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2012 Budget: FG Finally Removes Fuel Subsidy

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 Behind Those Figures


“Modest” increase in projected expenditure, although still considered high as Nigeria seeks to reduce deficit. Expenditure is always on the increase, but the difference this time is significantly lower.


Fiscal deficit-to-GDP, a slight improvement on this year’s 2.96% which is considered to be some good news in any case.


Projected percentage point reduction in recurrent expenditure (72 per cent for next year). Some good news, since there has been public outcry on overhead costs.


Estimated crude oil production, considered a bit too high but based probably on peace in the Niger Delta. Any disruption, which is not unlikely, will affect revenue.


Projected economic growth, one of the highest in the world. The biggest news, though, is that it will be driven by non-oil sector.


FG’s projected expenditure in 2012. Conversely, if subsidy were to be continued, the figure would move close to N6 trillion, given that oil prices could hit $110 per barrel next year.

After decades of debates, protests and controversies, the fuel subsidy – as we used to know it – is gone. The 2012 budget presented to the National Assembly Tuesday  by President Goodluck Jonathan does not make any provision for subsidy.

Unlike in the 2011 budget in which N240 billion was appropriated but over N1.2 trillion has been spent so far, there is zero provision in next year’s budget – and since no money can be spent without appropriation, subsidy is as good as dead.

Although this is likely to lead to strikes and public demonstrations, the National Economic Council (NEC), chaired by the vice-president and made up of the state governors and governor of the Central Bank of Nigeria (CBN), had said on Monday Nigeria was facing an economic catastrophe similar to that of Greece if the subsidy remained.

The highlights of the 2012 Appropriation Bill include:
• an aggregate expenditure of N4.749 trillion, which represents an increase of six per cent over the N4.484 trillion appropriated for 2011;
• crude oil production of 2.48 million barrels per day (mbpd) up from 2.3mbpd for 2011;

oil price benchmark of $70 per barrel and an exchange rate of N155 to a dollar; •
projected GDP growth rate of 7.2 per cent and an inflation rate of 9.5 per cent. •
The gross federally collectible revenue is projected at N9.406 trillion, of which the total revenue available for the Federal Government’s budget is N3.644 trillion, representing an increase of nine per cent over the estimate for 2011.

The sum of N1.32 trillion has been earmarked as capital expenditure, accounting for about 28 per cent of total expenditure compared to 26 per cent in 2011.

The capital allocation also represents a 15-per-cent increase over the amount approved in the 2011 budget but, according to Jonathan, the emphasis this time is on the completion of critical infrastructure projects.

A provision of N2.472 trillion has been made for recurrent (non-debt) expenditure which is 72 per cent of the budget, a reduction from the 74.4 per cent position in the 2011 budget.

It also includes N398 billion for Statutory Transfers and N560 billion for Debt Service underscoring the real need to address the rising domestic debt profile.

Jonathan disclosed that the fiscal deficit in the budget proposal has been projected at about 2.77 per cent of GDP as opposed to the 2.96 per cent in 2011.

This, he said, was within the threshold stipulated in the Fiscal Responsibility Act, 2007 and a clear indication of government’s commitment to fiscal prudence.

He said his administration was conscious of the need to control the cost of governance and would soon commence the process of streamlining agencies with overlapping mandates as a way of realigning public expenditure.

According to him, the preliminary report of the task force set up for this purpose had been submitted and government would implement relevant recommendations in the report as well as pursue the biometric verification of workers and pensioners in order to cut cost.

Allocations to some critical sectors of the economy are as follows: Security - N921.91 billion; Power (including Bulk Trader, Nelmco, and Multi-Year Tariff Order (MYTO) - N161.42 billion; Works - N180.8 billion; Education (excluding Universal Basic Education Commission, Petroleum Technology Development Trust Fund (PTDF) and Education Trust Fund) - N400.15 billion; Health - N282.77 billion; and Agriculture and Rural Development - N78.98 billion.

Others are: Water Resources - N39 billion; Petroleum Resources – N59.66 billion; Aviation - N49.23 billion; Transport - N54.83 billion; Lands & Housing - N26.49 billion; Science & Technology - N30.84 billion; Niger Delta - N59.72 billion; Federal Capital Territory Administration (FCTA) - N45.57 billion and Communications Technology - N18.31 billion.



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Updated 7 Years ago

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