Gabriel Omoh
3 December 2008
Lagos — PRESIDENT Umaru Yar' Adua, yesterday, presented a deficit budget with a total expenditure of N2.87 trillion on an expected federal revenue forecast of N1.778 trillion including Independent Revenue of N306 billion leaving a financing gap of N1.09 trillion or 38 per cent of the total budget.
According to the President, "The fiscal balance in the proposed 2009 budget is a deficit of N1.09 trillion or 3.95 per cent of GDP, based on our assumed benchmark oil price of $45/barrel and forecast production of 2.292mbpd.
BUDGET 2009 PRESENTATION: President Umaru Yar'Adua at the presentation of the Budget 2009 to the National Assembly, in Abuja yesterday. Photo: Gbemiga Olamikan.
The deficit is to be financed by outstanding signature bonuses, proceeds of ongoing privatisation, the recall of $200 million from the Nigerian Trust Fund of the African Development Bank, any unspent balances from the 2008 Budget, domestic borrowing and a Naira-denominated international bond issue of $500 million.
The latter bond issue is primarily for the development of a benchmark for the pricing of local and foreign currency denominated sovereign debt instruments."
A breakdown of the budget proposal showed that N140.7 billion is for Statutory Transfers, N283.6 billion for Debt Service, N1.649 trillion for Recurrent (Non-Debt) Expenditure and N796.7 billion for Capital Expenditure.
According to the President, the Federal Government will in 2009 execute five key projects that will move the economy towards achieving the seven-point agenda of the government. Delivering the budget speech to the joint sitting of the National Assembly, the President said: "The 2009 Budget is predicated on certain key assumptions that take a realistic fiscal outlook for 2009.
These include: Oil production of 2.292mbpd, benchmark oil price of $45/barrel; Joint Venture cash calls of $5billion; GDP growth rate of 8.9 per cent; Inflation rate of 8.2 per cent.
According tohim, "On the basis of these assumptions, taking into account the revenue sharing formula, the total federally collectable revenue is projected at N5.131 trillion, which includes oil revenues of N2.9405 trillion and non-oil revenues of N1.973 trillion as well as other non-Federation Account items such as grants and special levies amounting to N217.5 billion. The total Revenue for the Federal Government Budget is forecast at N1.778 trillion, including Independent Revenue of N306 billion."
He told members of the National Assembly that "the aggregate expenditure for 2009 is N2.87 trillion, comprising N140.7 billion for Statutory Transfers, N283.6 billion for Debt Service, N1.649 trillion for Recurrent (Non-Debt) Expenditure and N796.7 billion for Capital Expenditure."
According to him, "This aggregate expenditure represents a 4.45 per cent increase over the N2.748 trillion initially appropriated in 2008 and an 8.42 per cent increase over the 2008 Amended Budget's level of expenditure of N2.647 trillion. More crucially, the capital vote of N796.7 billion is significantly higher than the actual capital expenditure of N491 billion in 2007.
7 key projects for 2009
He said seven key projects would be executed in 2009 in power, petroleum, roads, transport, health, agriculture and Niger Delta.
Power
The key projects that will be funded by the 2009 Budget in the power sector include the Mambilla Hydro-electric power generation project for which N3.5 billion has been voted, N21.5 billion vote for other generation projects (including N6.5 billion for the completion of the Niger Delta Power Holding Company's NIPP projects), N32 billion for Transmission projects, and N19.25 billion for Distribution projects;
Petroleum
In Petroleum Resources, the President said N903.9 million had been voted for the Trans-Sahara Gas Pipeline, N6.7 billion for the Calabar-Umuahia-Ajaokuta Gas Pipeline, N10.3 billion for the Ajaokuta-Abuja-Kano pipeline and N1.1 billion for the Gas Supply Pipeline to PHCN Delta IV.
Roads, bridges
According to him, N10.7 billion has been voted for Access Roads to six NNPC refineries and ports, N56.86 billion for highways construction and rehabilitation, N4.3 billion for the construction of the 2nd River Niger Bridge at Onitsha and N3.6 billion for the Guto/Bagana Bridge across the River Benue (both bridges are being constructed through PPP arrangements) and provisions for several other Presidential Initiative and Priority road projects.
Transport
In the transport sector, "N12.4 billion has been voted for the completion of the Ajaokuta-Warri line to the Delta Steel Jetty; N8.3 billion for the modernisation of locomotives, coaches and wagons, rehabilitation works and procurement of railway equipment, and N8.4 billion for the dredging of the Lower River Niger.
In the health sector, set aside is N6.5 billion for HIV/AIDS, N3 billion for Midwifery Services Scheme, N7.7 billion for maternal and children's health, and N6 billion for polio eradication.
Agriculture
For agriculture and water resources, the sum of N4.6 billion has been voted for the development of livestock production infrastructure, N15 billion for the supply of fertiliser, N6.5 billion for tractor service PPP schemes, N9.2 billion for the construction and rehabilitation of dams, and N11.6 billion for water supply and sanitation.
