Minister of  Finance, Ngozi Okonjo Iweala

By Obinna Chima

Financial analysts Wednesday said that the 2013 Appropriation Bill presented by President Goodluck Jonathan to members of the National Assembly, reflected an improvement in the Federal Government’s fiscal policy in the coming years.

They stressed that the 2013 budget proposed expenditure and revenue, when passed into law, would obviously be a significant improvement in the current budget, even as they argued that if effectively implemented, the economy would experience improved level of macro-economic stability and policy alignment between fiscal and monetary policies.

The president presented a budget proposal of N4.93 trillion for 2013, as against N4.697 trillion in 2012, two months earlier than usual. With this, its implementation period, if expeditiously approved by the lawmakers and signed into law, will run from January to December next year.

The share of recurrent spending in aggregate expenditure in the 2013 budget estimate was reduced from 71.47 per cent in 2012 to 68.7 per cent, while capital expenditure as a share of aggregate spending was also increased from 28.53 per cent in 2012 to 31.3 per cent in 2013.

The Appropriation Bill also showed that the Federal Government plans to narrow the budget deficit of 2.17 per cent of Gross Domestic Product (GDP) in 2013, compared to 2.85 per cent in 2012.

Also, the gross federally collectible revenue was projected at N10.84 trillion, of which the total revenue available for the Federal Government’s budget was forecast at N3.89 trillion, representing an increase of about nine per cent over the estimate for 2012.

However, the proposal of oil benchmark price of $75 per barrel by the president in 2013, as against the $80 suggested by the lawmakers, may lead to a showdown between both arms of government. The oil benchmark for 2012 was $72 per barrel. The Federal Government also projected oil output of 2.53 million barrels per day in 2013 from 2.48 million in 2012.

Jonathan said that non-oil revenue federal collected revenue would continue to grow in 2013 “as the ongoing reforms in our revenue collecting agencies and the implementation of initiatives to further develop the non-oil sector continue to yield results”.

A senior analyst at BGL Limited, Mr. Femi Ademola, welcomed the proposed revenue and expenditure, even as he commended the government for the timeliness.

Commenting on the divergent position on the oil benchmark by both arms of government, Ademola who spoke in a telephone interview with THISDAY, said: “There is always going to be disagreement on the oil benchmark until we have a law on how funds captured in the budget will be spent.”

On her part, Regional Head of Research, Africa, Global Research, Standard Chartered Bank, Razia Khan, described the Federal Government’s proposed revenue and expenditure as an encouraging sign of the attention currently given to ongoing reforms in the country. According to her, the financial market is expected to react positively in all the key metrics.

“First, spending is set to rise to N4.93 trillion in 2013. This five per cent rise in spending is relatively modest, and compares extremely favourably with the magnitude of spending increase that we had seen in 2010.  In real terms, it signals the ongoing attempt to achieve fiscal consolidation.  This is also reflected in the budget deficit, which falls to a projected 2.17 per cent of GDP, from an estimated 2.85 per cent in 2012.

“Second, the make-up of that spending is more encouraging as well.  The share of recurrent spending falls to 68.7 per cent of the budget, from 71.47 per cent previously.  It is a step in the right direction, and indicative of the authorities’ desire to gradually boost the share of capital expenditure – providing a firmer platform for future growth.

According to her, the adoption of a $75 per barrel oil benchmark is still relatively positive.

Managing Director/Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, explained that the increase in capital expenditure is expected to lead to an appreciable improvement in the size of physical infrastructure that the government can implement so as to further narrow the country's infrastructure gap.  According to him, the basis of the revenue estimate is realistic.

He added: “A crude oil bench mark of $75 per barrel, oil production of 2.53 million barrels per day and exchange rate of N160/$ are all within achievable threshold given the current global economic environment and the improving level of security in the Niger Delta, which is critical to oil production volume.
“I think that for the first time in a long period, business managers can start the New Year with a clear roadmap on the economic direction of the government, which incidentally is the dominant controller of economic resources in Nigeria.

“This implies that if the budget is passed before December 31, 2012, economic activities will begin in earnest from January 1 unlike in previous years when investors and other economic agents had to wait till April or May for the budget to be passed before they made their investment decisions.”

But Emerging Markets Strategist, Standard Bank Plc, Mr. Samir Gadio, expressed concern that the risk is that the National Assembly may push for a higher oil price benchmark and seek to increase the amount of spending planned for 2013 in line with the trend in recent years.