Yar’Adua Signs Budget with Reservations

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Yar’Adua Signs Budget with Reservations

From Juliana Taiwo in Abuja, 03.11.2009

President Umaru Musa Yar’Adua yesterday signed the N3.101 trillion budget for 2009 but with a caveat that with the present global meltdown, the realities on ground make it an “unworkable document”.
Yar’Adua, at the formal signing which took place at 1.15pm in the presence of the leaders of the National Assembly and some key ministers and special advisers in his cabinet, expressed reservations regarding higher forecasts by the legislators given the current realities of declining international crude oil prices and production constraints.
He said the indices used to prepare the budget had changed drastically, hence they could not be used as factors with which the 2009 appropriation was predicated.
The President based his comments on four factors: one, the $45 per barrel crude oil benchmark as against the recent sustained fall in prices; the falling level of oil production as a result of militant activities; the stoppage of the $500 million bond which was approved for listing in the international capital market; and the dwindling exchange rate of the naira against the dollar.
He said: “In December 2008, I presented a Budget Proposal with an aggregate expenditure of N2.87 trillion with a deficit of N1.09 trillion or 3.95 per cent of GDP.  Based on the revised fiscal framework subsequently agreed with the National Assembly, we had a deficit of N654 billion or 2.36 per cent of GDP. After due consideration of the Budget Proposal, the National Assembly passed a N3.1018 trillion budget with a deficit of N836.6 billion or 3.02 per cent of GDP.
“As passed, the 2009 Budget projects higher oil revenues than in the original proposal.  However, I must express some reservation regarding these higher forecasts given the current realities of declining international oil prices and production constraints. Due to militant activities in the Niger Delta, our production has sometimes declined to as low as 1.6mbpd from a projection of 2.209mbpd.
“Should this low production turn out to be our average for the year, and the average price falls to $40/barrel from the original budget projection of $45/barrel, our fiscal deficit would increase to N1.35 trillion or 5.24 per cent of GDP, which is well above the three per cent allowable limit under the Fiscal Responsibility Act. Financing such a large fiscal deficit will have its own challenges.
“We are reviewing the timing of the $500 million naira-denominated international bond issue. Similarly, care needs to be taken with regards to public borrowing from the domestic markets to avoid the effect of crowding out credit to the private sector and stifling economic growth. These are issues that the Legislature and the Executive will closely monitor, going forward.”
Though President Yar’Adua praised the harmonious working relationship between the executive and the legislature, he said the performance of the 2009 budget is hinged on service delivery to the Nigerian people.
“The 2009 budget is devoted to sectors which we consider critical to the regeneration of the economy.  There is a decided bias for power supply, transportation and other critical infrastructure.  There is also increased funding for education, health, agriculture and other areas critical to the attainment of the Millennium Development Goals. The peace, security and sustained development of the Niger Delta are also a core priority in the 2009 budget,” he said.
Despite the global economic crisis, Yar’Adua said he was optimistic that Nigeria would emerge a better and greater country.
“For us, therefore, the present global economic crisis offers an opportunity to re-examine the structure of our economy and implement strategies that will reposition our nation for the global economic order that will emerge from the current experience.  With our collective aspiration to make Nigeria one of the world’s 20 leading economies by 2020, we see this global crisis as an obstacle we must overcome, and not a reason to abandon what we consider a worthwhile journey,” he said.
“As a government, we are committed to doing everything possible to minimise the impact of the current global crisis on the people of this country.  Whatever the sacrifices that have to be made, we will not allow the weakest among us to shoulder the burden,” he added.
Asked by State House correspondents to react to the observations of President Yar’Adua, the Speaker of the House of Representatives, Dimeji Bankole, said though he agreed with most of the observations raised, they were more excited that the budget was passed within the first quarter.
“We are all excited that the budget has been signed in the first quarter of the year which means quarterly implementations can be easily monitored and supervised accordingly by the ministers and we are all here to work together with the other arms of government.
“I agree with him on the concerns raised. I have raised those concerns as well with some members of the National Assembly. We are just as concerned as he is on the fact that we have falling revenue, we will project accordingly to make sure that if we have to do some necessary supplementary budget and virement in future we are up to the task in the face of the realities of the world,” he said.
Asked why solutions to the issues were not sought before the budget was passed, he replied: “The budget is a continuous process, so solving is today, tomorrow as long as we solve it. The way out is to monitor the budget accordingly and solve the problems as they crop up.”
Asked what moral ground the National Assembly had in increasing its budgetary allocations unilaterally, he said: “I think you should take a second look at those figures. I am aware that the capital projects for the House of Representatives for example was reduced from N9 billion to N2 billion. So have a look at those figures again and then you can ask me those questions.”
Senate President David Mark said now was the time to properly monitor the implementation of the budget but warned that it would entail a lot of sacrifices on the part of all Nigerians.
“I think the President captured it very well. There are some parameters which we had before that are not really current now. But the end result is that we must all make sacrifices to make sure that the budget, as it is, is implemented to the best of our ability. There is of course no doubt that we need to make sacrifice even you the media men will have to make sacrifice.
“I think once we start the implementation we will see how far we can go in terms of how much of it we can implement. I mean going from 2.29 million barrels per day to 1.8 million barrel per day is a lot of difference, there is no doubt about that. And the fact that even that is being reduced to 1.6 million barrels per day because of the actions of the militants even makes it much more difficult. And the benchmark we had before was $45 for the budget and it’s been fluctuating between $40 and $41. That makes it even much more difficult. But the fact of the matter is that Nigerians are very determined to make the best of the situation,” he said.
On if those factors were not dealt with before the budget was passed, he replied: “Really who can see the future? If we all can, we will be more than happy. But because we didn’t foresee these and they have come now, who knows what the dollar is going to be against the naira tomorrow, do you know? Nobody! We can’t really predict that. There is no accurate or specific way of doing it.”
Commenting on how Nigeria was going to overcome the problems of fully implementing the budget and if there is going to be a review, he said: “Let’s start then. When we start, we will know exactly what to do next. But definitely I am sure that both the National Assembly and the executive are making plans to at least cushion the effect of our inability to implement some of it. I’ll say the review will be entirely dependent on what happens very soon.”

N3.101 trillion
Expenditure passed by the National Assembly for the 2009 budget, as against the N2.87 trillion proposed by the President.

N836.6 billion
Deficit in the approved budget, as against the N654 billion agreed with the executive based on the revised fiscal framework.

1.6 million
Barrels per day crude oil production has sometimes fallen to, as against the projected 2.09million in the initial proposal.