The havoc wreaked by floods in parts of the country will drag economic growth down to 6.5 per cent in 2013 from 6.8 per cent in 2011, President Goodluck Jonathan said yesterday in his 2013 budget proposal presented to a joint session of the National Assembly.
The N4.92 trillion expenditure plan, according to Jonathan, is underpinned by parameters which reflect the government's prudent economic policies in an uncertain global economy that indicate tougher times ahead.
"Projected Gross Domestic Product (GDP) rate is now estimated at 6.5 per cent compared to 6.8 per cent in the Fiscal Strategy Paper. The revision is underpinned by the fact that the severe floods experienced over large parts of the country are expected to impact on economic activity in 2013, especially agriculture," Jonathan said, adding however that "the growth prospect may be improved with the plan to boost dry season farming".
In the budget document, oil production for 2013 is estimated at 2.53 million barrels per day, up from 2.48million barrels in 2012 and benchmark price is 75 dollars per barrel, a modest increase from the 72 dollars per barrel approved in the 2012 budget. The president explained that the benchmark price was based on "a well established economic method of estimating oil price moving averages".
With the theme "Fiscal Consolidation with Inclusive Growth", the president said the budget would build on the four main pillars - macroeconomic stability, structural reforms, governance and institutions and Investing in priority sectors - on which the 2012 budget was based.
On the structure of the budget, he explained that recurrent expenditure has tended to crowd out capital expenditure in the national budget and , to correct the imbalance, recurrent expenditure will be cut to sustainable levels through reduction of waste, corruption and duplication in the functions of government agencies.
"In this respect, the biometric verification of employees is being extended to all agencies of government, while the process for rationalizing public agencies and reducing duplication of mandates among different government agencies has begun, following the report of the Oronsaye Committee.
"The share of recurrent spending in aggregate expenditure is set to further reduce from 71.47 per cent in 2012 to 68.7 per cent in the 2013 budget, while capital expenditure as a share of aggregate spending is set to increase from 28.53 per cent in 2012 to 31.3 per cent in 2013," Jonathan said, disclosing that a sinking fund of N100 billion was being established in the 2013 fiscal year to be used for repaying government's maturing debt obligations and to curb the rising domestic debt profile.
However, planned gross federally collectible revenue is projected at N10.84 trillion, of which the total revenue available for the federal government's budget is forecast at N3.89 trillion, representing an increase of about 9 per cent over the estimate for 2012, while non-oil revenue is projected to continue to grow in 2013 as the ongoing reforms in revenue collecting agencies and the implementation of initiatives will further develop the non-oil sector to yield results.
On expenditure, an aggregate of N4.92 trillion is proposed for the main budget of the 2013 fiscal year, representing a modest increase of about 5 per cent over the N4.7 trillion appropriated for 2012. This is made up of N380.02 billion for Statutory Transfers, N591.76 billion for Debt Service, N2.41 trillion for Recurrent (Non-Debt) Expenditure and N1.54 trillion for Capital Expenditure.
The president said that, based on the above, the fiscal deficit is projected to improve to about 2.17 per cent of GDP in the 2013 budget compared to 2.85 per cent in 2012. "This is well within the threshold stipulated in the Fiscal Responsibility Act, 2007 and clearly highlights our commitment to fiscal prudence. We are determined to further rein in domestic borrowing, and this way ensure that our debt stock remains at a sustainable level," he said.
Key allocations are as follows: Works - N183.5 billion; Power - N74.26 billion, to be complemented with a proposed Infrastructure Euro Bond of about $1 billion in order to complete gas pipelines and other infrastructure investments; Education - N426.53 billion; Health - N279.23 billion; Defence - N348.91 billion; Police - N319.65 billion; and Agriculture & Rural Development - N81.41 billion.
The SURE-P, he disclosed, will continue with the expected resources of N180 billion in 2013 augmented by the projected 2012 unspent balances, bringing the total to about N273.5 billion.
To promote Nigerian agriculture and industry, he said, aside the fiscal measures on rice, cassava, wheat and machinery for the agriculture and power sectors, additional measures which will be effective from January 1, 2013, will see machinery and spare parts imported for local sugar manufacturing industries attracting zero (0) per cent duty; a 5-year tax holiday for "sugarcane to sugar" value chain investors.
"Furthermore, import duty and levy on raw sugar will be 10 per cent and 50 per cent respectively, while refined sugar will attract 20 per cent duty and 60 per cent levy.
