Niger Delta, security get 20% of spending plan.

It is a budget about the ordinary Nigerian. It is designed to leapfrog the provision of basic infrastructure to improve the quality of life of our people.

These were some of the words used by President Umaru Musa Yar’ Adua yesterday as he presented the 2008 budget before the joint sitting session of the National Assembly.

Government’s spending plan of N2.449 trillion particularly confirmed Business Day’s exclusive lead report yesterday, and 20 percent of the total money will go to the Niger Delta and security, two critical areas that have been of major concern to government, Nigerians and business for quite some time.

A total of N444.6 billion will be spent in fiscal 2008 on both areas, a 6.5 percent increase over the amount allocated in 2007. The government plans to spend 210 billion on education, a figure representing 13 percent of total ministries, departments and agencies budget for the year.

Energy and agriculture came distant third and fourth with N139.78 billion (excluding National Integrated Power Projects, which he said will be implemented through alternative funding) and N121.1 billion, a seven per cent of the total budget.

"Given the estimated total revenue available to fund the federal budget, we plan a deficit of N0.56 trillion or 2.5% of GDP which will be financed from the proceeds of the sale of government properties. Oil Bloc signature bonus, privatization proceeds and domestic borrowings, "he said.

The 2008 budget, Yar’Adua disclosed, "builds upon and consolidates past macroeconomic and budgetary reforms. It gives priority to, and makes ample provision for improving physical infrastructure, particularly power and transportation, human capital development, the Niger Delta, and social safety nets. These are all encapsulated in the Seven-Point Agenda of this Administration."

The proposed aggregate expenditure according to Yar’Adua is made up of the following, statutory transfers N187.6 billion, debt service N372.2 billion, spending by ministries, departments and agencies (MDAs)N1.89 trillion.

The budget, he stressed, will basically be "about the ordinary Nigerian. It is about accelerating the provision of basic infrastructure to improve the quality of life of our people. It is about creating jobs and the enabling environment for the private sector to thrive."

The president stated that the 2008 budget makes a provision for a total of N1.89 trillion for spending by ministries, departments and agencies. This represents a 0.1% increase relative to 2007.

A breakdown of the spending shows payroll of N779.3 billion; overheads of N267.6 billion, capital expenditure of N634.2 billion and consolidated revenue fund charges excluding debt charges of N212.5 billion.

The key assumption of the 2008 budget, Yar’Adua enunciated, are oil price of $53.83 per barrel, crude oil production of 2.45 million barrels per day, joint venture cash calls of $4.97billlion, GDP growth rate of 11 per cent, inflation rate of 8.5 per cent and exchange rate of N117 to $1.

The budget, the president stated, "is based on a prudent benchmark price US$53.83 per barrel for crude oil", noting that the projection was meant to "ensure that we fund the budget with predictable revenues, whilst ensuring that the benchmark price remains realistic."

He said that based on these assumptions, "we expect the sum of N4.539 trillion to accrue to the federation account. This represents an increase of 5.5 per cent over 2007. Oil Revenue is estimated at N3.629 trillion after taking account of existing commitments to Joint Venture Cash Calls of N0.581 trillion, while Non-Oil Revenue is estimated at N0.91 trillion. Oil Revenue represents 80 per cent of the total estimated revenue, while Non-Oil Revenue represents 20 per cent.

The revenue accruable to the Federal Government from the federation account for 2008, Yar’Adua disclosed is estimated at N2.026 trillion.

"Of this sum, the actual amount accruable to the Federal Budget will be N1.866 trillion as against N1.7 trillion in 2007. This is arrived at after deducting amounts that should go to the Derivation and Ecology Fund (N38billion), Stabilization Fund (N19billion), Development of Natural Resources (N63billion), and the FCT (N41billion)."

On debt servicing, the president said, "We propose a debt service of N372.3 billion for 2008, representing an increase of 25.3%, relative to 2007. This is made up of domestic, long-term debt service of N306.2 billion and foreign debt service of N66 billion."

The overall increase in debt service requirement for 2008 relative to 2007, he said, "is reflective of the increase in the domestic debt stock in 2006 – 2007."

"These include N86 billion of pension arrears and N105 billion of arrears owed to local contractors. In addition, N200 billion of domestic borrowing was required to finance the 2007 Budget. The domestic debt stock is expected to reach N1.9 trillion by the end of this year," he said.

"This figure represents an increase of N285 billion due principally to the clearance of contractor and pension arrears, amounting to N105 billion and N86 billion, respectively. The cost of servicing domestic public debt is estimated at N306.2 billion in 2008. Based on our strong fiscal position, government intends to remain active in the debt market," Yar’Adua stated further.

Praising the government for its successful exit from the Paris Club debts, Yar’Adua noted that the structure of the nation’s external debts has changed significantly, with the total foreign debt stock now standing at US$3 billion, down from about US$32 billion in 2005.

"I am glad to add that we have successfully exited the London Club debt stock. Nigeria is now one of the few countries outside the Organisation for Economic Co-operation and Development (OECD) with a debt to GDP ratio below 20 per cent," he said.

Commending the lawmakers for their speedy passage of the 2007 supplimetary appropriation, he said, "We are inexorably committed to pursuing the goal of making our economy one of the twenty biggest economies in the world by the year 2020. To this end, we will endeavour to fast track the key parameters of our development paradigm as outlined in our Seven-Point agenda."

"In delivering our Administration’s first budget to this august Assembly," YarAdua said he was delighted to report that the nation’s economy has been one of the fastest growing, not only in Africa but also in the world. "This growth rate is forecast to continue into 2008 and 2009."

He noted that the last five years had indicated even brighter prospects for sustained growth, noting that by current trends, real GDP growth for 2007 – 2008 is set to average 7.0 per cent per annum, much better than the performance of the previous two decades when GDP growth averaged 3.0 per cent per annum.

"Significantly, this rate of growth has been much higher than our population growth rate. This has resulted in a sharp increase in GDP per capita after a prolonged period of stagnation, from about $400 at the turn of the century to well over US$1000 by the end of 2007. However, in order to meet our growth and development targets by the year 2020 it is imperative that our economy grows at an even faster rate," he noted.

"Consistent with our commitments under the Paris Club Debt settlement, and in pursuit of the attainment of the MDGs, the 2008 budget will devote the entire debt relief gains, amounting to N110 billion, to carefully selected poverty reduction initiatives and programmes in education, agriculture, water resources, power and social safety nets."

He told the lawmakers that the collective challenge today, "is to translate these macro-economic gains into tangible improvements in the living standards of our people. Despite the rapid growth of the economy, about 50 per cent of our population still live below the poverty line.

Oil still accounts for about 40 per cent of GDP, 90 per cent of exports and 80 per cent of government revenue. The challenge therefore is to reverse these ratios."