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Full
text of President Jonathan’s 2012 Budget speech
Newsdiaryonline Tue Dec 13,2011
..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.
REVIEW OF IMPLEMENTATION OF THE 2011 BUDGET
SO FAR
We are approaching the end of a peculiar
fiscal year for our nation. The 2011 Elections, the subsequent
inauguration of a new Administration last May and the passage of
the 2011 Amendment Budget in May 2011 all affected the
implementation of the budget in 2011. Provisional data on the
implementation of the 2011 Budget as at October 2011 indicate
that revenue performance improved during the year over the
situation in 2010.
Oil revenue receipts achieved the targeted
levels as a result of relatively higher oil prices and
production levels than benchmarked while non-oil receipts,
though short of the projection for the period, are tending
towards the set targets for 2011. As of mid-November, about 67%
of the released funds had been utilized and we expect it to
reach 70% by the end of December which is fairly good
considering the circumstances. You will agree with me that 2010
and 2011 Budgets were relatively expansionary, and we must now
inject a dose of caution.
With the support of the National Assembly,
the Government is determined to pursue a programme of
far-reaching fiscal consolidation so as to reduce our deficit
and domestic borrowing to more manageable levels.
We have introduced measures to actualize
this programme in the 2012 fiscal year both in the areas of
improved revenue collection, recurrent expenditure reduction and
increasing the share of capital expenditure in aggregate
spending, in contrast with the trend of recent years.
PRIORITIES OF THE 2012 BUDGET
At a time when rating agencies are
downgrading countries globally, the Outlook on Nigeria was
recently upgraded from negative to stable by Fitch Ratings; this
was largely a reflection of two things: a) the new economic
programme, including the Medium-Term Fiscal Framework that
government has put in place with important reforms and a clear
programme of fiscal consolidation; b) the successful political
transition following the 2011 elections.
In furtherance of its efforts, the
government has significantly scaled up the flow of resources to
key areas of priority including Security, Infrastructure renewal
and development (including power and roads), human capital
development and food security to give a more inclusive growth
and attention to job creation. Yet, there is much that still
needs to be done. The Transformation Agenda spells out the
strategic direction of my Administration.
In this respect, being the first budget
under this Agenda, the 2012 Budget has been designed with the
theme: fiscal consolidation, inclusive growth and job creation.
To achieve the above objectives, we have
established four main pillars, namely,
(a) Macroeconomic stability;
(b) Structural reforms;
(c) Governance and institutions; and
(d) Investing in priority sectors.
Macroeconomic Stability
Government is determined to pursue policies
that will ensure a stable macroeconomic environment through a
strong and prudent fiscal policy, manageable deficits,
sustainable debt-GDP ratio of no more than 30%, and single digit
inflation, thereby promoting real growth. We believe that these
measures would engender a stable and competitive exchange rate
and help to reverse the declining trend of our international
reserves.
Our domestic debt profile has risen sharply
in recent years, currently standing at about 16.4% of GDP. This
cannot be allowed to continue and become a new burden on our
children. So in addition to looking at the expenditure side of
our national balance sheet, we are also paying strong attention
to the revenue side.
In this regard, we have initiated steps to
increase revenues by blocking leakages from various sources,
improve corporate tax collection, and boost internally generated
revenue. We also believe that we should be able to earn a lot
more revenue from the maritime sector. As part of the on-going
port reforms, government will work vigorously to increase our
revenue from maritime and related activities.
Starting in 2012 for the medium term, we
shall focus on cutting recurrent expenditure to sustainable
levels through reducing waste, inefficiency, corruption and
duplication in government. Recent reviews of public expenditures
provide a basis for taking such measures. In order to make
capital spending more effective, government is introducing a new
template for analyzing the financial and other factors including
the economic rates of return, job creation, and environmental
sustainability.
Similarly, Government will continue to
prioritize its expenditures while focus will be on the
completion of viable on-going capital projects. It is our
intention to fund and bring the large portfolio of on-going
projects to completion in the next few years while also taking
on flagship projects already identified in the Transformation
Agenda.
