Wednesday 14 December 2011

President Jonathan Presents N4.749 trillion budget Proposal

President Jonathan presents N4.749trn budget proposal
•FG increases tariffs on wheat, rice,
 •Deregulates petroleum sector
 •Gives special concession to agriculture  

PRESIDENT Goodluck Jonathan, on Tuesday, unveiled the 2012 budget of the federation, putting the annual estimates at N4.749 trillion.
The president, who also re-stated government’s intention to liberalise the downstream petroleum sector, and rejuvenate the agriculture sector so as to create jobs for Nigerians, announced that wheat flour and rice importation would attract 65 per cent and 30 per cent levies respectively.
A direct effect of the fiscal policies announced by the president indicates a likely increase in the price of bread and imported rice, two major staple food items in Nigeria. The price of beer and malt drinks may also be affected by the new policies.
The president, while presenting the 2012 budget to the joint sitting of the National Assembly unfolded an economic plan targetting a total removal of concession or waiver on import duty on rice and wheat.
According to President Jonathan: “From July 1, 2012, wheat flour will attract a levy of 65 per cent to bring the effective duty to 100 per cent, while wheat grain will attract a 15 per cent levy which will bring the effective duty to 20 per cent.
"Similarly, there will be a levy of 25 per cent on brown rice to bring it to 30 per cent. In addition, to encourage domestic rice production, a levy of 40 per cent will be placed on imported polished rice leading to an effective duty rate of 50 per cent. Effective December 31, 2012 all rice millers should move towards domestic production and milling of rice, as the levy of 50 per cent will be further raised to 100 per cent. Let me add here that no waivers or concessions will be entertained for rice and wheat importation,” the president disclosed.
If the budget is implemented, it means a bag of rice, which sells at N8,000 today may, next year go for about N16,000 in the market, while the price of bread, beer and malt drinks may similarly hit the roof top.
While noting that the budget might not represent an end in itself but a tool for creation of wealth, the president also said the government would use trade and tariff in the 2012 budget as an instrument of industrialisation, hence his decision to ensure that machinery for agricultural production, especially for local production of wheat and cassava attracts zero per cent duty.
Though the president was silent on the commonly used term ‘deregulation’, he clearly stated the decision of his administration to ensure some reforms in the different sectors, including the downstream petroleum sector. He added that the liberalisation policy would flow from the power sector, which would benefit from the privatisation agenda that ruled the telecommunications sector in the past.
He said: “We believe that the power sector can benefit from liberalisation and privatisation 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 liberalisation so as to create jobs for our people.”
According to the president, the 2012 budget is based on key assumption including a daily crude oil production capacity of 2.48 million barrels per day, crude oil benchmark of US$70 per barrel and a foreign exchange rate of N155 to one US dollar.
He also stated that the government was projecting a GDP growth rate of 7.2 per cent; while inflation rate is projected at 9.5 per cent. Out of the N4.749 trillion budget for the 2012 fiscal year, the sum of N2.472 trillion is assigned to recurrent (non-debt) expenditure, while N1.32 trillion is assigned to capital votes. Debt servicing is expected to gulp N560 billion
The president stated that there was an aggregate increase in the capital expenditure proposed for the 2012 fiscal year, adding that the N1.32 trillion expenditure represents 28 per cent of the total budget, as opposed to 26 per cent recorded in the 2011 budget.
He also stated that the 2012 budget of N4.749 trillion amounted to a modest increase of six per cent over the N4.484 trillion appropriated for 2011.
He stated that the government intended to build on a progressive reduction in the capital expenditure and take it to 33 per cent by 2015.

The sectoral allocations, as released by the president, show that Defence takes the lion’s share of the budget, with the allocation of N921.91 billion. It is followed by the education sector, which has an allocation of N400.15 billion. This, however, excludes statutory allocations to the Universal Basic Education Commission; Petroleum Technology Development Trust Fund (PTDF) and Education Trust Fund.
Other sectoral allocations as presented by President Jonathan on Tuesday include Health Sector, expected to gulp N282.77 billion; Power, N161.42 billion; Works, N180.8 billion; Agriculture and Rural Development, N78.98 billion; Water Resources, N39 billion; Petroleum Resources N59.66 billion; Aviation, N49.23 billion; Transport, N54.83 billion; Lands and Housing, N26.49 billion; Science and Technology, N30.84 billion.
Niger Delta - N59.72 billion; Federal Capital Territory Administration N45.57 billion and Communications Technology N18.31 billion.
As part of the governments strategic policy to boost local production of rice and cassava, Jonathan stated that the government would increase import duties on imported rice , while machinery in the agriculture sector, aimed at increasing local production will attract zero import duty.
The president said: “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 per cent rebate if they attain 40 per cent blending.

The sum total for 2012 fiscal year is N4.749 trillion, an increase of six per cent over the N4.484 trillion appropriated for 2011.
Benchmark oil price of US$70/barrel
Estimated oil production of 2.48 million barrels per day (mbpd)
Exchange rate of NGN155/US$;
Projected GDP growth rate of 7.2 per cent
Projected inflation rate of 9.5 per cent.
The aggregate expenditure comprises N398 billion for Statutory Transfers,
N560 billion for Debt Service
N2.472 trillion for Recurrent (Non-Debt) Expenditure.
Recurrent Expenditure -N2.472trillion for Recurrent (Non-Debt) Expenditure
Capital Expenditure- N1.32 trillion representing a 15 per cent increase
SECURITY- N921.91 billion;
POWER -161.42 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
AVIATION – N49.23 billion
TRANSPORT – N54.83 billion
LANDS AND HOUSING – N26.49 billion
NIGER DELTA – N59.72 billion
COMMUNICATIONS TECHNOLOGY – N18.31 billion. Exchange rate of NGN155/US$.

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