Posted by: "Oyebisi Babatunde Oluseyi" oyebisius@gmail.com
Fri Nov 9, 2007 5:29 am (PST)
2008 Budget Speech
By
His Excellency, President Umaru Musa Yar'Adua, GCFR
At the Joint Session of the National Assembly
Abuja, Thursday, November 8, 2007
PROTOCOL
The dawn of a new millennium is a once in a lifetime experience. The
conventional resolve that accompanies the fleeting of each New Year
and the emanation of another one is amplified by the momentous feeling
that we are witnessing a spectacle of history in the making. The dawn
of a new centenary also reflects on the past.
Undoubtedly, Nigeria has experienced tremendous progress since the
turn of the century. This was made possible by our commitment and
resolve for progress, sound macroeconomic policies, a plethora of
reforms within the context of the National Economic Empowerment and
Development Strategic Initiative (NEEDS), the Millennium Development
Goals (MDGs), the Seven-Point Agenda and the implementation of the
Policy Support Instrument (PSI) framework.
The sustained rise in international oil prices was also a significant
contributory factor.
In delivering our Administration' s first budget to this august
Assembly, I am delighted to report that our economy has been one of
the fastest growing, not only in Africa but also in the world. This
growth rate is forecast to continue into 2008 and 2009. In particular,
the last five years have indicated even brighter prospects for
sustained growth. Based on current trends, real GDP growth for 2007 –
2008 is set to average 7.0% per annum, much better than the
performance of the previous two decades when GDP growth averaged 3.0%
per annum. Significantly, this rate of growth has been much higher
than our population growth rate. This has resulted in a sharp increase
in GDP per capita after a prolonged period of stagnation, from about
US$400 at the turn of the century to well over US$1000 by the end of
2007. However, in order to meet our growth and development targets by
the year 2020 it is imperative that our economy grows at an even
faster rate.
Our collective challenge today is to translate these macro-economic
gains into tangible improvements in the living standards of our
people. Despite the rapid growth of the economy, about 50% of our
population still live below the poverty line. Oil still accounts for
about 40% of GDP, 90% of exports and 80% of government revenue. The
challenge therefore is to reverse these ratios.
It is against this backdrop that I consider it a great honour to
present to this Joint Session of the National Assembly, the 2008
Budget proposal of the Federal Government of Nigeria.
In our continued efforts at fiscal reforms, this budget has been
prepared within the context of a Medium-Term Fiscal Framework, which
takes account of the forecast revenue and expenditure for the period
2008 - 2010.
Mr. Senate President,
Mr. Speaker,
Distinguished Members of the National Assembly,
The preparation of this budget has been informed by the need to be
disciplined, focussed and strategic. We placed emphasis on containing
costs so as to enhance value for money. We followed a well-defined
participatory process aimed at ensuring that spending proposals are
properly linked to our Seven-Point Agenda. All the major line
Ministries were requested to reappraise in detail their initial
proposals, keeping in view the need to strengthen public expenditure
management and ensure transparency, accountability and value for
money, with emphasis on completing on-going projects. This has helped
us to make significant spending efficiency gains. It is our intention
that this level of attention to detail will continue to underlie all
future Budget preparation and implementation.
The 2008 budget builds upon and consolidates past macroeconomic and
budgetary reforms. It gives priority to, and makes ample provision for
improving physical infrastructure, particularly power and
transportation, human capital development, the Niger Delta, and social
safety nets. These are all encapsulated in the Seven-Point Agenda of
this Administration.
Broadly, the 2008 budget provides:
• N444.6 billion for Security and the Niger Delta, which is 20% of the
total Federal Government Budget, up 6.5% from 2007 allocation;
• N210 billion for Education or 13% of the total MDA spending;
• N139.78 billion for the Energy sector, excluding National Integrated
Power Projects which will be implemented through alternative funding;
and
• N121.1 billion, that is 7% of total budget, for Agriculture and
Water Resources.