On the Niger Delta, the President said: "The new ministry will invest N28.4 billion on the East-West Road to improve accessibility to the region; N92.8 million on projects to improve and restore the environment and N18.6 billion on other projects, particularly the establishment of two sophisticated skills acquisition centres to help the youths from the region acquire practical skills relevant to the energy and petrochemicals industry."
Security
In specific areas such as security, the President said "the Police are investing N5.738 billion in a new initiative in enhancing security and community policing in seven cities across the nation, namely Abuja, Lagos, Kano, Ibadan, Port Harcourt, Maiduguri and Onitsha.
The Nigeria Police Force is committed to reducing crime by 40 per cent in these seven cities over the next year. The Interior Ministry is investing N1.8 billion in prison infrastructure rehabilitation to improve the security of the prisons and provide better facilities for reorienting convicted felons for rehabilitation into society.
"The Ministry of Works proposes in 2009 to complete the construction and rehabilitation of 3,293km length of roads. Under the FERMA programme, 10,676km of federal roads will be kept in motorable condition under the Retainership Programme, and 20,000km of roads will undergo emergency repair work. The Zonal Intervention Roads project will cover a total of about 2,400kms of roads. This Administration is also committed to accelerating the enhancement of road works by maintaining
10,000km of roads every year for the next three years.
On power, he said: "We are increasing investment in power generation by enhancing NNPC's ability to provide 1.2 billion SCF of gas to the domestic market, so as to ensure that this Administration can deliver 6,000 MW of power by the end of 2009.
"Notwithstanding the global downturn, Nigeria's economic growth remains on track, buoyed by the strong performance of the non-oil sector. Growth in the non-oil sector, particularly in agriculture, remains robust, at an estimated 9 per cent. The oil sector's GDP contracted in 2008 by about 2.5 per cent due to reduced production levels precipitated by the ongoing situation in the Niger Delta. Overall, real GDP growth for 2009 is estimated to be about 7.5% which compares favourably with the 6.6 per cent recorded so far in 2008.
"This out turn lays the foundation for sustainable double-digit growth over the medium-term horizon, as we increase investments in critical infrastructure, implement sectoral reforms, maintain macroeconomic stability and ensure lasting peace, security and development, not only in the Niger Delta, but across the nation, as a whole.
"Year-on-year, headline inflation has exceeded our single-digit projections and remains high at 14.7% in October 2008. This outcome is symptomatic of the rising global costs of food and energy which affect all economies worldwide. By October, food inflation had increased to 19.2%. However, core inflation for all items other than farm produce and energy commodities, remained in a single-digit at 7.9%.
Our efforts to manage inflation will continue to build on the increasing coordination between monetary and fiscal policy, and our emphasis on fiscal discipline and prudence in macroeconomic management.
"Overall, our economic fundamentals are fairly strong, buttressed by the growth of the non-oil sector in the face of these challenges. This confidence has been duly reflected in our Local Currency Issuer Default Ratings (IDRs) which were upgraded by international rating agencies from BB- to BB in May this year.
Our long-term foreign and local currency IDRs remain stable, endorsing our macroeconomic stability and strong external reserves position. Indeed, in November this year, an international investment bank, Merrill Lynch, rated Nigeria among the least vulnerable economies in the world based on a number of economic indicators. Our ranking, ahead of all other leading developed and emerging economies across the globe, is indicative of the stability and safety that our ongoing economic reforms have guaranteed.
It is against this cautiously optimistic economic backdrop that the 2009 Budget Proposal, which I hereby present, was prepared.
"The 2009 Budget preparation has been based on the outcomes of the 2009-2011 Medium-Term Sector Strategies which held in July 2008 with the active involvement of the Organised Private Sector and Civil Society, and in consultation with the relevant Committees of the National Assembly.
Consultation with the National Assembly was continued in a series of interactive meetings between the Presidential Committee on the Budget and many of the Committees of both the Senate and the House of Representatives.
The commitment and input of the Distinguished and Honourable Members of the National Assembly in this work is deeply appreciated and underscores the spirit of cooperation and consultation with which the Budget has been prepared.
Review of 2008 Budget
Reviewing the performance of 2008 budget, the President said: "The 2008 Budget was based on projected oil production of 2.45 million barrels per day, a benchmark oil price of $59.00/barrel and an exchange rate of NGN117/US$.
Based on these assumptions, I signed into law last April an Appropriation Bill of N2.748 trillion, representing a 32% increase in Federal spending over the 2007 fiscal year.
"This, however, was based on a prior understanding with the National Assembly that the level and composition of projected expenditure under the 2008 Budget would be subsequently reviewed.
Consequently, I submitted a proposal for a Budget Amendment to the National Assembly in July, which, I am pleased to say, has now been passed by the National Assembly.
