By Omoh Gabriel
President Umaru Musa Yar‚Äô Adua has in the provision of the 2009 budget introduce austerity measure in Ministries, Departments and Agencies to combat the financial constraints facing the 2009 budget. This will in the course of the implementation of the budget bring about belt tightening of the every Nigerian. This is more so if the revenue expectation fall short of target as already the price of crude has slide to $44 per barrel below the $45 per barrel benchmark of the 2009 budget and the fact that OPEC has cut Nigeria quota to 2.05million barrel per day while the budget is predicated on oil production of 2.292million barrel per day.
Giving hints of the proposed austerity measures in Lagos on Friday, Minister of Finance Dr. Shamshudeen Usman who was accompanied by the Minister of Information Mr. John Odey said that ‚ÄúDue to these serious resource constraints, the 2009 budget features certain cost saving measures‚Äù Giving details of the measures the minister said that in the 2009 budget circle ‚Äúthe federal government will not purchase any new vehicle‚Äù. He said that the government in the thought that went into the framework of the 2009 budget has decided to introduce eight cost saving measures which guided the provisions for the budget proposals. The eight measures are:
* No new procurement of new vehicles, no construction/acquisition/purchase of new office buildings, reduction in the provision for office furniture and equipment in non essential cases, reduced provision for international travels and transport, focus on priority sectors, reduced provision for workshops, outlays on meals and refreshment have been rationalised across the board, minimal capital votes for some MDAs.
Dr. Usman said that ‚Äúit is based on these policies that details of the 2009 budgetary provisions were made‚Äù. The minister disclosed that ‚Äúthe deficit component of the 2009 budget was higher than what the fiscal responsibility act provided for and would require the approval of the National Assembly for the executive to implement the deficit‚Äù. He said that the act provision ‚Äúempowers the executive to raise a deficit of 3 per cent of GDP but that the current deficit is 3.3 which is above the provision of the act and would need the approval of the legislature for it to stand‚Äù. Making for clarification on the budget the minister said that the source of funding of the deficit has been well articulated. He said that ‚Äúthe deficit is to be financed by out standing signature bonuses, privatisation proceeds, recall of $200million from Africa Development Bank/ATF, unspent balances of 2008 budget and domestic borrowing‚Äù.
Giving the breakdown of the amount expected from the various outlined sources to finance the deficit the minister said that outstanding signature bonuses from oil block sales amounts to N155billion, Proceeds from privatisation N100billion, the recall of $200million from yields of Nigeria investment in Africa Development Bank Trust funds (which has grown to $400million) N25billion, Domestic borrowing will yield N420billion, Nigeria International Bond that will be floated will yield another N62billion and about N330billion from the unspent 2008 budget will all be put together to finance the deficit component of the 2009 budget.
Explaining the rational for federal government‚Äôs plan to issue a $500 million, 10-year sovereign bond Shamshudeen said that it is ‚Äúaimed at setting a benchmark interest rate for private borrowers looking to invest in the global capital market that will set a basis for discussion with private investors who are interested in Nigeria Public Private Partnership. He said that at the moment there is no benchmark for measuring Nigeria risk and with government plan for PPP, it has become imperative for Nigeria to raise the bond from the international capital market. It is for us to have a benchmark rate so that we can determine the risk nature of the country,” He said the interest rate at which the naira-denominated bond is sold will help provide a reference point for Nigerian banks and other domestic companies in raising funds in the international credit market. Global investors are increasingly interested in buying Nigeria assets as a way of picking up yield, due to tightening debt spreads in traditional emerging markets. Ratings agency Standard & Poor’s launched a national credit rating scale for the Nigerian government and corporate debt last month to reflect rising foreign investment in Africa’s top oil producer.
File : Austerity 06/12/08