Consistent with our commitments under the Paris Club Debt settlement,
and in pursuit of the attainment of the MDGs, the 2008 budget will
devote the entire debt relief gains, amounting to N110 billion, to
carefully selected poverty reduction initiatives and programmes in
Education, Agriculture, Water Resources, Power and Social Safety Nets.
The Budget is basically about the ordinary Nigerian. It is about
accelerating the provision of basic infrastructure to improve the
quality of life of our people. It is about creating jobs and the
enabling environment for the private sector to thrive.
REVIEW OF BUDGET 2007
The 2007 Budget was predicated on a production volume of 2.5 million
barrels per day and a benchmark price of US$40 per barrel. Based on
these assumptions and a projected N100 billion from Independent
revenue sources, projected total revenue available to fund the federal
budget was N1.73 trillion. This represented a 20% growth relative to
2006. The 2007 Appropriation Act authorised aggregate spending of N2.3
trillion, made up of Statutory Transfers of N102 billion, Debt Service
of N326 billion and N1.88 trillion for MDAs. The projected deficit was
therefore N570 billion or 2.5% of GDP.
The performance of the 2007 Budget in the first half of 2007 has been
mixed. While oil prices remained well above the benchmark price of
$US40 per barrel on which the 2007 Budget was predicated, adverse
production variances, due principally to disruptions in the Niger
Delta, resulted in weak revenue performance.
The projected revenue for 2007 was estimated to be about N796 billion
short of budget expectations, of which N 339 billion would be the
impact on the Federal Budget. The implementation of the expenditure
plans for 2007 was however insulated from the effects of the revenue
underperformance through monthly releases, totalling N454 billion
which were drawn from the Excess Crude Account in the first half of
the year.
To further enhance the implementation of the 2007 Budget, we sought
your approval, after a review of the 2007 Appropriation, to redirect
available funds to the implementation of a number of key public
service reforms, including the implementation of the Consolidated
Salary Structure, on-going right-sizing of the MDAs and clearance of
local debt arrears. A sum of N170 billion in efficiency savings was
identified from within the existing Appropriation to fund these
reforms. An additional N86 billion, principally made up of independent
revenue already received was also appropriated.
At this juncture, I must put on record my appreciation and that of the
nation as a whole for the efficient and timely manner in which the
National Assembly approved the 2007 Revised Budget proposals. This has
encouraged me to believe that the budget I am presenting to you today
will be considered with similar sense patriotism. I would like to
seize this opportunity to confirm to you that, in the same spirit, I
have signed the 2007 Supplementary Appropriation Bill passed to me
after approval by the National Assembly.
THE 2008 BUDGET
We are inexorably committed to pursuing the goal of making our economy
one of the twenty biggest economies in the world by the year 2020. To
this end, we will endeavour to fast track the key parameters of our
development paradigm as outlined in our Seven-Point Agenda.
Key to our developmental aspirations is the need to maintain
macroeconomic stability and fiscal responsibility.
While our overall strategy is to focus on the completion of on-going
projects, we have also taken onboard a few new projects targeted at
improving infrastructural deficiencies.
KEY ASSUMPTIONS AND TARGETS
The 2008 Budget is based on a number of assumptions and it is driven
by the need to meet certain targets. These are:
• Oil price of $53.83 per barrel
• Crude oil production of 2.45 million barrels per day
• Joint Venture Cash Calls of US$4.97billlion
• GDP growth rate of 11%
• Inflation rate of 8.5% and
• Exchange rate of N 117 to US$1
The budget is based on a prudent benchmark price US$53.83 per barrel
to ensure that we fund the budget with predictable revenues, whilst
ensuring that the benchmark price remains realistic.
REVENUE PROJECTIONS:
Federation Account
Based on these assumptions, we expect the sum of N4.539 trillion to
accrue to the Federation Account. This represents an increase of 5.5%
over 2007. Oil Revenue is estimated at N3.629 trillion after taking
account of existing commitments to Joint Venture Cash Calls of N0.581
trillion, while Non-Oil Revenue is estimated at N0.91 trillion. Oil
Revenue represents 80% of the total estimated revenue, while Non-Oil
Revenue represents 20%.
