This is the Nigeria's 2012 Budget speech delivered by His Excellency, Dr. Goodluck Ebele Jonathan, GCFR and President of the Federal Republic of Nigeria before A Joint Session of the National Assembly, Abuja, today, Tuesday, 13 December 2011. I will break the speech into posts because of its length. Enjoy!
2012 BUDGET SPEECH
Delivered by:
His Excellency
Dr. Goodluck Ebele Jonathan, GCFR
President
Federal Republic of Nigeria
Before: A Joint Session of the National Assembly, Abuja
Tuesday, 13 December 2011
PROTOCOL
I am delighted to present the 2012 Federal Budget Proposal before this esteemed Joint Session of the National Assembly. This Proposal comes at the end of a long consultative process with key stakeholders and it translates the development plans of government unveiled in the Transformation Agenda into concrete actions.
This budget is a stepping-stone to the transformation of our economy and country in our walk to economic freedom. This esteemed Assembly would agree that this path would neither be easy nor uncontested; but with a sharp focus, hard work, determination and making careful choices we will overcome.
GLOBAL ECONOMIC DEVELOPMENTS
In the past year, the global economic recovery slowed down significantly and downside risks are on the increase as many countries, particularly in the Organization for Economic Cooperation and Development (OECD), have faced serious challenges leading to fiscal retrenchment and austerity measures in the face of high and rising levels of sovereign debt.
The Euro Zone crisis in particular has time and again thrown financial markets into turmoil as several countries in this economic and monetary union continue to face difficulty in servicing their debts. On the other hand, although many emerging and developing countries, like India and China are experiencing relatively robust growth, downside risks remain as well. In fact, global growth projection has continuously been revised downward and is now 4% for 2012-2013.
These developments have implications for our economy as, aside from the impact on the inflow of Foreign Direct Investments, they could also lead to lower demand for our primary export commodity. We are living witnesses to the extent of volatility that can afflict the international oil market with prices plummeting from US$147/barrel in July 2008 to about US$38/barrel four months later. Thus, although the oil price is currently over US$100/barrel, there is no guarantee what it would be in the future.
We cannot subject the well-being of Nigerians to such large fluctuations and must therefore protect ourselves by managing our finances prudently including by adopting a conservative benchmark oil price for our budgets.
There are also uncertainties in the area of international food prices which make it imperative that we take steps to safeguard our position through policies that would promote food security. So far, the Nigerian economy has weathered these storms well but efforts need to be reinforced to ensure macroeconomic stability and sustained economic growth.
DEVELOPMENTS IN THE DOMESTIC ENVIRONMENT
This year marked another milestone in our democratic experience, with the successful elections and peaceful transition. We now need to build on the mandate that Nigerians have entrusted to us to deliver the dividends of democracy through stronger economic reforms to deliver growth and create jobs. I have created an Economic Management Team (EMT) that I chair, and an Economic Management Implementation Team (EMIT) chaired by the Coordinating Minister for the Economy and Minister of Finance, to help us deliver on this economic agenda.
The robust growth recorded in the first half of 2011 underscores the resilience of the Nigerian economy and the prudence of our economic policies. Our growth in the 2010-2011 period has been broad-based.
The economy recorded impressive growth of 7.85 percent in 2010 and 7.72 percent as of the second quarter of 2011 compared to 5.2% forecast for sub-Sahara Africa. Medium-term prospects are also bright, with real GDP growth projected to remain strong over the period. Furthermore, we intend to pursue a programme of greater fiscal discipline complemented with appropriate monetary policy in order to help stabilize our declining foreign reserve.
The non-oil sector continues to be the main driver of growth with increased crop production, growth in wholesale and retail trade and increased financial sector activities backed by the banking sector reforms. Contributions by the oil sector continue to improve as average daily oil production rose to 2.45 million barrels per day in the second quarter of 2011 compared to 2.35 million barrels per day in the corresponding period in 2010.
At the same time, food inflation has been on a downward trend from 14.1% in October 2010 to 9.7% in October 2011, but it is still a matter of concern as our objective is to move to low or mid-single digit inflation.
