The World Bank has joined in the growing chorus of complaint about Nigeria's state budget, arguing that it posed "grave danger for the Nigerian economy and for the country's fight against poverty".

At the behest of parliament, Nigeria has adopted a highly aggressive 2002 budget, aiming to spend almost $3bn more than it currently has finance for.

Nigerian lawmakers have taken an optimistic view over the future direction of oil prices, as well as sources of revenue from privatisation and repatriation of assets expropriated by the previous military regime.

"The large budget was in some sense not totally unexpected in this pre-election year," Mark Tomlinson, World Bank country director for Nigeria, told a budget workshop in Lagos.

But he argued that the current figures would mean a serious diminution of the country's external reserves, leaving the economy "extremely vulnerable".

Looking on the bright side

According to World Bank estimates, Nigeria is unlikely to be able to implement effectively its 2002 budget.

Even with improved world oil prices, the budget should still be in deficit to the tune of 6.9% of gross domestic product, Mr Tomlinson said.

Under current plans, Nigeria plans to make up some two-thirds of the shortfall with proceeds from the recovery of funds stolen by former military dictators.

"This estimate is highly optimistic and unlikely to materialise," Mr Tomlinson said.

Another possible source of income is accelerated privatisation, but the biggest pending sale - that of mobile phone giant Nitel - fell through this year, and may have to start from scratch.

Wobble worries

The effects of these concerns, Mr Tomlinson said, would be felt in the value of the currency, the naira, and in inflation statistics.

Surplus government funds could just find their way into the financial markets, rather than being used to tackle Nigeria's underlying problems, he said.

And if the central bank raises interest rates, in order to choke off inflation and defend the naira, that could impede Nigeria's access to credit, and therefore choke off growth.

Mr Tomlinson's concerns have been heard from other economic advisers, and are shared by President Olusegun Obasanjo.

Nevertheless, Mr Obasanjo has signed the bill into law.