We will continue to diversify our revenue base by further development
of the non-oil sectors of our economy which are estimated to grow by
10% in 2008.
Oil Revenue
Of the total N4.210 trillion that we estimate will accrue from Oil
Revenue, Crude Oil Sales are expected to contribute N2.345 trillion,
as against N1.6 trillion in 2007; Petroleum Profits Tax is estimated
at N1.282 trillion compared to N1.78 trillion in 2007; while Royalties
and Rents should account for N 0.583 billion as against N0.532 billion
in 2007.
Non-Oil Revenue
This is made up of Companies' Income Tax, Value Added Tax and Customs
& Excise Duties. Of the sum of N0.91 trillion expected to accrue to
the Federation Account from Non-Oil Revenue; Companies' Income Tax is
expected to account for N349 billion, as against N299 billion in 2007;
Value Added Tax should contribute N310 billion, as against N265
billion in 2007; while Customs & Excise Duties should account for N251
billion, as against N230 billion in 2007.
Federal Government Revenue
The revenue accruable to the Federal Government from the Federation
Account for 2008 is estimated at N2.026 trillion. Of this sum, the
actual amount accruable to the Federal Budget will be N1.866 trillion
as against N1.7 trillion in 2007. This is arrived at after deducting
amounts that should go to the Derivation and Ecology Fund (
N38billion), Stabilization Fund (N19billion) , Development of Natural
Resources ( N63billion), and the FCT (N41billion) .
Independent Revenue
Independent Revenue, made up of revenues that accrue exclusively to
the Federal Government from the operating surpluses and dividends of
commercial enterprises, is expected to be N120 billion.
Our estimate of total revenue available to fund the 2008 Budget is
therefore N1.986 trillion.
FEDERAL GOVERNMENT EXPENDITURE
The proposed aggregate expenditure is made up of the following:
• Statutory Transfers: N187.6 billion
• Debt Service: N372.2 billion
• Spending by Ministries, Departments and Agencies (MDAs): N1.89 trillion
Given the estimated total revenue available to fund the federal
budget, we plan a deficit of N0.56 trillion or 2.5% of GDP which will
be financed from the proceeds of the sale of government properties,
Oil Blocks Signature Bonus, privatization proceeds and domestic
borrowings.
The details of the expenditure heads are as follows.
STATUTORY TRANSFERS
In complying with the law, we will fully provide for the following
statutory transfers:
• National Judicial Council (NJC), N78 billion as against N43 billion in 2007.
• Niger Delta Development Commission (NDDC), N69.9 billion as against
N24 billion in 2007.
• Universal Basic Education Commission (UBEC), N39.7 billion as
against N35.3 billion in 2007.
DEBT SERVICE
We propose a Debt Service of N372.3 billion for 2008, representing an
increase of 25.3%, relative to 2007. This is made up of domestic,
long-term debt service of N306.2 billion and foreign debt service of
N66 billion.
DOMESTIC DEBT
The overall increase in debt service requirement for 2008 relative to
2007 is reflective of the increase in the domestic debt stock in 2006
– 2007.
These include N86 billion of pension arrears and N105 billion of
arrears owed to local contractors. In addition, N200 billion of
domestic borrowing was required to finance the 2007 Budget. The
domestic debt stock is expected to reach N1.9 trillion by the end of
this year. This figure represents an increase of N285 billion due
principally to the clearance of contractor and pension arrears,
amounting to N105 billion and N86 billion, respectively. The cost of
servicing domestic public debt is estimated at N306.2 billion in 2008.
Based on our strong fiscal position, government intends to remain
active in the debt market.
EXTERNAL DEBTS
Since our successful exit from the Paris Club debts, the structure of
our external debts has changed significantly. Our total foreign debt
stock now stands at US$3 billion, down from about US$32 billion in
2005.