THE 2012 BUDGET
The 2012 budget is based on a set of assumptions reflecting Government's determination to maintain prudence in the face of continued uncertainties in the external environment. Accordingly, the budget is based on the following:
• Oil production of 2.48 million barrels per day (mbpd) up from 2.3mbpd for 2011;
• Benchmark oil price of US$70/barrel, a cautious revision from the US$75/barrel approved in the 2011 Amended Budget;
• Exchange rate of NGN155/US$;
• Projected GDP growth rate of 7.2%; and
• Projected inflation rate of 9.5%.
2012 Revenue and Expenditure Profile
Based on the above assumptions, the Gross federally collectible revenue is projected at N9.406trillion, of which the total revenue available for the Federal Government's Budget is forecast at N3.644 trillion, representing an increase of 9% over the estimate for 2011. Non-oil revenue is projected to grow significantly in 2012 as recent efforts to reform revenue collecting agencies and the implementation of initiatives to further develop non-oil sectors are expected to yield results.
The aggregate expenditure proposed for the 2012 fiscal year is N4.749 trillion, which is a modest increase of 6% over the N4.484 trillion appropriated for 2011. I am pleased to note, however, that the declining share of capital is being reversed so it will account for about 28% of total expenditure in 2012 compared to 26% in 2011. We intend to continue on this path so that by 2015, it will have risen to almost 33%.
This underscores the need to intensify our efforts to curtail recurrent expenditure, which we have already embarked upon under the policy of fiscal consolidation as evident from the Medium-Term Fiscal Framework. The share of recurrent expenditure in the 2012 Budget proposal is 72%, down from 74.4% in 2011, and we intend to continue on this downward trend up to 2015.
The aggregate expenditure comprises N398 billion for Statutory Transfers, N560 billion for Debt Service underscoring the real need to address the rising domestic debt profile, andN2.472trillion for Recurrent (Non-Debt) Expenditure. We are conscious of the need to control the cost of governance. Government will streamline agencies with overlapping mandates as a way to realign public expenditure.
In this respect, I have received the preliminary Report of the task force which I set up for this purpose and we shall implement relevant recommendations. We are also pursuing the biometric verification of workers and pensioners as part of our effort to control cost.
Capital expenditure has an allocation of N1.32 trillion representing a 15% increase over the amount approved in the 2011 Budget. The emphasis is on the completion of critical infrastructure projects.
Based on the above, the fiscal deficit is projected at about 2.77% of GDP in the 2012 Budget compared to 2.96% in 2011. This is within the threshold stipulated in the Fiscal Responsibility Act, 2007 and clearly highlights our commitment to fiscal prudence as a way to create more space for the private sector.
This will also have a salutary effect on our domestic debt profile, which has risen significantly in recent years. We are determined to rein in domestic borrowing, and through this, ensure that our debt is at a sustainable level.
As I mentioned earlier, government has made significant progress in putting the finances of the nation on a sound footing and laying the foundation for rapid and sustainable economic growth.
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) & Education Trust Fund] - N400.15 billion; Health - N282.77 billion; and Agriculture & 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.
Fiscal Policy
Fellow compatriots, you will agree that the budget is not an end in itself but rather, an instrument for the promotion of economic growth, wealth creation, poverty reduction and service delivery to the citizenry. Government desires that we should begin to experience a commensurate increase in gainful employment and social well-being of Nigerians with the rate of economic growth.
This Budget seeks to act, not only to create jobs, but to also lay a solid foundation for sustainable economic growth which would deliver the dividends of democracy to our people. In this respect as you may recall, I hosted a retreat in October this year with the organized private Sector (OPS) at which a number of issues including fiscal policy were extensively discussed.
I wish to reiterate here that the principal objective of my Administration's fiscal policy in the area of tariffs and trade is to promote industrialization and the growth of the manufacturing and agricultural sectors of the economy and above all to generate employment for Nigerians.
As part of the process to realize this objective, we have commenced the review of the 2008-2012 Customs and Excise Tariffs to correct identified anomalies and introduce policies that will help in the promotion of industrialization in the country when the review is concluded. In addition, to ensure a level-playing field for businesses, this Administration, beginning from the 2012 fiscal year, will where necessary, only grant concessions or waivers on a sectoral basis. The focus of any concessions will be on expanding domestic production for local consumption and boosting exports, development of value chains, and boosting employment.
