FEC okays N4.9tn for 2013 budget

The Federal Executive Council on Wednesday approved the Medium Term Fiscal Framework of the 2013 Budget as presented by the Coordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala.

Okonjo-Iweala, who spoke with State House correspondents at the end of the meeting in Abuja, said the 2013 Budget was based on the projected production of 2.53 million barrels of crude oil per day.

According to her, the projected revenue for 2013 is put at N3.891tn while expenditure is N4.929tn.

She said government had reduced recurrent expenditure from 71.47 per cent in 2012 to 68.66 per cent in 2013.

She added that capital expenditure was increased from 28.53 per cent to 31.34 per cent in 2013.

Okonjo-Iweala gave the benchmark price of crude oil as $75 per barrel.

She said the budget christened “Fiscal consolidation with growth” will see fiscal deficit coming down to about 2.17 per cent of Gross Domestic Product, which is well below the three per cent recommended in fiscal responsibility.

Under the budget, Okonjo-Iweala said Federal Government would adopt a new approach to debt management.

She added that the government was planning to start a sinking fund that would be devoted to retiring debts and bonds.

She explained that while about N25bn would be set aside annually from this year to retire debt; N75bn would be set aside from next year to retire bonds.

She said, “The focus of the Federal Government’s proposals on Budget 2013 as reflected in the Medium Term Expenditure Framework and the Fiscal Strategy Paper is that the budget should make practical impact on the areas that matter most to the Nigerian people – job creation, power supply, roads, rail, other infrastructure and, of course, agriculture.

“To help achieve this central objective, a key proposal of the Fiscal Strategy Paper is the continuation of the downward trend in recurrent expenditure and upward trend in capital expenditure.”

The minister also said, “Specifically, 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. Within the same period, capital expenditure is expected to rise from 28.53 per cent in 2012 to 31.34 per cent in 2013 and will continue in like manner in the medium-term.

“In the same vein, the government is putting in place, for the first time, a strong strategy for managing domestic debt. The first part of this strategy is to ensure a decline in fiscal deficit and domestic borrowing from 2.85 per cent and N744.44bn in 2012 to 2.17 per cent and N727.19bn in 2013 respectively with further decline up to 2015.

“The second part is the creation of a sinking fund of N25bn yearly to accumulate money for paying off bonds.”

Okonjo-Iweala said the focus would be on improving aggregate revenue receipts, optimising expenditure and keeping the fiscal deficit at a reasonable level.

She noted that the proposals for the 2013 budget were based on a rigorous review of the performance of the global economy with regard to negative economic developments around the world, which had the potential to negatively impact the country’s economy.

Based on the foundation of prudence, she added, the proposals represented a robust response to the developments anchored on a strong macroeconomic framework.

The minister said, “The 2013-2015 Fiscal Strategy Paper and Medium Term Expenditure Framework are statutory documents, which articulate government’s fiscal plan and policy objectives over the period and are updated annually. The MTEF includes the Medium-Term Revenue and Expenditure Frameworks, both of which outline principal components of government’s public expenditure management plan.

“The aim is to ensure that planned spending is set at prudent and sustainable levels and is consistent with government’s overall medium-term fiscal objectives.”

The minister said the country’s resources would be managed prudently and transparently while ensuring that priority was given to the key growth sectors of the economy and national security.

An authority in world finance, who is the regional head of Africa Global Research, Standard Chartered Bank, London, Razia Khan, yesterday took a swipe at the 2013 budget, saying it is unrealistic. Khan also advises the executive committee on matters relating to Africa, and provides in-depth analysis of African economies to the bank's clients. She spoke in an exclusive interview with LEADERSHIP yesterday where she raised fears over the federal government's ability to implement the proposed N4.929 budget for year 2013, given the developments in the oil sector.

Khan, while commenting on the proposed budget, said the rise in spending was not unexpected.

She however said that a $75/pbl benchmark oil price together with a hugely ambitious output assumption of 2.5 million barrels per day (bpd) was worrying.

"It's much more the output assumption that may prove unrealistic - sure, Nigeria can get there when it is producing at an all-time high," said Khan.

She however explained that, in more normal times, actual oil output is likely to lag behind this.

But she expressed faith in the share of capital expenditure in total spending, saying the increase is pretty significant. That is, from 28.5 per cent of total budget to 31.34 per cent.

"Of course, given recent politics, implementation of the capital expenditure budget will remain in focus - but, in all, this is pretty good news," she said.

Her only concern is the oil output assumption, which could easily be undershot, necessitating more borrowing.

The federal government hinted yesterday it would spend the sum of N4.929 trillion under the 2013 budget, just as it projected a total revenue of N3.89 trillion.

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