By Yinka Kolawole & Povidence Obuh
The 2010 national budget was set out to stimulate the economy which warranted devoting more than 40 percent of the budget to capital expenditure as against 27.76 percent that was allocated to capital spending in the 2009 budget.

Director General, Budget Office of the Federation, Dr. Bright Okogu, stated this last week, in Lagos, at the National Economic Society (NES) Seminar on the 2010 Budget held in conjunction with the Chartered Institute of Bankers of Nigeria (CIBN).

Specifically, N1.853 trillion was budgeted for capital expenditure in 2010 which is 81.2 percent higher than the N1.022 trillion devoted to capital spending in 2009, an indication that budget 2010 seems to be more committed to investment than budget 2009.

Okogu noted that the slow recovery from the global financial crisis occasioned by the crises in the local capital market and the banking sector, necessitated the need for the government to take steps at stimulating the economy through fiscal intervention.

He remarked that the increased spending is not without its challenges, such as higher deficits as the federal government seeks to stimulate the economy, with a deficit target of 4.75 percent of GDP which is higher than the 3 percent threshold recommended in FRA 2007, noting however, that FRA 2007 allows for this under exceptional circumstances, such as the recent economic recession.

He added that the increased deficit is in line with global trends and government plans to be finance it through: Privatisation proceeds, Signature bonus, International bond, ECA withdrawals and, Domestic borrowing.

The DG asserted that in order to avoid adverse impact on macroeconomy, deficit needs to be managed carefully, adding that the increased spending is designed to target infrastructure. He further noted that improved capital budget implementation efforts are required, with alternative sources of funds, such as PPP, being sought to compliment public investment, adding that these efforts are bound to have a positive impact on output and employment.

In his paper presented at the event, Prof. Oyinlola Olaniyi of the Department of Economics, University of Abuja, noted that the increase in budgetary allocations has led to a 75 percent increase in debt service obligations.

“This is made up of N34billion for foreign debt service while domestic debt service takes N0.463 trillion.  While the foreign debt service component is drastically reduced the injection of almost half a trillion naira into the domestic market for debt service require a good fund flow management strategy if the inflation target of budget is to be met,” he said. Earlier in his opening remarks, Chairman of the occasion, Chief Philip Asiodu, said:

“The only way to arrest and reverse the degradation in standard over the past three decades and to reposition Nigeria to attract the necessary support and inflow of resources for the realisation of vision2020 is stability in politics, stability and continuity in national economic management policies and reality and sanctity of contracts.”