The Export Expansion Grant (EEG) scheme has, over the years, contributed significantly in the diversification of the economy through the promotion of non-oil exports. Efforts have therefore reached an advanced stage to review and streamline the Scheme to make it more effective as an instrument for the promotion of non-oil exports. We shall also aggressively pursue economic diplomacy within the framework of ECOWAS to ensure that the ECOWAS Trade Liberalization Scheme (ETLS) achieves its objective of promoting intra- ECOWAS trade and that it is not used as a vehicle for dumping goods in the region. In particular, we shall review the application of the ECOWAS Trade Liberalization Scheme (ETLS) to the oil palm and other sectors.
For some time now, especially with the advent of the consolidated salary structure, there has been agitation over the lopsided nature of the Personal Income Tax Act and the fact that the tax free allowances were inadequate. I am pleased to announce that I have signed the Personal Income Tax Amendment Act 2011 into law which amongst others has the benefit of reducing, on the average, taxes paid by low income earners and providing a more equitable tax structure for individuals. This law also provides for Tax Appeal Tribunals to listen to, and address concerns of individual taxpayers as a cost-effective administrative intervention prior to recourse to the courts.
Other fiscal changes to be gazetted shortly, include tax waivers on all bonds and related instruments issued by corporate and other tiers of Government, tax rebates as incentive to companies that create jobs, regulations to support taxpayers' self- assessment, and regulations to support the growing quest of those involved in social and community development to get tax incentives for those donating to their causes.
As you may recall, Government initiated a new multifaceted National Job Creation Scheme with the provision of seed funding of N50 billion in the 2011 Budget. Implementation of this programme has commenced in earnest.
This Administration believes that it is time to give Nigerian youths an opportunity to enjoy the dignity of a job, the support for innovation, the confidence to be an entrepreneur and, the sheer optimism to be an employer of labour along with the security of an income that can contribute to our economic development. We are conscious of the fact that we have the task of transforming the huge potential of our youths into real, tangible outcomes which all of our people can experience and call their own.
In this respect, Government is focused on stimulating entrepreneurial activity and setting a framework for young people with creative tendencies to showcase their business acumen, build capacity and create jobs. In this spirit, and to move beyond the conventional paradigm of job creation, the Government, partnering with the organized private sector and our development partners, took bold steps to initiate the Youth Enterprise With Innovation in Nigeria (YouWin) programme which I launched in Abuja in October and has since been launched also across the six geopolitical zones.
This programme is targeted to, not only create a new generation of innovative real sector entrepreneurs in Nigeria, but, in the medium term, also generate jobs for youths across the country.
I believe that this move will drive the future technological and socio-economic development of our country. YouWin will lead to the creation of about 100,000 jobs through support to our young entrepreneurs.
CONCLUSION
Mr. Senate President, Mr. Speaker, Distinguished Senators, Honourable Members of this esteemed Assembly, the Proposal I lay before you this day seeks to sustain sound macroeconomic growth that will translate to achieving socio-economic transformation, and gainful employment for our people. But, we can only progress in this course and turn our possibilities into reality when we diligently adhere to the implementation of well thought-out and articulated developmental policies.
The 2012 Budget, as our collaborative effort, has taken the welfare of Nigerians as top priority. In an environment of global uncertainties and domestic challenges, the strong support of the National Assembly is invaluable for us to achieve our set developmental goals.
As we collectively resolve to create a brighter and enduring future for all Nigerians - a future of hope and prosperity not lack, fear or hatred, we must prepare to overcome any adversity that may arise. Accordingly, we must all be determined and committed to follow through with the difficult but balanced choices that we make in piloting the affairs of this great nation.
Finally, I wish to appreciate the enduring partnership between the Executive and the Legislature in discharging our shared responsibility for nation-building and I note, with thanks, the patriotism, commitment and support that Distinguished and Honourable Members of this esteemed Assembly have consistently demonstrated.
Once again, I encourage us to dialogue openly, frankly and in good faith over the challenges that face us as a nation. It is my hope that the National Assembly will consider and pass the 2012 Budget Proposal expeditiously; and I foresee even more productive collaboration to the benefit of all our people.
I am indeed grateful for your kind attention.
May God bless you all, and bless the Federal Republic of Nigeria.
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