From 2012, there will also be a robust
programme to strengthen our oil reserves base, and increase oil
exploration activities in identified inland sedimentary basins,
outside the Niger Delta, with the requisite potential for the
production of oil and gas, particularly the Chad Basin.
Structural Reforms
My Administration is pressing forward with
key structural reforms. We are implementing the privatization of
the power sector based on the Power Roadmap which I unveiled
last year. We believe that the power sector can benefit from
liberalization and privatization by attracting investors in the
same manner as the telecommunications sector has done. In the
same vein, government will come up with policies to encourage
investment in the downstream sector through liberalization so as
to create jobs for our people.
We have also embarked on reforming our
ports and customs and we intend to continue vigorously on this
path so as to reduce the cost of doing business for our private
sector actors. No longer are we going to be contented for
clearance of goods in our ports to take 3-4 weeks with attendant
demurrage and costs while it takes 48 hours elsewhere.
In this regard, I have set up a Committee
chaired by the Coordinating Minister for the Economy and
Minister of Finance with a mandate to remove the bottlenecks at
our ports and another Committee made up of private sector users
of the ports to monitor implementation. We also intend to work
hard to improve the infrastructure at the ports. Other
impediments such as those arising from bureaucratic and costly
paperwork will also be removed.
With regard to the petroleum sector, the
Federal Government is conscious of the need to bring the
Petroleum Industry Bill debate to conclusion so as to give
investors the comfort and policy certainty that they require. My
Administration is determined to bring this matter to closure by
engaging with all stakeholders and I therefore call on the
National Assembly to work with us in this regard.
Governance and Building Institutions
Our reforms can only endure if they are
founded on strong systems and institutions that promote
transparency and we are taking steps to strengthen ours. As you
are aware, we have already resumed the publication of revenues
allocated to the three tiers of Government as this will promote
transparency and accountability in the management of public
funds.
Similarly, the recent passage of the
Freedom of Information Act has further strengthened the hands of
citizens in monitoring the activities of government and I
acknowledge the role of the National Assembly and civil society,
in making this a reality. The fight against corruption is a
collective responsibility and my Administration will strengthen
our anti-corruption agencies such as the EFCC and ICPC to enable
them discharge their mandate. Finally, we recognize that we can
only succeed in our effort to transform the economy if we have a
vibrant civil service and we fully intend to embark on reforming
the public service for optimal service delivery.
Investing in priority sectors: Creating
Jobs
Against the background of the above
reforms, this Administration will promote job creation and
inclusive growth by investing in critical infrastructure, human
capital development and security including more support for the
police, defence and counter-terrorism operations. We shall also
give priority attention to Information and Communications
Technology, Solid Minerals development, Manufacturing, Aviation
and Creative industries in order to further develop these
sectors that are known to be sources of growth and job creation.
Let me now comment on a few sectors. The
Agricultural sector is being totally transformed to enable us
move from traditional farming to modern agriculture as a
business both for our small and large-scale farmers. Our
objective is to ensure food security whilst also promoting
exports in agriculture value chains where we have a comparative
advantage. We intend to process and add value to different crops
such as rice, cassava, sorghum, oil palm, cocoa, cotton etc.
This approach is central to our
transformation strategy. Accordingly, this Administration has
adopted enabling measures to support the development of private
sector-driven marketing institutions, and push for policies that
would promote our agriculture to create jobs.
To unleash the potential of this sector,
the Federal Ministry of Finance has put in place a mechanism to
share risks with the banking sector by guaranteeing 70% of the
principal of all loans made for supply of seeds and fertilizer
by the private sector this season. In addition, to get the
inputs to farmers at an affordable cost, we are subsidizing the
interest rate on these loans to bring it down from 15% to 7% per
annum. The Minister of Agriculture and the Central Bank are
collaborating to extend these services for credit availability
for the medium term.
We are introducing further fiscal policy
measures to support the development of the agricultural sector.
In this respect, the duty on machinery and certain specified
equipment for the sector will, effective January 31st 2012,
attract zero duty. We will further look at supportive fiscal
policies for the rice and wheat sectors to stimulate domestic
production.
