By Omoh Gabriel (in Istanbul, Turkey), Babajide Komolafe & Daniel Idonor
ABUJA â€” THE National Economic Council, NEC, yesterday, approved the sharing of the $2 billion (about N300 billion) recently proposed for injection into the economy to avoid an imminent contraction of the economy following ongoing reform of the banking sector by the Central Bank.
This is coming just as it has emerged that the Government plans to overspend by N3.4 trillion in the next three fiscal years fromÂ 2010 to 2012, despite total projected revenue of N6.9 trillion.
President Umaru Yarâ€™Adua had last week proposed the immediate release and injection of the sum from the Excess Crude Account to be shared by the three tiers of government.
But NEC which is an economic advisory body to the president at its quarterly meeting presided over by its chairman, Vice President Goodluck Jonathan with most governors in attendance hailed the president for graciously making the proposal even before it was discussed by NEC.
Briefing State House Correspondents after the NEC meeting at the Presidential Villa, Minister of National Planning, Dr Shamsudeen Usman, disclosed that the Federation Account Allocation Committee (FAAC) has been directed to work out the sharing formula and by the next week the fund will be shared among the three tiers of government.
â€œNEC has taken some decisions to give support to the measures of the central bank in strengthening of the economy. The economy is in cash crunch and the banks are not lending anymore as they should to stimulate growth and development. And for the economy not to contract, the council saw the need to pump in some more funds into the economy.
The sum of $2billion have been approved to be shared among the three tiers of government and the money will be shared next week. It will follow the FAAC meeting which will also take place next Monday and Tuesday here in Abuja,â€
Dr. Usman also said that NEC also approves a new blueprint for the Vision 20:20 economic policy which will be ratified next week for final presentation and launching by the federal government.
FG to overspend by N3.4trn
The government disclosed this in the medium term budget framework for 2010 to 2012 released yesterday.
In the framework, government expects that total revenue for the three years will be N6.94 trillion. This comprises of net budgeted oil revenue of N4.2 trillion and net non-oil revenue of N2.8 trillion.
On the other hand, government would spend N10.3 trillion. This translates to a deficit of N3.4 trillion for the three years and average deficit of N1.13 trillion for each year, indicating 35 per cent increase when compared with N837 billion deficit for the current fiscal year.
On the average, the projected budget deficit translates to 3.09 per cent of the Gross Domestic Product (GDP). The deficit is projected to rise to 3.28 per cent of GDP in 2010 and fall to 3.1 and 2.9 per cent of GDP for 2011 and 2012 respectively.
The framework proposes crude oil benchmark price of $50, $52.5 and $55 per barrel for 2010, 2011 and 2012 respectively. Total revenue from oil for the three yearsÂ is $2.096Â trillion, N2,308 trillion and N2,535 trillion, while net budgeted oil revenue is N1,184 trillion, N1,396 trillion and N1,566 trillion. Net revenue from non-oil sources for the three years is N913 million, N912 billion and N969 billion.
Real GDP is projected to slow down to 2.61 per cent in 2010 and rise to 4.89 and 5.83 per cent in 2011 and 2012 respectively.
The Federal Government projects that headline inflation will fall during the three years to 10.11 per cent in 2010, and 8.5 per cent in the latter years.
It would be recalled that owing to decline in revenue and increase in expenditure, the Federal Government recorded budget deficit of N382.23 billion in the second quarter of this year.
The Central Bank said in its economic report for the quarter, â€œThe fiscal operations of the Federal Government in the second quarter 2009, resulted in an overall deficit of N382.23 billion, compared with the deficits of N57.96 billion in the preceding quarter and the budgeted sum of N209.15 billion.
As a percentage of GDP, the fiscal deficit was 5.7 per cent in the review quarter. The fiscal deficit was financed from additional issuance of FGN Bonds and other funds.