Source: Nigeria government
Title: President Umaru Musa Yar'Adua, 2008 Budget speech
The dawn of a new millennium is a once in a lifetime experience. The
conventional resolve that accompanies the fleeting of each New Year and the
emanation of another one is amplified by the momentous feeling that we are
witnessing a spectacle of history in the making. The dawn of a new centenary
also reflects on the past.
Undoubtedly, Nigeria has experienced tremendous progress since the turn of the
twentieth century. This was made possible by our commitment and resolve for
progress, sound macroeconomic policies, a plethora of reforms within the
context of the National Economic Empowerment and Development Strategy
Initiative (NEEDS), the Millennium Development Goals (MDGs), my
Administration's Seven-Point Agenda and the implementation of the Policy
Support Instrument (PSI) framework.
The sustained rise in international oil prices was also a significant contributory
In delivering my first budget to this august Assembly, I am delighted to report
that our 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. In
particular, the last five years have indicated even brighter prospects for
sustained growth. Based on current trends, real GDP growth for 2007 - 2008 is
set to average 7.0% per annum, much better than the performance of the
previous two decades when GDP growth averaged 3.0% 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 US$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 2020 it is imperative that our economy grows at an
even faster rate.
Our 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% of our population still live below the poverty
line. Oil still accounts for about 40% of GDP, 90% of exports and 80% of
government revenue. The challenge therefore is to reverse these ratios.
It is against this backdrop that I consider it a great honour to present to this
Joint Session of the National Assembly, the 2008 Budget proposal of the Federal
Government of Nigeria.
In our continued efforts at fiscal reforms, this budget has been prepared within
the context of a Medium-Term Fiscal Framework, which takes account of the
forecast revenue and expenditure for the period 2008 - 2010.
Mr. Senate President,
Distinguished Members of the National Assembly,
The preparation of this budget has been informed by the need to be disciplined,
focussed and strategic. We placed emphasis on containing costs so as to
enhance value for money. We followed a well-defined participatory process
aimed at ensuring that spending proposals are properly linked to our Seven-
Point Agenda. All the major line Ministries were requested to reappraise in detail
their initial proposals, keeping in view the need to strengthen public expenditure
management and ensure transparency, accountability and value for money, with
emphasis on completing on-going projects. This has helped us to make
significant spending efficiency gains. It is our intention that this level of
attention to detail will continue to underlie all future Budget preparation and
The 2008 budget, 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.
Broadly, the 2008 budget provides:
· N444.6 billion for Security and the Niger Delta, which is 20% of the total
Federal Government Budget, up 6.5% from 2007 allocation;
· N210 billion for Education or 13% of the total MDA spending;
· N139.78 billion for the Energy sector, excluding National Integrated Power
Projects which will be implemented through alternative funding; and
· N121.1 billion, that is 7% of total budget, for Agriculture and Water
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 and Water
Resources, Power and Social Safety Nets.
The Budget is basically 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
REVIEW OF BUDGET 2007
The 2007 Budget was predicated on a production volume of 2.5 million barrels
per day and a benchmark price of US$40 per barrel. Based on these
assumptions and a projected N100 billion from Independent revenue sources,
projected total revenue available to fund the federal budget is N1.73 trillion. This
represents a 20% growth relative to 2006. The 2007 Appropriation Act
authorised aggregate spending of N2.3 trillion, made up of Statutory Transfers of
N102 billion, Debt Service of N326 billion and N1.88 trillion for MDAs. The
projected deficit was therefore N570 billion or 2.5% of GDP.
The performance of the 2007 Budget in the first half of 2007 has been mixed.
While oil prices remained well above the benchmark price of $US40 per barrel on
which the 2007 Budget was predicated, adverse production variances, due
principally to disruptions in the Niger Delta, resulted in weak revenue
The projected revenue for 2007 was estimated to be about N796 billion short of
budget expectations, of which N339 billion would be the impact on the Federal
Budget. The implementation of the expenditure plans for 2007 was however
insulated from the effects of the revenue underperformance through monthly
releases, totalling N454 billion which were drawn from the Excess Crude Account
in the first half of the year.
To further enhance the implementation of the 2007 Budget, we sought your
approval, after a review of the 2007 Appropriation, to redirect available funds to
the implementation of a number of key public service reforms, including the
implementation of the Consolidated Salary Structure, on-going right-sizing of the
MDAs and clearance of local debt arrears. A sum of N170 billion in efficiency
savings was identified from within the existing Appropriation to fund these
reforms. An additional N86 billion, principally made up of independent revenue
already received was also appropriated.
At this juncture, I must put on record my appreciation and that of the nation as
a whole for the efficient and timely manner in which the National Assembly
approved the 2007 Revised Budget proposals. This has encouraged me to
believe that the budget I am presenting to you today will be considered with
similar sense of responsibility and patriotism. I would like to seize this
opportunity to confirm to you that, in the same spirit, I have signed the 2007
Supplementary Appropriation Bill passed to me after approval by the National
THE 2008 BUDGET
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.
