February 16, 2012
Following the failure to remove the subsidy on petrol, the Federal Government has revised the 2012 budget proposal, of which it intends to spend N888.1 billion as subsidy on petrol and kerosene this year.
In the revised proposal, the government cut aggregate expenditure by N100.25 billion, to bring total expenditure for the year to N4.648 trillion, down from the N4.749 trillion in the budget proposal submitted last December by President Goodluck Jonathan.
Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, who briefed journalists in Abuja, Wednesday, said following the partial subsidy removal, which arose from a reduction in the price of petrol to N97 per litre from the indicative price of N141 per litre set by the Petroleum Products Pricing and Regulatory Agency (PPPRA) on January 1, the new price had implications on the 2012 budget.
The minister explained that the 2012 Fiscal Framework earlier submitted to the National Assembly had assumed 100 per cent subsidy removal with only N155 billion provided for carry-over of 2011 subsidy payments.
Giving a breakdown of the N888.1 billion built into the revised budget, the minister said that the subsidy on petrol and kerosene in 2012 is N656.30 billion, while N231.8 billion is a carryover from outstanding payments for 2011.
On how the government arrived at the estimated subsidy payments in 2012, the minister explained that after extensive consultations with the Nigerian National Petroleum Corporation (NNPC) and PPPRA, the amount required for 2012 was estimated using 2008 as the baseline year.
According to her, 2008 appeared to be the year subsidy payments and other associated factors were fairly stable. The Federal Government’s share of the projected subsidy is now N374.73 billion, while the balance will be made up from monthly allocations meant for states and local governments.
The total cumulative accrual from the partial removal of subsidy for the federal, states, and local governments now stands at N426 billion from which the Federal Government would get N180 billion as against N478 billion it would have saved had the subsidy of petrol been fully removed.
The minister, who also spoke on the Subsidy Reinvestment and Empowerment Programme (SURE-P), said since the accrual to the Federal Government now stands at N180 billion under a partial subsidy regime, the government would scale down projects under SURE-P.
She listed some of the priority projects/programmes, which will now be accommodated under the reduced accrual as social safety nets such as those for health care, mass transit programmes, vocational training, major road and rail projects, including the Abuja-Abaji road, Benin-Shagamu road, second Niger Bridge and Kano-Maiduguri road, among others.
Okonjo-Iweala stated that with the budget revision, the fiscal deficit now stands at N1.18 trillion, adding that although the deficit increased slightly from 2.77 per cent of GDP in the original budget proposal to 2.97 per cent of GDP under the revised budget, the extant sources of financing the deficit remained privatisation proceeds, signature bonuses and domestic borrowing.
The minister noted that following President Jonathan’s directive, and in line with his commitment to reduce the fiscal deficit and domestic borrowing, several steps were taken to bring the deficit in the 2012 budget to a more manageable level.
On the revenue side, the minister said the measures included squeezing further resources from revenue generating agencies, adding that internally generated revenue would go up by N53.3 billion from N393.46 billion to N446.78 billion as a result of the ongoing engagement with these agencies.
She also disclosed that the Pension Task Force made a recovery of about N151 billion following the use of the biometric verification system in plugging leakages occasioned by the menace of ghost workers in the public sector.
The minister disclosed that N74 billion of the amount had already been reflected in the revised 2012 budget.
Okonjo-Iweala said the cut in aggregate expenditure was also achieved through reductions in statutory transfers by N25.34 billion; the service wide vote - N24.39 billion from N337.08 billion to N312.69 billion; and the overhead vote which was reduced by N17.75 billion.
Capital expenditure was also reduced by N35.53 billion from N1.319 trillion to N1.284 trillion, as a result of the removal of administrative capital items such as the procurement of fridges, computers, fans and vehicles, among others.
She said these cuts and others resulted in savings of about N100.25 billion, with aggregate expenditure coming down from N4.749 trillion in the previous budget proposal to N4.649 trillion in the revised budget.
The minister, who also spoke on the Federal Government's planned external borrowing, said external debt currently stands at $5.6 billion while domestic debt was put at N5.6 trillion, adding that though domestic debt is worrisome, the nation's debt to GDP ratio is still sustainable.