Gabriel Omoh
3 December 2008
(Page 2 of 3)
"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.
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