Key to our developmental aspirations is the need to maintain macroeconomic
stability and fiscal responsibility.
While our overall strategy is to focus on the completion of on-going projects, we
have also taken onboard a few new projects targeted at improving
KEY ASSUMPTIONS AND TARGETS
The 2008 Budget is based on a number of assumptions and it is driven by the
need to meet certain targets. These are:
· Oil price of $53.83 per barrel
· Crude oil production of 2.45 million barrels per day
· Joint Venture Cash Calls of US$4.97billlion
· GDP growth rate of 11%
· Inflation rate of 8.5% and
· Exchange rate of N117 to US$1
The budget is based on a prudent benchmark price US$53.83 per barrel to
ensure that we fund the budget with predictable revenues, whilst ensuring that
the benchmark price remains realistic.
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% 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% of the total
estimated revenue, while Non-Oil Revenue represents 20%.
We will continue to diversify our revenue base by further development to the
non-oil sectors of our economy which are estimated to grow by 10% in 2008.
Of the total N4.210 trillion that we estimate will accrue from Oil Revenue, Crude
Oil Sales are expected to contribute N2.345 trillion, as against N1.6 trillion in
2007; Petroleum Profits Tax is estimated at N1.282 trillion compared to N1.78
trillion in 2007; while Royalties and Rents should account for N0.583 billion as
against N0.532 billion in 2007.
This is made up of Companies' Income Tax, Value Added Tax and Customs &
Excise Duties. Of the sum of N0.91 trillion expected to accrue to the Federation
Account from Non-Oil Revenue; Companies' Income Tax is expected to account
for N349 billion, as against N299 billion in 2007; Value Added Tax should
contribute N310 billion, as against N265 billion in 2007; while Customs & Excise
Duties should account for N251 billion, as against N230 billion in 2007.
Federal Government Revenue
The revenue accruable to the Federal Government from the Federation Account
for 2008 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).
Independent Revenue, made up of revenues that accrue exclusively to the
Federal Government from the operating surpluses and dividends of commercial
enterprises, is expected to be N120 billion.
Our estimate of total revenue available to fund the 2008 Budget is therefore
FEDERAL GOVERNMENT EXPENDITURE
The proposed aggregate expenditure 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
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 Blocks Signature Bonus,
privatization proceeds and domestic borrowings.
The details of the expenditure heads are as follows.
In complying with the law, we will fully provide for the following statutory
· National Judicial Council (NJC), N78 billion as against N43 billion in
· Niger Delta Development Commission (NDDC), N69.9 billion as
against N24 billion in 2007.
· Universal Basic Education Commission (UBEC), N39.7 billion as
against N35.3 billion in 2007.
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 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. 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.
Since our successful exit from the Paris Club debts, the structure of our external
debts has changed significantly. Our total foreign debt stock now stands 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%.
This manageable debt level continues to allow us to redirect expenditure away
from debt service payments to capital spending.
Our intention is to continue to service multilateral debts as and when due, until
maturity. Our analysis indicates that there will be no financial benefit from
undertaking any restructuring or otherwise prepaying these debts. We therefore
have earmarked the sum of N66 billion for servicing our external debts in 2008.
SPENDING BY MINISTRIES, DEPARTMENTS AND AGENCIES
We propose a total of N1.89 trillion for spending by Ministries, Departments and
Agencies. This represents a 0.1% increase relative to 2007 made up of -
· Payroll of N779.3 billion;
· Overheads of N267.6 billion
· Capital Expenditure of N634.2 billion
· Consolidated Revenue Fund Charges excluding Debt Charges of
Payroll and Overheads, which together constitute Recurrent Non-Debt
Expenditure, account for 55.2% of total spending, while Capital Expenditure
accounts for 33%. Within recurrent expenditure, payroll has increased minimally
to N779.3 billion, following Government reforms in that area. Overheads have
been kept in check with a proposal of N267.6 billion, a reduction from the 2007
level. The relatively low utilization of the 2007 capital budget accounts for the
reduction to N634.2 billion in 2008.
I will now give highlights of some key projects.
We propose capital expenditure of N94.36 billion for the Transportation Sector.
Specifically, we have set aside the sum of N73.1billion for Highway Construction
and Rehabilitation; N6.02 billion for Survey, Mapping and Geo-Information
activities; N6 billion for Water Transportation development, including the
dredging of the River Niger from Lokoja to Warri, (including the construction of
jetties); and N9 billion for the development of Air Transportation.
To augment government spending on the provision of roads, we shall invite
private investments into the sector. We have already reached agreements with
interested private sector investors for the construction of the second Niger
Bridge at Onitsha/Asaba and a Bridge across River Benue at Bagana on the basis
of a public-private partnership.
