- Category: GENERAL
- Published on Wednesday, 08 August 2012 22:45
- Written by Elombah.com
The Federal Executive Council Wednesday approved a draft budget of N4.929 trillion for the 2013 fiscal year. Nigeria's cabinet also agreed to increase spending by five percent but reduce the fiscal deficit in next year's budget, which will be sent to National Assembly for approval next month. The Coordinating Minister for the
Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, stated this while briefing State House Correspondents on the outcome of the weekly FEC meeting, presided over by President Goodluck Jonathan
Cabinet agreed total 2013 budget spending of 4.929 trillion naira ($30.80 billion), up from 4.697 trillion this year, Ngozi Okonjo-Iweala told reporters at the presidential villa.
The fiscal deficit and domestic borrowing would come down to 2.17 percent and 727.19 billion naira next year respectively, from 2.85 percent and 744.44 billion this year, she said.
Iwealla also said the draft budget was based on the production of 2.53 million barrels of oil per day with a benchmark of $75 per barrel as against 2.48 million per day at $72 per barrel in 2012, the News Agency of Nigeria reports.
She said the 2013 budget framework tagged “Physical Consolidation with Growth” had projected a revenue profile of N3.891 trillion.
The minister said that government was working towards a new approach in managing domestic debt.
“Fiscal deficit is coming down and we are projecting fiscal deficit; we had fiscal deficit of 2.85 per cent of GDP in 2012 and we are expecting this to come down to 2.17 per cent of GDP, which is well below the three per cent that is prescribed in law in the Fiscal Responsibility Act.
“We have been managing down the domestic borrowing; the yearly domestic borrowing that we do; we’ve been bringing it down from N852 billion in 2011 to N744 billion in 2012 budget and we are projecting N727 billion for this fiscal year 2013. So, we are gradually bringing this down.”
Okonjo-Iweala noted that the projection of the government was to ensure that by 2015, yearly borrowing would reduce to N500 billion.
She stressed that though the figure would not represent the entire debt stock, it would mean that the stock of debt would grow at a much slower pace.
She added that government would soon introduce a ‘Sink-in Fund’ of N25 billion yearly to service domestic debt.
“We are going to start a sink-in fund with Mr. President’s approval; we will be devoting the sum of N25 billion to a sink-in fund because we must be putting aside money to retire the debt that we have been building up – our domestic debt.
“And we will also put aside N75 billion to help retire a bond that is coming up in February next year,” she said.
In previous years, the national assembly and executive arm of government have disagreed over the budget and the figures put forward by cabinet are subject to change. In recent years, parliament has succeeded in boosting total spending.
"The focus of the federal government's proposals is that the budget should make a practical impact on the areas that matter most to the Nigerian people which are: jobs, power supply, roads, rail other infrastructure and agriculture," Ngozi Okonjo-Iweala said.
"The 2013 budget proposal is anchored on the key goal of achieving fiscal consolidation with growth and job creation."
Next year's budget is based on oil production, which makes up 80 percent of government revenue, of 2.5 million barrels per day, up from 2.4 million bpd in the 2012 budget and at the top of analysts' projections, especially given the spike in crude oil theft this year.
The FEC is proposing a benchmark oil price of $75 a barrel, up from $72 in this year's budget. Anything Nigeria earns from oil exports over that benchmark price is supposed to be saved in its excess crude account, although this has been systematically raided by a succession of administrations when funds run short.
The oil output assumptions and benchmark price means Nigeria is expecting revenue of 3.891 trillion naira next year.
"The rise in spending is not unexpected. But a $75 per barrel benchmark oil price together with a hugely ambitious output assumption is worrying," Razia Khan, Head of Africa Research at Standard Chartered said.
Oil theft has surged in the restive onshore Niger Delta region this year with foreign oil major Shell saying around 150,000 bpd is stolen and much more deferred due to the damage caused to infrastructure by the thieves.
Nigeria's oil exports, which are popular with the U.S., India and Europe, were expected to hit an 11-month low in September.
Okonjo-Iweala said capital expenditure would rise to 31.34 percent in the 2013 budget, up from 28.5 percent this year as she looks to reduce the amount government spends on itself.
One of the major problems with Nigerian spending plans in the past has been they are passed months late and often half the proposed capital projects aren't implemented due to corruption and mismanagement. ($1 = 160.0500 Nigerian nairas)