Government is also introducing policies to
encourage the substitution of high quality cassava flour for
wheat flour in bread-baking. Bakeries will have 18 months in
which to make the transition, and will enjoy a corporate tax
incentive of 12% rebate if they attain 40% blending. With effect
from March 31st 2012, importation of cassava flour will be
prohibited so as to further support this programme.
All equipment for processing of high
quality cassava flour and composite flour blending will enjoy a
duty free regime as incentive to bakers for composite flour
utilization. Consultations with the sector to ensure a smooth
transition are on-going.
It is common wisdom that the best way we
can grow our economy and create jobs for our people is for us to
patronize Nigerian-made goods. This is why we are introducing
enabling policies to drive this process. In this regard, we are
introducing fiscal policy measures that will encourage the
purchase and utilization of locally produced commodities.
From July 1st 2012, wheat flour will
attract a levy of 65% to bring the effective duty to 100%, while
wheat grain will attract a 15% levy which will bring the
effective duty to 20%.
Similarly, there will be a levy of 25% on
brown rice to bring it to 30%. In addition, to encourage
domestic rice production, a levy of 40% will be placed on
imported polished rice leading to an effective duty rate of 50%.
Effective December 31st 2012, all rice millers should move
towards domestic production and milling of rice, as the levy of
50% will be further raised to 100%. Let me add here that no
waivers or concessions will be entertained for rice and wheat
importation.
We have also commenced implementation of
the Power Roadmap which aims to create a robust power sector
through the privatization of the generation and distribution of
power as well as create an enabling environment for investment.
Institutional arrangements have been made for a Bulk Trader
company to intermediate between power producers and distributors
in a market setting, thereby giving Independent Power Producers
(IPPs) the confidence to invest in generation capacity.
Government, in collaboration with our
development partners has created a credit risk management
initiative to provide Partial Risk Guarantees (PRG) to give
comfort to gas producers in respect of payment. Similarly,
effective January 31st 2012, equipment and machinery in the
power sector will attract zero duty.
The Government recognizes the provision of
affordable housing as a social need and, also, a veritable
source of socio-economic development and job creation. Owning
one’s own home is a basic aspiration of every human being, and
our people are no different.
To this end, based on a new housing policy,
Government is working with our development partners to create an
effective mortgage finance system in the country and to develop
value chains in the building materials segment. This will give
the necessary stimulant to the sector to accelerate its
development and also help to reduce the cost of construction,
thereby energizing the construction industry.
It is a well-known fact that government
alone cannot solve the infrastructure problem, which is why we
have invited the private sector and international investors to
partner with us through the Public Private Partnership (PPP)
arrangements.
As estimated in the First National
Implementation Plan of the Nigeria Vision 20:2020, we need N32
trillion for the execution of capital projects over a four
year-period, of which the private sector is to contribute N13
trillion. In this respect, we are creating the enabling
environment to attract private investments by having a clear
regulatory framework.
Government will, in addition to ongoing
critical infrastructure projects, execute new flagship projects
with positive multiplier effects across the country through PPP
arrangements in the next three years.
In our continuing effort to improve on our
human development index, we are conscious of the need to avoid
the trap of focusing on economic growth as an end in itself, but
rather, a means to improved human development through ensuring
better health care, education and wealth creation.
To this end, my Administration will
continue to invest in these sectors to improve on the quality of
education for our children especially young graduates from our
educational institutions, support Public-Private Partnership
arrangements for skills development and improve the quality of
our health service delivery.
Fellow Compatriots, we recognize that we
can only achieve the developmental goals in a secure and
peaceful environment. Accordingly, safeguarding the sovereignty,
independence and territorial integrity of the country is at the
heart of ongoing reforms in the security sector. As you are
aware, we have since commenced strategic programmes to upgrade
the skills of officers in the security agencies while
modernizing security infrastructure across the country.
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, and N2.472 trillion 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.
Th
This is the document referred to in the Witness
Statement on Oath of Clifford O. Kokogho as
“Exhibit
COK.2”
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