Other measures, according to President Jonathan, are: A 10 per cent import duty and 100 per cent levy will be applied to both brown and polished rice; all commercial aircraft and aircraft spare parts imported for use in Nigeria will now attract zero per cent duty and zero per cent VAT to improve the aviation sector through newer fleet and less onerous maintenance.
Machinery and equipment imported for use in the solid minerals sector will now attract zero per cent import duty and zero per cent VAT, and, to encourage the production of mass transit vehicles in Nigeria, duty on Completely Knocked Down components (CKD) for mass transit buses of at least 40-seater capacity, will now be zero per cent, down from 5 per cent. He assured that "Government is desirous of supporting green growth and, in this regard, will explore options for providing incentives for energy-efficient vehicles from the 2014 fiscal year."
On gender empowerment Jonathan said to further integrate women in the various sectors, "we have developed an innovative approach to mainstreaming gender issues starting with 5 pilot ministries - Agriculture, Health, Communication Technology, Water Resources and Works. These ministries are signing MoUs with the Ministry of Women Affairs to deliver on specific services for women."
He explained that the Ministry of Agriculture, for example, will work with the Ministry of Communication Technology to ensure that five million women farmers and agricultural entrepreneurs receive mobile phones to be able to access information on agro-inputs through an e-wallet scheme.
"The Ministry of Health, in addition to scaling up its ongoing 'Save a Million Lives' initiative, plans to give back health and hope to one-third of the pool of young girls and women who have been waiting a long time for V.V.F repairs through surgery and economic rehabilitation.
In addition, we are up-scaling routine immunization" while the Ministry of Works plans to increase the number of women that are employed in public works programmes as contractors, workers and project evaluators, setting itself a target of 35 per cent for women in FERMA rehabilitation work. In every geopolitical zone, at least 3 roads leading to areas where women's socio-economic activities are concentrated will be prioritised and completed," he added.
Jonathan blames 2012 budget delay on 2011 budget carry-over
President Jonathan said yesterday that the carry-over of the 2011 budget implementation into the first quarter of this year was responsible for the delay in the implementation of the 2012 budget.
The 2012 budget has been one of the major causes of conflicts between the executive arm of government and the legislature, with the latter accusing the former of poor implementation.
Jonathan said that since the 2012 budget became law last April when it was passed into law, N711.6 billion has so far been released to Ministries, Departments and Agencies (MDAs) for capital budget, with further releases expected immediately after the 4th quarter of the fiscal year.
The president said, "On the expenditure side, the implementation of the 2012 Budget is on track, having commenced effectively in April when it became law. We have so far released N711.6 billion to MDAs for the implementation of their capital budgets while further releases are to follow shortly for the fourth quarter.
"The continued implementation of the 2011 capital budget in the first quarter of 2012 clearly affected the implementation of the 2012 Budget".
Jonathan added that it was for this reason that he took a personal interest in the budget implementation since May this year by chairing weekly sessions with ministers and heads of parastatals on their progress in this regard.
He added: "We are determined to use the instrument of the budget to improve the welfare of Nigerians. You would recall my assurance to Nigerians that subsequent budgets will be presented earlier to the National Assembly. It is in this spirit that I lay this Proposal before this Assembly today, to give sufficient time for deliberation on the Proposal and approval of the budget, and to enable us commence implementation from January 1st 2013."
He clarified that government was more bothered on the tangible outcomes from the implementation of the Appropriation Acts and not just the amounts spent.
Accordingly, he reminded the lawmakers that he had signed Performance Agreement Contracts with ministers "with a view to ensuring delivery of projects and programmes in their respective budgets.
"The ministers, in turn, are signing similar agreements with their Permanent Secretaries, Heads of parastatals and Directors to cascade down the need for responsibility and accountability," he stated.
He said government was also determined to reduce the cost of governance by reviewing the recommendations targeted at rationalizing agencies of the federal government with overlapping functions.
He said, "This has been taken into account in the preparation of the 2013 Budget, and we expect some modest cost savings from this exercise in the course of the 2013 fiscal year. However, more significant progress will be made in 2014, as we work with the legislature to harmonise those agencies that have enabling laws, but which also have duplicative mandates."
The president recalled that he had assured Nigerians that proceeds from the partial withdrawal of petroleum subsidies will be applied to implementing the Subsidy Reinvestment Programme (SURE-P) under the chairmanship of Dr. Christopher Kolade, which implementation, he said, was continuing over the medium-term.
"In the 2012 fiscal year, we had voted N180 billion for the implementation of social safety net programmes, road and rail infrastructure projects. So far, N36.5 billion of this amount has been utilized to support maternal and child health programmes as well as mass transit, roads and rail projects and job creation through the Community Services and Public Works programme," he stated.