I congratulate the Leadership, and the Distinguished and Honourable Members for this gesture, which exemplifies the spirit of cooperation and mutual respect between both arms of government in the service of our people.
Some of the efficiency savings from this reduced appropriation are being applied to finance the 2008 Supplementary Budget, which is designed to provide for items such as critical expenditure in the power sector. Again, I am delighted to observe the speedy approval of the 2008 Supplementary Budget by the National Assembly.
"The performance of the 2008 Budget has been mixed and indeed far from satisfactory. While releases of budgetary allocations to the MDAs have been on course, with 100% of the capital vote released by the middle of November, actual utilisation has not kept pace with the releases due to a number of factors which we are closely looking into.
On the revenue side, although international oil prices reached record high levels in the first half of 2008, overall revenue performance has been below expectation, due to domestic oil production disruptions and declining international energy prices, as the global economy responds to the transnational financial crisis.
"The aggregate projection for Federation Account receipts in 2008 was N4.529 trillion. Oil-related revenue was expected to amount to N3.606 trillion or 80% of this sum while non-oil sources of revenue were to account for the balance of N923billion or 20%.
In addition to volatility in international oil prices, actual crude oil production has been lower than projected, averaging just over 2million barrels/day, due to the situation in the Niger Delta. As a result, overall revenue receipts have been well below expectation.
"On a positive note, non-oil revenues have performed better than anticipated, due largely to increased efficiency of collection of the various taxes. Indeed, the current oil price situation underscores the over-dependence of the Federal Budget on oil related receipts.
Consequently, this Administration will continue to lay emphasis on diversifying our sources of revenue from oil to non-oil sources. In the 2009 fiscal year, more emphasis will be placed on increasing remittances from public corporations, parastatals and agencies. In this regard, we anticipate greater Independent Revenue of about N306 billion from various sources.
The Federal Inland Revenue and Nigerian Customs Services will be further empowered to meet their mandates and shall be expected to increase their efficiency in collection. Trade related revenues will increase, as the 48-hour cargo clearance reforms transform the efficiency of our ports.
"While the tariff bands under the new 2008-2012 Nigeria Customs and Tariff Book are lower than what previously obtained, the fifth band of 35% continues to afford modest protection for some of our key local industries.
The new tariffs are also consistent with our commitment to expanding trade across the ECOWAS region and creating new export opportunities for our domestic industries. As compliance improves and the incidence of smuggling reduces, we expect that non-oil, trade-related revenue will increase.
"Finally, as we increase spending on our transportation and power infrastructure, we will ensure a better investment environment for our industries, entrepreneurs and investors through substantial reduction in the cost of doing business.
Philosophy and thrust of the 2009 Budget
"The 2009 Federal Budget is focussed on delivering on the promises of this Administration's Seven-Point Agenda by enhancing investment in critical physical infrastructure and human capital development, implementing socio-economic reforms and consolidating democracy.
"Many of the 2009 Budget interventions adopt a multi-dimensional approach in addressing key challenges to our development as a nation.
As our Public-Private Partnership policy is fully implemented, private initiatives are expected to complement the Government's interventions in key areas of our economy with the overarching objective of making a positive, tangible and enduring difference to the life of the ordinary Nigerian.
"The 2009 Budget is to give priority to the completion of ongoing projects, which will quickly deliver tangible results in service delivery. Accordingly, rather than embarking on new projects, this Administration has opted to devote more resources to completing existing projects and discharging outstanding obligations from the 2007 and 2008 fiscal years.
We will continue to ensure that all new projects are well articulated, properly costed, and sensibly prioritised, taking into account available resources and the implementation capacity of the MDAs.
"The 2009 Federal Budget is to deliver on our promises to reduce poverty and attain our Millennium Development Goals.
Our guiding vision is as encapsulated in the Seven-Point Agenda. By enhancing physical infrastructure through improving the power and road transportation sectors, we can improve the capacity of our non-oil sectors, such as agriculture and manufacturing, to contribute to more sustainable and enduring economic growth and development.
By investing in human capital development through education and healthcare delivery, we can create a better future for the next generation.
HIGHLIGHTS
Total expenditure N2.87trn
Statutory Transfers N140.7bn
Debt Service N283.6bn
Recurrent Expenditure N1.649trn
Capital Expenditure N796.7bn
Benchmark oil price $45pb
Oil production 2.292mbpd
GDP Growth rate 8.9%
Inflation rate 8.2%
Projected revenue
collection N5.131trn
Oil revenues N2.9405trn
Non-oil revenues N1.973trn
Non-federation
Account items N217.5bn
Power N76.25bn
Petroleum N19.39bn
Roads & Bridges N75.46bn
Transport N29.1bn
Health N23.2bbn
Agriculture N46.9bn
Niger Delta N47.928bn
Security N7.538bn
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