Yar’Adua presents N2.87tn budget

President Umaru Yar’Adua of Nigeria on Tuesday proposed a N2.87tn for the fiscal year 2009 to a joint session of the National Assembly, with a record deficit of N1.09tn largely on account of the dwindling oil revenues.

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President Umaru Yar’Adua

The 2009 budget, which was presented after two postponements, is 4.45 per cent higher that the initial 2008 appropriation of N2.74tn and 8.42 per cent above the amended 2008 budget of N2.64tn.


The President said the focus would be on the execution of key projects in areas such as power, transportation, land reform and food security, works and the Niger Delta.

Highlights show that N140.69bn was allocated for statutory transfers, N283.65bn for debt servicing, while N1.65tn was for recurrent expenditure.


According to Yar’Adua, the balance of N796.74bn was “for contribution to the development fund for capital expenditure for the year ending on the 31st day of December 2009.”


He noted that the budget was predicated on $45 per barrel of crude oil, saying that it was safer to “adopt prudent outlook that would not invest misplaced confidence in the expectation of unrealistically high prices.”

The President noted that the budget was also based on a daily oil production of 2.292 million barrels per day, Joint Venture cash calls of $5bn, Gross Domestic Product growth rate of 8.9 per cent and inflation rate of 8.2 per cent.


Yar’Adua said the fiscal balance in the proposed budget was a deficit of N1.09tn or 3.95 per cent of GDP.

He explained that the deficit was to be financed by outstanding signature bonuses, proceeds of ongoing privatisation, the recall of $200m from the Nigerian Trust Fund of the African Development Bank, any unspent balances from the 2008 budget, domestic borrowing and a naira-denominated international bond issue of $500m.

Raising concerns over the volatility of the oil prices, which had plummeted from a record $147/barrel in July this year to $50/barrel, the president warned that there were no guarantees that the prices would not decline further despite the Organisation of Petroleum Exporting Countries’ mitigating efforts.


On the performance of the 2008 budget, Yar’Adua admitted that the implementation had been poor.


He noted, “While releases of budgetary allocations to the MDAs have been on course, with 100 per cent of capital vote having been released by the middle of November, actual utilisation has not kept pace with the releases due to a number of factors which we are closely looking into.

“On the revenue side, although international oil prices reached record high levels in the first half of 2008, overall revenue performance has been below expectation, due to domestic oil production disruptions and declining international energy prices, as the global economy responds to the transnational financial crisis.”


He said the 2009 budget provided 91 per cent of the capital vote to five key priority sectors, namely: N361.2bn for critical infrastructure including capital allocations of N88.5bn for power; N15.4bn for aviation; N26.5bn for petroleum resources; N129.3bn for works; N35.2bn for transport and N48.7bn (out of a capital vote of N64.45bn) for critical infrastructure within the Federal Capital Territory.


Also part of the 91 per cent is N131.9bn for Human Capital Development, including N39.6bn for Health, N33.6bn for Education, N32.6bn for the Millennium Development Goals Conditional Grants, N19.7bn for MDGs Quick Wins Projects and N6.3bn for MDGs Capacity Building.

A sum of N91.8bn was allocated for Land Reform and Food Security focusing on Agriculture and Water Resources.

The budgetary provision also includes N67bn for security; and N77.12bn for the Niger Delta, comprising N27.12bn for the Niger Detla Development Commission and N50bn on the newly created Ministry of the Niger Delta including provisions for enhancing critical infrastructure, environmental protection, youth development and grassroot empowerment.

Yar’Adua said the aggregate expenditure of N2.87tn represented a 4.45 per cent increase over the N2.748tn initially appropriated in 2008 and an 8.42 per cent increase over the 2008 amended budget level of expenditure of N2.647 tn.

“More crucially, the capital vote of N796.7bn is significantly higher than actual capital expenditure of N491bn in 2007,” he said.

Enumerating the key projects for funding through the 2009 budget, Yar’Adua said N82.75bn would be spent on the power sector in the 2009 fiscal year.

The breakdown of the projects under power sector include N3.5bn for the Mambilla Hydro-Electric Power Generation Project; N21.5bn for other generation projects, including N6.5bn for the completion of the Niger Delta Power Holding Company’s NIPP projects; N32bn for transmission projects and N19.25bn for distribution projects.

In the same vein, N29.7bn was earmarked for petroleum resources development; N71.86bn for roads construction; N29.1bn for rail modernisation and dredging of lower River Niger.

Yar’Adua said his administration would only focus on the execution of highly-prioritised projects, and would henceforth face the completion of ongoing projects across the country.

”We are moving from a system where we spread our limited resources thinly across many projects that take several years to complete, to one where we concentrate and focus on fewer, highly prioritised projects, which we can bring to quick completion,” he said.

On ensuring the performance of the 2009 budget, he charged ministries, departments and agencies to ensure that they meet the targets.

He said, “In line with this administration’s emphasis on ensuring service delivery and insisting on the rule of law, transparency and accountability, the MDAs will be expected to implement their projects and programmes with the deepest sense of responsibility and with emphasis on due process in the implementation of this budget.

“Emphasis would be on increasing value for money, setting the highest standards of accountability and probity in the discharge of public service, and expecting these standards to be respected by all.

“As we move towards a more dynamic, results-oriented and performance-based budgeting process, the MDAs will be held to their commitments to delivering measurable targets and outputs.”

He said the decline in international oil prices had compelled his government to make some exceptional adjustments in spending, as well as introduce certain policies to curb inefficient spending in MDAs.

He further stated that the government was considering getting the consent of the National Assembly to take the extraordinary step of exceeding, in the short term, the deficit target under the Fiscal Responsibility Act 2007.

“However, we remain committed to reverting to a more conservative and sustainable fiscal deficit of three per cent, or lower, in the medium term, consistent with international best practice.

“Monetary policy in the medium term will be focused on continuing efforts at managing inflation within a single-digit and keeping interest rates at appropriate levels using the present market-determined monetary management system.

“We are committed to maintaining an appropriate exchange rate, and taking necessary steps to manage the volume of money supply through the Central Bank’s open market operations,” he said.

Yar’Adua noted that in order to strengthen and increase efficiency in public expenditure management, recurrent expenditure by way of overheads had been frozen under the 2009 budget.

According to him, investments in non-priority capital outlays such as the acquisition of new vehicles, and the construction and furnishing of new headquarters for MDAs, had also been suspended.

He said, “Excessive expenditure on international travels and training has been curbed by 50 per cent with expenditure on local travels slashed by 25 per cent. Recurrent expenditure on personnel costs will also be controlled with the full deployment of IT, by way of the Integrated Personnel and Payroll Information System, to all MDAs.

“Payments for goods and services will be discharged through the e-payment system to increase efficiency and reduce avenues for corruption.”

On the development of the Niger Delta, Yar’Adua said the new ministry would invest N28.4bn on the East-West Road to improve accessibility to the region, N92.8m on projects to improve and restore the environment and N18.6bn on other projects, particularly the establishment of two sophisticated skills acquisition centres to help the youths from the region to acquire practical skills relevant to the energy and petrochemicals industry.