I am glad to add that we have successfully exited the London Club debt
stock. Nigeria is now one of the few countries outside the
Organisation for Economic Co-operation and Development (OECD) with a
debt to GDP ratio below 20%.
This manageable debt level continues to allow us to redirect
expenditure away from debt service payments to capital spending.
Our intention is to continue to service multilateral debts as and when
due, until maturity. Our analysis indicates that there will be no
financial benefit from undertaking any restructuring or otherwise
prepaying these debts. We therefore have earmarked the sum of N66
billion for servicing our external debts in 2008.
SPENDING BY MINISTRIES, DEPARTMENTS AND AGENCIES
We propose a total of N1.89 trillion for spending by Ministries,
Departments and Agencies. This represents a 0.1% increase relative to
2007 made up of –
• Payroll of N779.3 billion;
• Overheads of N267.6 billion
• Capital Expenditure of N634.2 billion
• Consolidated Revenue Fund Charges excluding Debt Charges of N212.5 billion
Payroll and Overheads, which together constitute Recurrent Non-Debt
Expenditure, account for 55.2% of total spending, while Capital
Expenditure accounts for 33%. Within recurrent expenditure, payroll
has increased minimally to N779.3 billion, following Government
reforms in that area. Overheads have been kept in check with a
proposal of N267.6 billion, a reduction from the 2007 level. The
relatively low utilization of the 2007 capital budget accounts for the
reduction to N634.2 billion in 2008.
I will now give highlights of some key projects.
Transportation
We propose capital expenditure of N94.36 billion for the
Transportation Sector. Specifically, we have set aside the sum of
N73.1billion for Highway Construction and Rehabilitation; N6.02
billion for Survey, Mapping and Geo-Information activities; N6 billion
for Water Transportation development, including the dredging of the
River Niger from Lokoja to Warri, (including the construction of
jetties); and N9 billion for the development of Air Transportation.
To augment government spending on the provision of roads we shall
invite private investments into the sector. We have already reached
agreements with interested private sector investors for the
construction of the second Niger Bridge at Onitsha/Asaba and a Bridge
across River Benue at Bagana on the basis of a public-private
partnership.
Agriculture and Water Resources
A total of N89.95 billion is proposed for the Agriculture and Water
Resources sector.
The sum of N 31.2 billion is proposed for the construction of dams and
irrigation projects nationwide. Other key projects and initiatives
include:
• N7.2 billion for the Gurara Water Transfer project, to supply water
to the FCT and its environs
• N3.4 billion for cooperative and community tractor service in 200
centers nationwide
• Procurement of tractors and implements supplied at subsidized rates
• N0.9 billion for Buyer of Last Resort Programmes
• N4 billion for Agricultural Credits and Subsidies, including the
Fertilizer Subsidy Programme
• N 0.3 billion for the Chinese South-South Cooperation Programme
Education
We propose an allocation of N210.45 billion for the education sector,
up 12% from the N188 billion allocated in 2007. The capital component
of the allocation is N47.8billion, targeted at human resource capacity
building, upgrading of facilities in our educational institutions and
reforms to improve the quality of, and access to education. This
excludes our intervention through the Universal Basic Education
Commission, through which we are providing additional resources of
N39.7 billion to the States and Local Governments to support basic
education.
These additional resources are to upgrade infrastructure and teaching
facilities in primary schools across the nation.
Health
For the Health Sector, we propose an allocation of N138.17 billion for
2008, a 12.57% increase over the 2007 allocation of N120.8 billion.
The capital component of this amount is N49.37 billion, out of which
funds have been provided for, among others, the following projects:
• Refurbishing and equipping all Federal Tertiary Health Institutions
• National AIDS/STI Control Programme, including the procurement and
distribution of ARVs and test kits
• Rollback Malaria Programme, including the procurement of new drugs
for malaria case management and insecticide treated nets
• National Programme on Immunisation for routine immunisation
• Capacity building and training for 5,000 health workers on
integrated management of childhood illnesses.
