- Title: NIGERIA: Nigeria proposes 2012 budget with higher spending
- Date: 14th December 2011
- Summary: VARIOUS OF NEWSPAPER HEADLINES READING: "PRESIDENT JONATHAN MUM ON OIL SUBSIDY" AND "2012 BUDGET: FG FINALLY REMOVES FUEL SUBSIDY"
- Embargoed: 29th December 2011 12:00
- Location: Nigeria, Nigeria
- Country: Nigeria
- Topics: Economy,Politics
- Reuters ID: LVA59UVIIPINIXTZ9UI19FLS8DDV
- Story Text: Nigeria's President, Goodluck Jonathan presents the 2011/2012 budget to the national assembly, with increased spending but a lower fiscal deficit.
Nigeria's president, Goodluck Jonathan presented a 2012 budget plan to the national assembly on Tuesday (December 14) including increased spending but a lower deficit, saying it marked the start of prudent fiscal planning during uncertain times.
Analysts voiced concern that Africa's largest oil exporter will be depending for its revenue on no disruptions to its crude output, with global economic conditions another key risk factor.
President Goodluck Jonathan said spending would rise to 4.749 trillion naira ($29.29 billion) from 4.48 trillion naira in 2011 but spending to keep the government running would fall to 72 percent of the budget from 74.4 percent as the government spends more on capital projects.
Nigeria is often criticised for spending most of its money on running the administration rather than on badly needed infrastructure projects to create jobs and boost growth in the continent's second-largest economy.
"My position is pressing forward with key structural reforms. We are implementing the privatisation of the power sector based on the power road map which I unveiled last year. We believe that the power sector can benefit from the liberalisation and privatisation in attracting investors in the same manner as the telecommunication sector has done. In the same vein, government will come up with policies to encourage investment in the downstream sector through liberalisation so as to create jobs for our people." Jonathan dressed in his trademark kaftan and fedora hat, told lawmakers.
The fiscal deficit will be cut to 2.77 percent of gross domestic product next year from 2.96 percent in the 2011 budget, Jonathan said.
He told lawmakers the 2012 spending plan was based on a benchmark oil price of $70 a barrel and production of 2.48 million barrels per day.
That output projection is higher than expected, however, and leaves little room for potential production outages, which have been common in the past.
The budget proposal also assumed an exchange rate of 155 naira to the U.S. dollar compared with the current level of above 160, and average inflation of 9.5 percent compared with current double-digit levels.
"The gross federally collectable revenue is projected at 9.406 trillion of which the total revenue available for the federal government budget is forecast at 3.644 trillion representing an increase of 9 percent over the estimate for 2011," he said GDP growth was forecast at 7.2 percent in the budget proposal.
Africa's most populous nation is supposed to put revenue above the benchmark oil price into a savings account to cushion it from future oil shocks. But analysts have raised concerns about how Nigeria would cope with a dip in oil prices, given the country's inability to save during a period of booming prices.
The Excess Crude Account (ECA) has been drained in recent years, despite high oil prices. The government removed $2 billion from the ECA for "various projects" last month and it now contains an estimated $3 billion.
Jonathan appointed former World Bank managing director Ngozi Okonjo-Iweala as finance minister following his election victory and she pledged to clean-up public finances, launch a sovereign wealth fund and end costly petrol import subsidies.
"He has initiated policies for job creation in this economy and I think you should pay attention to that. We are expecting a very strong implementation of our agricultural budget. We are very excited about the prospects for launching housing. We have put supportive policies for power and I think that is what Nigerians want to hear," said Nigeria's finance minister, Okonjo-Iweala.
Okonjo-Iweala said subsidies would cost $7 billion this year, a quarter of total spending, but Jonathan made no mention of subsidy plans.
The plan is controversial because most Nigerians believe cheap fuel is the only benefit they get from living in an oil-rich state.
Economists see removing the handout as a necessary step because subsidies fuel corruption.
- Copyright Holder: REUTERS
- Copyright Notice: (c) Copyright Thomson Reuters 2011. Open For Restrictions - http://about.reuters.com/fulllegal.asp
- Usage Terms/Restrictions: Video restrictions: parts of this video may require additional clearances. Please see ‘Business Notes’ for more information.