By UDEME CLEMENT
The recent approval of 2013 fiscal framework with projected revenue of N3.891 trillion and N4.929trillion for expenditure by the Federal Government, while 2012 Budget is still in implementation stage and has been contested by House of Representatives as well as various interest groups has sparked controversy in the economy.
While some financial analysts said government should handle economic activities systematically to enhance development, others are of the opinion that government ought to have evaluated the performance of 2012 budget to ascertain the impact on the economy before jumping into 2013 fiscal framework.
President Goodluck Jonathan at a recent Federal Executive Council (FEC) meeting said that the fiscal framework must be submitted to the National Assembly by September.
Giving insight into what prompted the immediate approval of the financial document, the co-ordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, said, “the work for budget for 2013 must start early this year, that is why we have the fiscal strategy paper this early. Once we finish it, we will transmit the document to the National Assembly.
“We are working on the basis of crude oil production projection of 2.53 million barrels a day, against 2.48 million barrels a day in 2012, and benchmark price of $75 a barrel against $72 a barrel in 2012. Fiscal deficit will be reduced to 2.17 per cent in 2013, from 2.85 per cent of the Gross Domestic Product (GDP), which is below the three per cent as prescribed by the fiscal responsibility bill. Also, the 2013 budget will include a new approach to managing debt in the economy.”
She added, “We have been managing the yearly domestic borrowing from N852bn in 2011 to N744bn in 2012 and we are projecting N727bn in 2013. Therefore by 2015, we want to bring the yearly borrowing down to N500billion, not the entire debt stock.
Most importantly, with the approval of the President, we want to start a sinking fund and will devote about N25billion into the fund in order to start putting money aside to retire the debt also built up. Also, N75billion will be set aside to retire a bond that will be due in February 2013.
Finance Minister, Ngozi-Okonjo-Iweala
“In 2013 budget, recurrent expenditure is reduced from 71.47 per cent of the total budget in 2012 down to 68.66 per cent. So we are continuing the trend by increasing capital expenditure from 28.53 per cent in 2012 to 31.34 per cent in 2013.
“Government is intensifying efforts to improve the implementation of 2012 budget, which was already at 41.3 percent as at 20th June and 2013 budget proposal will be anchored on the key goal of 2013-2015 Medium Term Framework designed to create jobs,” she maintained.
The Minister stressed that by 2015, yearly borrowing must be brought down to N500billion and not the entire debt stock, when the recent statistics released by the Debt Management Office (DMO) stated that Nigeria’s total debt stock as at March 2012 was N6.8 trillion, which translates to $44 billion.
Out of the total amount, N5.96 trillion ($38.3 billion) is said to be domestic debt and N919 billion ($5.9 billion) is external debt, only seven years after the much-talked about debt cancellation.
In 2005 the national debt was estimated at $36 billion. Worried by the huge debt stock, the Nigerian government made effort to pay the Paris club $12 billion to secure a debt relief of $18 billion. Interestingly, the debt relief was obtained through the initiative of the then Minister of Finance, Dr. Okonjo-Iweala, who is currently the Minister of Finance and the co-ordinating minister of the economy.
Meanwhile allocation for domestic debt service alone in 2012 appropriation bill was N559.6 billion, which is higher than allocation for power that is the most pressing need in the economy. This explains why most financial experts are advising government to run the economy coherently to ensure sustainable development.
The fiscal framework will ensure early passage of budget: Mr. Richard Tinubu, Management and Financial Consultant to Osun State government.
“The fiscal framework will ensure early passage of budget for investments to thrive. “Many people are complaining about the aspect of debt, forgetting that government needs money to finance capital projects. This implies that government will continue to borrow to execute capital projects if the economy must develop to attract foreign investments.
A financial analyst and Managing Director, Lambeth Trust & Investment Company Limited, Mr David Adonri said, “The approval of the fiscal framework is a welcome development. It means the ministry of finance is trying to conclude work on time on the budget. If the National Assembly approves the budget on time then it will fast track economic growth because by January the appropriation bill would have been ready.
“Another issue is that the budget components may not be friendly with the financial market because of the high level of debt. When over 26 per cent of a budget for the entire economic year is funded by debt, the tendency is that it may not be friendly with the economy”.
An operator of Small and Medium Enterprise (SME), Mr. Silas Igwe in a chat with Sunday Business, on the 2013 fiscal framework said, “We noted that the Finance Minister explained that the recurrent expenditure will decline from 71.47 per cent in 2012 to 68.66 per cent in 2013 and continue to decline in the medium-term.
According to her, capital expenditure is expected to rise from 28.53 per cent in 2012 to 31.34 per cent in 2013 and will continue the same way in the medium-term. These are laudable ideas. But beyond the figures we have on paper, we want to see positive impact on the economy in terms of boosting the growth of SMEs across the country.
Government should take proactive steps to develop the sub-sector of SMEs in order to achieve relative full employment in the economy. Private sector partnership must be encouraged, because government alone does not have the capacity to provide jobs for a population of over 160million.
