria’s capital market for medium to long term funding and to give it depth which is very much in line with good government practice elsewhere.