‘This budget is for the ordinary Nigerian’

11.08.2007

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. 

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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 Strategy 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. 

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 N339 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.