FG denies $1bn loan, as Jonathan signs N4.6trn budget
By Daniel Idonor
Friday, April 23, 2010
ABUJA—ACTING President Goodluck Jonathan, Thursday, signed into law a N 4.6 trillion budget for 2010, with more than a third earmarked for the development of roads, power and the Niger Delta.
Acting President Goodluck Jonathan with the Senate President, David Mark, Deputy Speaker, House of Representatives, Usman Nafada and Presidential Adviser on National Assembly, Senator Muhammed Abba Aji as he signed the 2010 Appropriation Bill into law in Abuja, yesterday. Photo by Abayomi Adeshida.
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The government also said it had no plan to borrow $1 billion to fund the N1.3 trillion deficit in the 2010 budget, stressing rather that it was considering raising about $500 million Bond from the International Capital Market.
Fielding questions from State House Correspondents after Acting President Goodluck Jonathan signed the 2010 Budget, the Minister of Finance, Mr Olusegun Aganga, denied reports that the government was in the process of borrowing from the World Bank to fund the shortfall in the budget.
He said: “This is absolutely wrong. We are not borrowing a $1 billion to fund the budget, I think what they are referring to is something which we are working on with the World Bank, and the World Bank as you know helps a number of developing countries. That is just a quantification of the work they are doing which is broken down to quite a few segments, maybe eight or nine of them.”
This process, he said, cannot be borrowing, adding: “It is not one billion dollars borrowing up-front, it doesn’t work like that. It has nothing to do with the budget.”
Capital expenditure on projects
The 2010 budget provisions signed into law includes N1.85 trillion as capital expenditure and N2.077 trillion as recurrent, non-debt expenditure. The capital expenditure is about 40.21 per cent of the total budget meaning that for every N100 to be spent this year N40.21 will go for infrastructure and other developmental projects while about N45 or 45.15 per cent will be devoted to the payment of salaries of federal civil servants, debt payment and the running of government.
The 2010 budget increases expenditure by 50 per cent from last year’s as the Federal Government tries to spend its way out of a downturn, pushing the economy into a budget deficit of more than five per cent. The budget when fully implemented has the capacity to improve on existing infrastructure and boost job creation as well as power supply.
The fear, however, is that Nigeria has never been able to implement its budget fully. Last year Ministries, Departments and Agencies were only able to execute about 47 per cent of the capital projects which resulted in the extension of the 2009 budget to March 2010.
“Acting President Goodluck Jonathan said at a signing ceremony in Abuja, yesterday: “It is with a deep sense of responsibility that I sign the 2010 budget for the acceleration of development in our country.”
Analysts had welcomed the government’s move to boost the economy but cautioned the quality of spending would be key, given Nigeria’s reputation for inefficient budget implementation.
Finance Minister Olusegun Aganga said: “The most important thing for us is to make sure that in spending we get good value for the money spent.”
The budget assumes an average oil price of $67 per barrel and oil production of 2.35 million barrels per day. It is based on an exchange rate at 150 naira to the dollar, an inflation rate of 11.2 per cent and growth of 5.47 per cent. The budget assumption of 2.35 million a day is predicated on peace returning to the Niger Delta which at the moment remains suspect.
The silent point in the 2010 budget is the non provision for subsidy. It is expected that subsidy on petroleum product will be removed during the implementation of the budget. This will result in consumer inflation remaining in double-digits through 2011 as the government slashes fuel subsidies, engage in.
Minister explains govt’s borrowing
Explaining the issue of borrowing to finance the 2010 budget, the minister of finance said: “I think that it has been made clear from the beginning. There are other sources of revenue in which we are looking at, there was some mention of sales of some assets and it has been mentioned that we are going to raise a bond this year.
“We are going to the international capital market this year to raise about $500 million but I think the most important thing we should understand is that in a recession, there is nothing wrong about spending, in fact if you look at any of the western world they all have deficit.”
He pointed out that the deficit was growing at an alarming rate, but noted that “the most important thing for us is to make sure that in spending we get good value for the money spent, that it is spent in areas where we generate both social and economic returns.
This, he added, “is what is critical and that is why we should all be pleased that the acting president made it very clear today that this administration is going to be focused on the execution of the budget is going to be heavily focused on how money is being spent and the minister in charge of special duties has been mandated to handle that, so you will see changes in that direction”.
Speaking on the budget, the Minister said that the assent or signing of the budget “is something that is going to help to grow the economy and it is something that we have been waiting for and it is something that has been done. My focus now will be on three major things.
“One, is about the management of our revenue, which will make sure that there are no leakages, making sure that we risk manage whatever we need to risk manage. Secondly, we are looking at what will be enhancing the quality of spending. It is ok to spend but it is important that you spend wisely and people are held accountable”.
“You may have heard what the Acting President said; he made it very clear that the minister in charge of special duties has been mandated to make sure that we get real value for money spent. So, the idea is to enhance the efficiency and the quality of our spending and the last one, which I of course continue to look at, is how we manage any excess revenue.
“As you know, the budget is based on benchmark of $67 dollars per barrel, where the oil is trading today, so obviously over time we will hopefully accumulate some excess reserve and the idea is how we build some fiscal policy around it or prudential guideline around it to make sure that that is properly managed.”
On the controversy surrounding the Joint Venture Cash-Call, Aganga said “It will not in any way affect the budget. We are looking into it already and the issue has been raised before.”
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