Highlighting the achievements of the 2012 fiscal year in key sectors, Jonathan said efforts in the power sector are beginning to pay off with improved power supply to various parts of the country.
He noted, however, that although gas-to-power and other initiatives were making this possible, there was still a long way to go on the power sector reform.
"As you may be aware, the ongoing privatisation of the generation and distribution companies has reached an advanced stage. In some cases, Preferred Bidders have already emerged. When completed, the programme will bring into the sector significant private investment, along with the requisite power output," he said.
On agriculture, the president said his administration has instituted key policy reforms to establish staple crop processing zones aimed at attracting the private sector into areas of high production, reducing post-harvest losses, and adding value to locally produced commodities.
NASS not executive rubber stamp - Mark
In a remark preceding the presentation of the budget, president of the Senate David Mark had foreclosed any expectation of passing the 2013 budget as presented by President Goodluck Jonathan, declaring that the National Assembly was not anybody's rubber stamp.
"We do not think that the constitution intended to turn the National Assembly into a mere mechanical rubber-stamp that must robotically pass budget estimates as presented," he said.
Mark warned that the full benefits of Jonathan administration's economic policies may not be accomplished if he continued with partial implementation of budgets.
He also told the president to be mindful of the fact that the social and economic challenges currently besetting the nation are the severest in Nigeria's contemporary history, adding that the National Assembly was also conscious of the fact that urgent steps need to be taken to address the country's dire infrastructural challenges.
An emphatic Mark told President Jonathan that what he laid before the National Assembly were mere estimates that were not immutable figures and must be thoroughly scrutinized and with the input of the National Assembly.
According to him: "As to whether the National Assembly has the power to make inputs to Appropriation Bills laid before it, our stand is that parliament is constitutionally empowered to make inputs. What the Constitution enjoins Mr. President to lay before the National Assembly are mere estimates, not immutable figures. "And once the estimates are so laid, their consideration becomes subject to the constitutionally prescribed modes of exercising legislative power.
"The duty which Your Excellency has come to perform this morning therefore carries profound social and economic implications for the nation. Our budgets, from my experience since 1999, have been dogged by three main areas of controversy. These are the time of presentation of the estimates to the National Assembly; whether the National Assembly has the constitutional power to make inputs on the budget estimates; and implementation of the budget.
"On the first issue, it is gratifying to note that the 2013 Budget Estimates is being presented unprecedentedly in October 2012. Yet, Mr President, a compelling case can still be made for a consistently earlier presentation. This will allow for a meticulous and exhaustive consideration and debate and ensure that we work towards passing it before the end of the year."
Tambuwal To Jonathan: Oteh, Onagoruwa Must Go
Giving a vote of thanks, the speaker, House of Representatives, Aminu Waziri Tambuwal, hailed President Jonathan's presentation of the 2013 budget in October as being in tandem with its Legislative Agenda which prescribes that the draft budget should be submitted at least three months prior to the start of a fiscal year and requested full implementation of the budget.
On the 2012 budget, Tambuwal stated that interim field oversight reports from its 90 standing House committees on the 2012 budget implementation were clearly unimpressive both in terms of releases as well as utilisation.
"It is important to state at this point the clear provisions of Section 8 of the Appropriation Act to the effect that approved budgeted funds shall be released to MDAs 'as at when due'. This is sadly observed more in breach," the speaker stated in his vote of thanks, after Jonathan had presented the draft 2013 budget to a joint session of the National Assembly.
He called on Jonathan to expeditiously constitute the Public Procurement Council in order to free the Federal Executive Council from the burden of contract administration.
"The composition of the Public Procurement Council provided under the Public Procurement Act is very critical to budget implementation," Tambuwal insisted, adding that "the present Constitution of the Bureau of Public Procurement has been identified as one of the bottlenecks to effective capital budget implementation.
Tambuwal described the volume of the federal government's domestic borrowing as "as a matter of grave concern".
"Figures emanating from the Debt Management Office regarding domestic borrowing are however worrisome. At a whopping $33.6 billion, government appears to be monopolizing domestic borrowing to the unhealthy exclusion of the private sector.
The speaker queried Jonathan's management of Nigeria's excess crude fund; he said the fund's quarterly implementation report has been hidden from the National Assembly in blatant breach of the Appropriation Act.
"Since 2010, the Appropriation Act has legislated that the excess crude component of the Federation Account be operated under separate records for purpose of transparency and accountability.
