By Henry Umoru
ABUJA—PRESIDENT Goodluck Jonathan, yesterday, forwarded to the Senate a 2012-2015 medium-term Fiscal framework, MTFF and 2012 Fiscal Strategy Paper, FSP, with plans to begin the withdrawal of fuel subsidy from next year.

President Jonathan stated: “A major component of the policy of fiscal consolidation is Government’s intent to phase out the fuel subsidy beginning from the 2012 fiscal year.

This will free up about N1.2 trillion in savings, part of which can be deployed into providing safety nets for poor segments of the society to ameliorate the effects of the subsidy removal. The accrual to the Sovereign Wealth Fund, SWF as a result of the withdrawal of the fuel subsidy will also augment funds for critical infrastructure through the infrastructure window of the SWF.”

Quick closure

In a letter to Senate President David Mark, President Jonathan who urged the Senate to approve the FSP and MTFF to enable the Federal Executive bring the preparation of the ongoing 2012 budget to quick closure, said that aggregate expenditure is expected to increase from N4.8 trillion in 2012 to N5.18 trillion in 2015, adding that efforts were being made to make savings from overheads as allocations will be frozen till 2015.

From left: Adamawa State Governor, Murtala Nyako; Chairman, Forte Oil, Mr. Femi Otedola; Managing Director, Access Bank, Mr. Aigboje Aig-Imoukhuede; and former Managing Director of Zenith Bank, Mr. Jim Ovia, at the Economic Management Team meeting presided over by President Goodluck Jonathan at the State House in Abuja, yesterday. Photo: State House

According to the Federal Government, capital spending will increase marginally from N1.32trillion in 2012 to N1.64 trillion in 2015 as Government intends to leverage on PPP type arrangements to supplement capital allocations from the Budget. In what appears to be a return to the former National Development Plan NDP, the Federal Executive Council in the paper resolved to manage the nation’s economic development plan on a long term basis.

According to the proposal, priority sectors identified by government will receive the bulk of capital allocations over the four-year period as against the present situation of scattered allocations and investments in projects that have remained uncompleted.

The Four-Year Budget Planning document tagged “Fiscal Strategy Paper (FSP) and 2012-2015 Medium-Term Fiscal Framework” according to the letter by the President are statutory requirements for submission to the National Assembly under the Fiscal Responsibility Act, 2007. The MTFF, the letter continues consists of the Medium-Term Revenue Framework and the Medium-Term Expenditure Framework, both of which outline principal components of the Government’s revenue and expenditure plan.

The letter read in part: “Prepared against the backdrop of global economic uncertainty, I firmly believe that the MTFF and FSP will ensure that planned spending is set at prudent and sustainable levels and is consistent with Government’s overall medium term developmental objectives set out in the Transformation Agenda of the Administration.”

The proposal is also aimed at promoting government’s fiscal objectives and transforming the economy on a sustainable basis, as well as advancing Nigeria as one of the world’s 20 largest economies by the year 2020.

According to the policy document prepared by the Budget Office of the Federation, Federal Ministry of Finance, “Over the 2012_2015 period, government will focus a large portion of its spending on key sectors which include security, infrastructure (including power), agriculture, manufacturing, housing and construction, entertainment, education, health and ICT.”

The 15-page document also stated that “By investing funds in these sectors, government intends to support job-creating opportunities which will in turn foster greater and diversified economic growth in the country. Government will also continue its strategy of fiscal consolidation by which expenditure, particularly on recurrent spending, will be reined in and directed to its most productive and growth-enhancing use while efforts will be intensified to increase revenue.”

According to the document, it is government’s intention to continue implementing a fiscal consolidation policy, especially given the structure of expenditure that has increasingly titled towards recurrent expenditure in recent times, adding, ”to correct this bias, government is implementing a 4-year capital project plan commencing from 2012, which will ensure that we exit from the current portfolio of ongoing projects.”

The estimation as postulated by the document is that summary of Federation Account Allocation Committee (FACC) and Value Added Tax (VAT) pool for the four years to the Federal, State and Local governments would sum up to 7,124.63 trillion Naira in 2012; 7,632.68 trillion Naira in 2013; 8,166.59 trillion Naira in 2014; and 8,702.67 trillion Naira in 2015.

Also during the same period, total capital spending by government is put at 1,319.89 trillion Naira in 2012; 1,430.89 trillion Naira in 2013; 1,539.93 trillion Naira in 2014; and 1,643.51 trillion Naira in 2015. For Ministries, Departments and Agencies (MDAs) spending, the sum of 3,901.88 trillion Naira has been projected for 2012; 4,054.61 trillion Naira for 2013; 4,209.98 trillion Naira for 2014; and 4,323.36 trillion Naira for 2015.

According to the government, the implementation of the 2011 Budget was still ongoing, adding, “reports from the OAGF indicate that FGN revenue fell below target by N231bn as of August 2011, mainly due to shortfalls in non-oil revenue as oil revenue receipts were on target. Expenditure releases are largely on track.

Benchmark prices

“In continuation of the adoption of an oil price based fiscal rule, oil benchmark prices significantly below the current market prices will be adopted for the 2012-2015 period. Revenue in excess of the benchmark price will continue to be set aside in the Sovereign Wealth Fund, SWF.

“Based on a combination of a 5-year and 10 year moving average, an oil benchmark price of US$75 per barrel has been adopted for 2012-2015 as baseline scenario. Less optimistic scenarios of US$ 65 and US$70 per barrel have also been prepared in recognition of potential volatilities in the international oil market.”

It will be recalled that Nigeria’s former national plans, the 1946-55 10-Year Plan of Development and Welfare (with plan revisions, 1951-55) and the 1955-60 plan (later extended to 1962), were framed by colonial administrators. Next in line was the First National Development Plan, 1962-68 whose main weaknesses were incomplete feasibility studies and inadequate evaluation of projects, accompanied by meager public participation, followed by excessive political intervention in economic decisions. Second National Development Plan (1970-74).

The Third National Development Plan (1975_80) envisioned a twelve-fold increase in the annual rate of public capital expenditures over the previous plan period.

The fourth plan (1981_85) lasted for nine months. The military government of General Muhammadu Buhari in 1985 had the Fifth National Development Plan was postponed until 1988_92. In late 1989, General Ibrahim Babangida abandoned the concept of a fixed five_year plan. Instead, a three_year “rolling plan” was introduced for 1990_92 with the expectations that planners would revise the 1990_92 three year rolling plan at the end of 1990, issuing a new plan for 1991_93.




Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.