Budget: Education, Defence, Police get lion’s share …as Jonathan proposes N4.9trn for 2013

President Goodluck Jonathan presenting the 2013 budget proposal to the joint sitting of the National Assembly in Abuja ... on Wednesday, October 10, 2012.

| credits: State House.

President Goodluck Jonathan, on Wednesday, presented a N4.9tn budget to the National Assembly for the 2013 fiscal year.

In the estimates titled, budget of “fiscal consolidation with inclusive growth,” Education, Defence and Police were allocated the highest share of N1.095trn

A breakdown of the N1.095trn shows  the Education sector getting N426.53bn;  Defence, N348.91bn, and  Police, N319.65bn.

Missing copiously from the budget was a provision for fuel subsidy, an indication perhaps that government may fully remove the subsidy in 2013.

The presentation was done even as the National Assembly slammed the Executive for the poor implementation of previous budgets, warning that it would no longer tolerate such tardiness.

While presenting the budget, Jonathan stuck to his original proposal of $75 per barrel of crude and rejected the $80 recommended by the House as the “realistic” crude oil benchmark for the 2013 budget

Observers believe that the development might set off a fresh budget dispute between the National Assembly and the Executive.

The N4.92trn proposed for 2013 is five per cent more than the N4.7trn budgeted in 2012.

The President had proposed a $75 benchmark in the 2013-2015 Medium Term Expenditure Framework and Fiscal Strategy Paper he sent to the legislature in September.

The 2013 budget has a deficit of N1.03trn. The House had argued that with the extra $5, the deficit would be cut down to N666.3bn.

Jonathan argued that his administration decided to stick to the proposed benchmark because of the unpredictable nature of oil prices in the international market, adding that the decision was taken “based on a well established econometric methodology of estimating oil price moving averages.”

The government puts daily oil production for 2013 at 2.53 million barrels as against the current 2.48m computed for 2012.

 Fiscal consolidation

The 2013 proposals  also  has the Health sector getting  N279.23bn as allocation; Works, N183.5bn; Agriculture and Rural Development, N81.41bn; and Power, N74.26bn.

The funding of the power and gas sector, the President said, would be complemented with a proposed infrastructure Euro Bond of about $1bn (about N160bn) in order to complete the gas pipelines and other infrastructure investments.

According to the President, the projected  GDP growth rate for 2013 is 6.5 per cent, different from the 6.85 per cent it earlier proposed in the MTEF.

“The revision is underpinned by the fact that the severe floods experienced over large parts of the country are expected to impact on economic activity in 2013, especially Agriculture. However, the growth prospects may improve with the plan to boost dry season farming,” he said.

Out of the aggregate expenditure of N4.92trn, Jonathan said that N2.41trn was earmarked for recurrent expenditure and N1.5trn for capital projects. The sum of N380.02bn was also allocated to Statutory Transfers and N591.76bn for Debt Service.

Jonathan added that the budget proposed a reduction in recurrent expenditure from 71.47 per cent in 2012 to 68.7 per cent. Similarly, he said that capital expenditure would increase from 28.53 per cent in 2012 to 31.3 per cent in 2013.

He said, “Based on the above, the fiscal deficit is projected to improve to about 2.17 per cent of GDP in the 2013 Budget compared to 2.85 per cent in 2012.

“This is well within the threshold stipulated in the Fiscal Responsibility Act, 2007 and clearly highlights our commitment to fiscal prudence. We are determined to further rein in domestic borrowing, and this way, ensure that our debt stock remains at a sustainable level.”

The government anticipates the gross federally collectible revenue in 2013 to be  N10.84tn “of which the total revenue available for the Federal Government’s Budget is forecast at N3.89trn, representing an increase of about nine per cent over the estimate for 2012.”

To promote agriculture and industry, the Federal Government proposed ‘supportive fiscal measures’ for some priority areas.

The President said from January 1, 2013, importation of machinery and spare parts for local manufacturing of sugar would attract a zero per cent duty while import duty and levy on raw sugar would be 10 and 50 per cent. He also announced a five-year tax holiday for ‘sugarcane to sugar’ value chain investors.

