The President Gives His Word

Also, under the new procurement approval system, the limit for the tenders boards of parastatals has been raised from N20m to less than N50m for goods and less than N250m for works, while the expenditure approval limit for permanent secretaries has been raised from less than N1m to less than N5m for goods and less than N10m for works. Directors-General and chief executive officers have also been permitted to give direct approvals for expenditures less than N2.5m for goods and less than N5m for works, up from their former limit of N700,000.

The Federal Executive Council, FEC, will approve procurement of goods valued at N100m and above, and works valued at N1b and above. And because of the higher nature of expenditure in the petroleum sector, President Yar’Adua also approved special financial limits for expenditures related to the Nigerian National Petroleum Corporation, NNPC. Thus, parastatals’ tenders boards in the oil sector will have approval limit of $2m and above but less than $4m; Group Headquarters Tenders Board, $4m and above but less than $10m; NNPC Tenders Board, $10m and above but less than $20m FEC, $20m and above.

“In approving the review, President Yar’Adua took note of the depreciation of the naira since the former thresholds were set and the inflationary trends in the country which have resulted in a corresponding increase in the cost of project execution. The review will help to achieve greater decentralisation in contract approvals and ensure greater efficiency in service delivery,” noted Adeniyi. The Federal Government had, also at the end of the FEC meeting of 28 January 2009 presided over by Vice President Goodluck Jonathan, directed ministers to draw up plans for the implementation of the budgets allocated to their various ministries.

Muhtar also promised that a monitoring mechanism to systematically track and report on the actual outputs and outcomes achieved by MDAs has been implemented. It is also envisaged that quarterly budget monitoring and evaluation reports will be published in line with the provisions of the Fiscal Responsibility Act 2007. Also, the focus on specific deliverables as enunciated in the breakdown of the 2009 budget by the Minister is expected to further facilitate the monitoring of its implementation.

As explained by the Finance Minister, specific deliverables in terms of public goods and services the MDAs have undertaken to provide to Nigerians include delivering 1.2 billion standard cubic feet, scf, of gas to the domestic market to ensure the attainment of the target of generation of 6,000 megawatts of power by the end of 2009, completion of the construction and rehabilitation of 3,293km of roads, maintenance of over 10,000km of federal roads every year for the next three years and completing modernisation of three teaching hospitals in Awka, Calabar and Ife and seven specialist hospitals in Kaduna, Lagos, Kano, Calabar, Enugu, Maiduguri and Abeokuta.

In the area of security, the Police, according to the Minister, is targeting a 40 per cent reduction in crime in seven cities nationwide, namely Abuja, Lagos, Kano, Ibadan, Port Harcourt, Maiduguri and Onitsha while in the area of food security, the focus of the budget will be on increasing land under cultivation by five per cent and irrigating 12,000 hectares of arable land to increase crop yields by between 50 per cent and 250 per cent. The contribution of agriculture to the country’s Gross Domestic Product is also expected to increase. Projects targeted for completion in the budget include headquarters of the Ministry of Foreign Affairs, the Shehu Shagari Complex and the Federal Secretariat Building Phase II, all in the Federal Capital Territory.

In all, 93 per cent of the capital budget is devoted to tackling critical areas. Specific allocations include N94.6b for the power sector, N29.4b for Aviation, N26.8b for Petroleum Resources, N208.6b for Works, N38.6b for Transport and N66.7b for infrastructural projects within the Federal Capital Territory, N50.8b for Health, N40b for Education, N32.6b for Millennium Development Goals, MDGs, and another conditional grant of N37.2b for MDG’s Quick Wins Projects; N138.9b for Land Reform and Food Security with focus on Agriculture and Water Resources; N99.3b for the Niger Delta, comprising N51.3b for various allocations for the Niger Delta Development Commission, NDDC, and N48b to the newly created Ministry of the Niger Delta.

The Federal Government has admitted that implementing the budget will not be a piece of cake. For one, while the projected total revenue in the appropriation bill passed by National Assembly in February 2009 is N2.2652tr, the aggregate expenditure in the budget is N3.1018tr. This includes N1.0223tr budgeted for capital expenditure and N1.682tr for recurrent expenditure; N168.62b for statutory transfers and N283.65b for debt service. The focus on infrastructure is expected to help enhance the growth of the real sector of the economy.

President Yar’Adua had, in December 2008, presented a total budget proposal of N2.87tr with a deficit of N1.09tr or 3.95 per cent of the GDP to the National Assembly. The deficit in the budget was later reduced to N654b or 2.36 per cent of the GDP in consultation with the National Assembly. However, the National Assembly eventually passed the N3.1018tr budget with a deficit of N836.6b or 3.02 per cent of the GDP. This is based on a projected crude oil production of 2.09 million barrels per day and $45 per barrel price benchmark. But in reality, Nigeria’s crude oil production has averaged 1.6mbpd principally as a result of militant activities which have resulted in significant shut-down of production by some oil companies.

Until last week when it rose above $50 per barrel, the price of crude oil in the international market had averaged $35 per barrel in the past few months. Government has also decided to temporarily suspend action on the $500m bond it had initially intended to list on the international market as a result of the global economic crisis. Yar’Adua had thus described the budget as passed by the National Assembly as unrealistic. “As passed, the 2009 budget projects higher oil revenues than in the original proposal. However, I must express some reservation regarding these higher forecasts given the current realities of declining international oil prices and production constraints. Due to militant activities in the Niger Delta, our production has sometimes declined to as low as 1.6mbpd from a projection of 2.209mbpd. Should this low production turn out to be our average for the year, and the average price falls to $40/barrel from the original budget projection of $45/barrel, our fiscal deficit would increase to N1.35 trillion or 5.24 per cent of GDP, which is well above the 3 per cent allowable limit under the Fiscal Responsibility Act.”

The President also noted that financing the deficit will be one of the key challenges of implementing the 2009 budget: “We are reviewing the timing of the $500m naira-denominated international bond issue. Similarly, care needs to be taken with regards to public borrowing from the domestic markets to avoid the effect of crowding out credit to the private sector and stifling economic growth. These are issues that the Legislature and the Executive will closely monitor, going forward.”

Muhtar agreed with the President: “The 2009 budget was premised on a benchmark oil price of $45 per barrel and a daily oil production of 2.292mbpd. The actual oil production recorded so far in 2009 currently averages about 1.6mbd. Oil prices, on the other hand, have hovered around US$40 since the beginning of the year. This indicates that the key assumptions underpinning the budget may not materialise.” But the Finance Minister was quick to add that the government will find its way out of the deficit challenge which he said was not unique to Nigeria. Government plans to finance the deficit by a combination of sources which include outstanding signature bonuses, proceeds from privatisation and withdrawal of some accumulated reserves that the government has with the African Development Bank’s Nigeria Trust. It will also pay more attention to its revenue generating agencies like the Customs and the Federal Inland Revenue Services to enhance their efficiency.