Agriculture and Water Resources
A total of N89.95 billion is proposed for the Agriculture and Water Resources
The sum of N31.2 billion is proposed for the construction of dams and irrigation
projects nationwide. Other key projects and initiatives include:
· N7.2 billion for the Gurara Water Transfer project, to supply water
to the FCT and its environs
· N3.4 billion for cooperative and community tractor service in 200
· Procurement of tractors and implements supplied at subsidized
· N0.9 billion for Buyer of Last Resort Programmes
· N4 billion for Agricultural Credits and Subsidies, including the
Fertilizer Subsidy Programme
· N 0.3 billion for the Chinese South-South Cooperation Programme
We propose an allocation of N210.45 billion for the education sector, up 12%
from the N188 billion allocated in 2007. The capital component of the allocation
is N47.8billion, targeted at human resource capacity building, upgrading of
facilities in our educational institutions and reforms to improve the quality of,
and access to education. This excludes our intervention through the Universal
Basic Education Commission, through which we are providing additional
resources of N39.7 billion to the States and Local Governments to support basic
These additional resources are to upgrade infrastructure and teaching facilities in
primary schools across the nation.
For the Health Sector, we propose an allocation of N138.17 billion for 2008, a
12.57% increase over the 2007 allocation of N120.8 billion. The capital
component of this amount is N49.37 billion, out of which funds have been
provided for, among others, the following projects:
· Refurbishing and equipping all Federal Tertiary Health Institutions
· National AIDS/STI Control Programme, including the procurement
and distribution of ARVs and test kits
· Rollback Malaria Programme, including the procurement of new
drugs for malaria case management and insecticide treated nets
· National Programme on Immunisation for routine immunisation
· Capacity building and training for 5,000 health workers on
integrated management of childhood illnesses.
We have allocated N139.78 billion to the Energy sector. This represents an
increase of 15.6% over the 2007 allocation of N118 billion. The capital
component of this is N114.4 billion, out of which funds have been provided for
the completion of 32 on-going Power Transmission Projects and the
rehabilitation of key power stations nationwide.
Alternative funding will be sourced for ongoing work on the National Integrated
Power Project in the Niger Delta region with expected output of 2,555MW.
We intend to enhance the capacity and preparedness of our security services.
We have therefore proposed a total allocation of N444.60 billion for the military
and the Police. We are providing our security services with all requisite force
enablers and multipliers, including arms and ammunition, improved information
and telecommunications equipment and facilities, riot control equipment,
training and retraining, and sundry logistics support. We are also rehabilitating
the residential and office accommodation of the security services.
Included in these allocations, as outlined earlier, are the debt relief savings for
2008 totalling N110 billion. As earlier stated, these savings will be used
exclusively to support and scale up spending on MDG-related initiatives and
programmes. In this respect, we shall increase investments in areas that
performed well in the 2007 budget. Of the N110 billion debt relief savings, we
propose to allocate N59.3 billion to the States and FCT as Conditional Grants, for
targeted, result-oriented expenditures. This is a safety net programme targeted
at ensuring that the rural poor have access to markets and credit, as MDGs are
better attained through the States and Local Governments. The role of the
Federal Government is to ensure the judicious application of these grants and to
support the efforts of the States and Local Governments that have demonstrated
commitment to reform, good governance and the socio-economic development
of their people.
The detailed budget contains a list of the priority projects earmarked for
completion this fiscal year in each sector.
We are providing N99.7 billion for pensions under the Pay-As-You-Go System for
the 2008 fiscal year, to ensure that our pensioners are paid as and when due.
Public Service Reforms
To ensure that our Public Service Reforms continue, we have set aside the sum
of N22.5billion in 2008 to support this programme. Our aim is to continue to
improve service delivery in the Public Service.
Mr. Senate President,
Honourable Members of the House of Representatives,
We have a historic opportunity to build a strong and resilient economy which will
result in tangible benefits for the generality of our people. We do not underestimate
However, with your continuing support, I am confident that we can, together,
lay the solid foundation of a bright and prosperous future for our nation.
We must have the courage to do all that is right, decent and compassionate; all
that needs to be done for our nation's restoration. We must do this always with
strict adherence to the rule of law and due process, however inconvenient
sometimes. We must not shy away from the path of fiscal responsibility and
Before I end this address, it is apposite that I inform this august Assembly that I
have assented to the Fiscal Responsibility Bill after due consultation with the
State Governments whose support and concurrence is critical to the successful
nationwide implementation of the provisions of the law. It is hoped that this will
help to institutionalise and formalise the observance of fiscal discipline.
I must restate our Administration's appreciation of the thorough and expeditious
manner in which the National Assembly has consistently considered matters
brought before it by the Executive.
I am reassured by this very cooperative relationship, founded on mutual respect
and a mutual recognition of our shared responsibility to rebuild our nation and
reposition her for democratic good governance, peace, security, sustained
growth and development.
Mr. Senate President,
Distinguished Members of the National Assembly,
It is with utmost regard that I lay before you the 2008 Budget of the Federal
Government of Nigeria for your consideration.
I thank you most sincerely for listening. God bless the Federal Republic of