"Besides, Section 30 of the Fiscal Responsibility Act makes it mandatory for the Budget Office to submit budget implementation Assessment reports to the National Assembly and the Fiscal Responsibility Commission on a quarterly basis and to publish same on Ministry of Finance's website.
"The president may be unaware that the National Assembly is neither availed evidence of implementation of this policy along with the records of Federal Government's portion of the excess crude funds nor the quarterly implementation reports, as required under the two Acts. Mr. President may wish to give appropriate directives to ensure full and speedy compliance by relevant agencies.
Tambuwal frowned at Jonathan's disregard for resolutions of the National Assembly as he insisted on the sack of the director-general of the Bureau of Public Enterprises (BPE), Ms Bolanale Onagoruwa, and the director-general of the Securities and Exchange Commission (SEC), Ms Arunmah Oteh, both indicted by separate panels of both arms of the National Assembly.
According to the speaker, "The National Assembly is becoming increasingly concerned about the disregard for its resolutions and public comments by certain functionaries of the Executive on same. I cite the Senate Resolution on the Bureau of Public Enterprises (BPE), the House Resolution on the state of insecurity of the nation, requesting Mr. President to visit and brief the House, the House of Representatives Resolution on the Securities and Exchange Commission (SEC), the concurrent resolution of the two chambers on Bakassi, among others."
U.S.$75 oil benchmark will boost economy - Experts
Concerns have been raised by economic analysts over the high oil output assumption in the proposed 2013 budget submitted to the National Assembly yesterday by President Goodluck Jonathan.
Although they applauded the reduction of deficit financing of the budget from 2.85 per cent to 2.17 per cent of Gross Domestic Product (GDP) and recurrent spending from 71.4 per cent to 68.7 per cent of total budgetary spending, the analysts said there has not been visible investment that would support that.
The federal government is looking at crude oil production of 2.53 million barrels per day (bpd), up from 2.48 million bpd in 2012.
"This measure has risen consistently year after year recently, with no real visibility on whether Nigeria has seen the investment that allows it to comfortably commit to greater output levels," said Razia Khan, Regional Head of Research, Africa Global Research, Standard Chartered Bank, London.
She said though some official data appear to indicate that Nigeria is currently producing near an alltime high, there are such vast disparities in different estimates, and so many gaping holes in measures of Nigeria's oil output, that the continued rise in Nigeria's budgeted output assumptions, at a time when investment in the sector has been dwindling, does not inspire great confidence.
"The hope is that passage of the PIB will create a platform for more regulatory certainty and lead to greater investment in Nigeria's oil and gas sector. But to see continued increases in oil output assumptions even ahead of formal passage of the PIB is a worry," she said.
Rose Omorojor, an analyst in Lagos, added that the president has to show commitment to security before hoping for such increased crude oil production. According to her, with the pockets of violence still in the region, it is still too early to assume that production will continue to climb.
John Okolo, a retired banker, said there is need for government to be cautious in terms of level of production and price assumptions in case there is a sudden downturn.
Spending is set to rise to N4.93 trillion in 2013, from N4.697 trillion previously. This 5% y/y rise in spending is relatively modest, and compares extremely. Khan believes that, in real terms, it signals the ongoing attempt to achieve fiscal consolidation.
"This is also reflected in the budget deficit which falls to a projected 2.17 per cent of GDP, from an estimated 2.85 per cent in 2012, largely as already indicated.
She said the make-up of that spending is more encouraging as well. The share of recurrent spending falls to 68.7 per cent of the budget, from 71.47 per cent previously. It is a further step in the right direction, and indicative of the authorities' desire to gradually boost the share of capital expenditure - providing a firmer platform for future growth. It is especially encouraging to see the funds earmarked for agriculture, as this could be a game changer for Nigeria, if the country succeeded in boosting agricultural productivity."
Concerning the controversial crude oil price benchmark, Khan said the adoption of a $75/pbl benchmark assumption is still relatively positive.
"Of greater concern is the suggestion that there might be an attempt by the House to raise this to $80/pbl. In our view, given global risks, and Nigeria's ongoing fiscal and export dependency on a single commodity, the priority for Nigeria has got to be increasing its rate of saving. Were oil prices to fall, Nigeria would currently be left very vulnerable, with no sound mechanism for smooth spending, let alone provide a counter-cyclical boost to the economy," she said.
She stated that the Sovereign Wealth Fund (SWF), while encouraging, is not yet sizeable enough to create a sound buffer against external shocks. It cannot be assumed either that the debt markets currently comfortably open to Nigeria would be unaffected by any fall in the oil price. She said there is a need for much more fiscal conservatism, and that the signals from the House are a considerable concern.
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