* Amended budget seen agreed before end of month
* Deficit will move back closer to 3.6 pct
* Both recurrent and capital spending to be tightened
(Adds details, quotes)
By Nick Tattersall
LAGOS, May 3 Nigeria's government is in talks
with parliament over the country's 2011 budget proposal and
expects to agree an amended version with a narrower deficit
within weeks, the head of the budget office said on Tuesday.
President Goodluck Jonathan initially proposed a 4.226
trillion naira ($27.32 billion) budget in December but
parliament inflated the spending plans, passing a 4.972 trillion
naira version three months later.
Government has said the 2011 budget is supposed to mark the
beginning of a period of fiscal consolidation in sub-Saharan
Africa's second biggest economy and Finance Minister Olusegun
Aganga described the amended version, which would push the
deficit to over four percent, as "unimplementable".
He vowed in March to take the issue up with parliament.
"We are very, very deep in the negotiations, we have gone
very far," Bright Okogu, director general of the budget office,
told reporters on the sidelines of an International Monetary
Fund (IMF) event in the commercial capital Lagos.
"We have both recognised in all our preliminary discussions
that there is a need to come back to a more realistic budget
deficit level," he said.
The original budget plan presented by Jonathan implied a
deficit of around 3.6 percent. Okogu said the final version
would push the deficit "back in that direction".
Presidential, parliamentary and state governorship elections
last month disrupted the pace of negotiations but Okogu said he
was optimistic agreement would be reached before the end of the
current administration on May 29.
"Both sides recognise that this has to be sorted out before
the new parliament comes into being, so we have a very tight
target that we are both working towards," he said.
Okogu said the tightening would come from both recurrent and
capital expenditure, although care would be taken not to impact
any badly-needed infrastructure or other capital projects.
"Some of it will be overheads for example that were
increased a little, and some of it will be capital," he said.
"We are going to be very careful. (Projects) that do not
have proper designs, are not properly costed, we want to work
with the National Assembly to see if they can be given attention
at a future date," he said.
More than half of the planned spending in the version passed
by parliament is earmarked for recurrent expenditure, meaning
Africa's most populous nation is spending more on keeping
government running than on badly needed new infrastructure.
Analysts had voiced concern about the state of Nigeria's
public finances in the run-up to April's elections after foreign
currency reserves dwindled and oil savings were eroded.
The central bank raised its benchmark interest rate by a
surprise full percentage point to 7.5 percent in March, partly
in a bid to ward off the effect of rising government spending
ahead of the elections.
Jonathan won the presidential vote but the ruling party saw
its parliamentary majority weaken and lost control of several
states. Although there were cases of ballot box snatching and
voter intimidation in some areas, the polls were generally
deemed to have been Nigeria's most credible in decades.
(For full Reuters Africa coverage and to have your say on the
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(Editing by Joe Brock)