Energy
We have allocated N139.78 billion to the Energy sector. This
represents an increase of 15.6% over the 2007 allocation of N118
billion. The capital component of this is 114.4 billion, out of which
funds have been provided for the completion of 32 on-going Power
Transmission Projects and the rehabilitation of key power stations
nationwide.
Alternative funding will be sourced for ongoing work on the National
Integrated Power Project in the Niger Delta region with expected
output of 2,555MW.
Security
We intend to enhance the capacity and preparedness of our security
services. We have therefore proposed a total allocation of N444.60
billion for the military and the Police. We are providing our security
services with all requisite force enablers and multipliers, including
arms and ammunition, improved information and telecommunications
equipment and facilities, riot control equipment, training and
retraining, and sundry logistics support. We are also rehabilitating
the residential and office accommodation of the security services.
MDGs
Included in these allocations, as outlined earlier, are the debt
relief savings for 2008 totalling N110 billion. As earlier stated,
these savings will be used exclusively to support and scale up
spending on MDG-related initiatives and programmes. In this respect,
we shall increase investments in areas that performed well in the 2007
budget. Of the N110 billion debt relief savings, we propose to
allocate N59.3 billion to the States and FCT as Conditional Grants,
for targeted, result-oriented expenditures. This is a safety net
programme targeted at ensuring that the rural poor have access to
markets and credit, as MDGs are better attained through the States and
Local Governments. The role of the Federal Government is to ensure the
judicious application of these grants and to support the efforts of
the States and Local Governments that have demonstrated commitment to
reform, good governance and the socio-economic development of their
people.
The detailed budget contains a list of the priority projects earmarked
for completion this fiscal year in each sector.
Pensions
We are providing N99.7 billion for pensions under the Pay-As-You-Go
System for the 2008 fiscal year, to ensure that our pensioners are
paid as and when due.
Public Service Reforms
To ensure that our Public Service Reforms continue, we have set aside
the sum of N22.5billion in 2008 to support this programme. Our aim is
to continue to improve service delivery in the Public Service.
CONCLUSION
Mr. Senate President,
Mr. Speaker,
Distinguished Senators,
Honourable Members of the House of Representatives,
We have a historic opportunity to build a strong and resilient economy
which will result in tangible benefits for the generality of our
people. We do not under-estimate the challenge.
However, with your continuing support, I am confident that we can,
together, lay the solid foundation of a bright and prosperous future
for our nation.
We must have the courage to do all that is right, decent and
compassionate; all that needs to be done for our nation's restoration.
We must do this always with strict adherence to the rule of law and
due process, however inconvenient sometimes. We must not shy away from
the path of fiscal responsibility and prudence.
Before I end this address, it is apposite that I inform this august
Assembly that I have assented to the Fiscal Responsibility Bill after
due consultation with the State Governments whose support and
concurrence is critical to the successful nationwide implementation of
the provisions of the law. It is hoped that this will help to
institutionalise and formalise the observance of fiscal discipline.
I must restate our Administration' s appreciation of the thorough and
expeditious manner in which the National Assembly has consistently
considered matters brought before it by the Executive.
I am reassured by this very cooperative relationship, founded on
mutual respect and a mutual recognition of our shared responsibility
to rebuild our nation and reposition her for democratic good
governance, peace, security, sustained growth and development.
Mr. Senate President,
Mr. Speaker,
Distinguished Members of the National Assembly,
It is with utmost regard and respect that I lay before you the 2008
Budget of the Federal Government of Nigeria for your consideration. I
pray that God in his infinite grace and mercy will guide all of us to
provide selfless and sincere service to our people.
I thank you most sincerely for listening. May God bless the Federal
Republic of Nigeria.
--
Oyebisi Babatunde Oluseyi
Coordinator: Membership, Advocacy and Campaigns
Nigeria Network of NGOs
No 25 Ogunlana Drive, Surulere
Lagos
Tel: +234 802 836 7748, 703 968 6500
E: seyi@nnngo.org, oyebisius@gmail. com
U: www.nnngo.org