According to him, import duty and levy on raw sugar would be 10 per cent  and 50 per cent respectively, while refined sugar would attract 2o per cent duty and 60 per cent levy. Rice –both brown and polished – would attract 10 per cent  import duty and 100 per cent levy.

“All commercial aircraft and aircraft spare parts imported for use in Nigeria will now attract zero per cent duty and VAT. This will appreciably improve safety in our skies as newer fleet and less onerous maintenance will prevail,” he said.

 Business unusual

Indications, however, emerged after the speech that the President’s proposals might have a tough time at the National Assembly.

The first salvo came from the Chairman of the National Assembly, Senator David Mark, who warned that budget proposals “were mere estimates and not immutable figures.”

He said, “As to whether the National Assembly has the power to make inputs to Appropriation Bills laid before it, our stand is that parliament is constitutionally empowered to make inputs. What the 1999 Constitution enjoins Mr. President to lay before the National Assembly are mere estimates and not immutable figures.

“And once the estimates are so laid, their consideration becomes subject to the constitutionally prescribed modes of exercising legislative power. Therefore, we do not think that the constitution intended to turn the National Assembly into a mere mechanical rubber-stamp that must robotically pass budget estimates as presented.”

He added that the National Assembly would deploy “its weapon of oversight” more than ever before in order to ensure the full implementation of the nation’s budgets.

“The need to ensure efficient utilisation of public finance for the promotion of the public good will be our guiding principle. We will work to ensure that the lofty developmental goals embedded in the budget are fully realised,” he said.

Mark noted that in exercising its constitutional power, the National Assembly would be mindful of the fact that the social and economic challenges currently facing the nation were the severest in the country’s contemporary history.

“The National Assembly is also conscious of the fact that urgent steps need to be taken to address dire infrastructural challenges,” he said.

Mark also pointed out that the nation’s budgets tended to incorporate every conceivable project, including those that the local governments were better positioned to execute.

“I advise that we depart from this practice and target projects that are realistically attainable with defined mechanisms for implementation and easy monitoring,” he said.

On his part, the Speaker of the House of Representatives, Aminu Tambuwal, told Jonathan that the committees of the House, which just returned from an assessment tour of the 2012 budget projects, passed a “clearly unimpressive” verdict.

Tambuwal reminded the President that legislators had no “other motives” when they demanded budget implementation other than to ask for the dividends of democracy to be delivered to the people through the execution  of projects.

The speaker called for a change in poor implementation in 2013 to avoid Executive-Legislative disputes. He also opposed the rising debt profile of the country, especially domestic borrowing, which he noted had crowded out private investors in the economy.

Tambuwal said, “It is important to state at this point the clear provisions of Section 8 of the Appropriation Act to the effect that approved budgeted funds shall be  released to MDAs (Ministries, Departments and Agencies) as at when due. This is sadly observed more in breach.

“The Composition of the Public Procurement Council provided under the Public Procurement Act is very critical to budget implementation. The sanctity of extant legislations and respect for the rule of law are critical hallmarks of true democracy. We, therefore, once more call on Mr. President to expeditiously constitute this council so as to free the Federal Executive Council from the burden of contract administration, so they can concentrate on the more sublime issues of their constitutional roles and responsibilities.

 “It will be recalled that the 2012 budget contained a deficit and the main source of funding this deficit was domestic borrowing. Figures emanating from the Debt Management Office regarding domestic borrowing are however worrisome. At a whopping $33.6bn, government appears to be monopolising domestic borrowing to the unhealthy exclusion of the private sector. This is certainly a matter of grave concern because global statistics on sustainable debt-GDP ratio percentages cannot continue to be used as guide for an economy that is not keeping pace with global trends.

“In our effort to address this concern, only yesterday(Tuesday), in passing the 2013-2015 Medium Term Expenditure Framework, which is the basis for annual budgets, the House resolved to raise the oil price benchmark from $75 per barrel to $80  per barrel with the objective that the difference of $5 per barrel be channeled exclusively towards reducing the deficit in the budget and consequently reducing domestic borrowing for same purpose by 66 per cent. This will make available these loanable funds to our private sector which will stimulate the economy and job creation for our teeming unemployed youths.”