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FG Cuts Spending, Proposes N888 Billion Subsidy in 2012

16 Feb 2012

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Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala

By Ndubuisi Francis

Following the failure to remove the subsidy on petrol, the Federal Government has revised the 2012 budget proposal, of which it intends to spend N888.1 billion as subsidy on petrol and kerosene this year.

In the revised proposal, the government cut aggregate expenditure by N100.25 billion, to bring total expenditure for the year to N4.648 trillion, down from the N4.749 trillion in the budget proposal submitted last December by President Goodluck Jonathan.

Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, who briefed journalists in Abuja, Wednesday, said following the partial subsidy removal, which arose from a reduction in the price of petrol to N97 per litre from the indicative price of N141 per litre set by the Petroleum Products Pricing and Regulatory Agency (PPPRA) on January 1, the new price had implications on the 2012 budget.

The minister explained that the 2012 Fiscal Framework earlier submitted to the National Assembly had assumed 100 per cent subsidy removal with only N155 billion provided for carry-over of 2011 subsidy payments.

Giving a breakdown of the N888.1 billion built into the revised budget, the minister said that the subsidy on petrol and kerosene in 2012 is N656.30 billion, while N231.8 billion is a carryover from outstanding payments for 2011.

On how the government arrived at the estimated subsidy payments in 2012, the minister explained that after extensive consultations with the Nigerian National Petroleum Corporation (NNPC) and PPPRA, the amount required for 2012 was estimated using 2008 as the baseline year.

According to her, 2008 appeared to be the year subsidy payments and other associated factors were fairly stable. The Federal Government’s share of the projected subsidy is now N374.73 billion, while the balance will be made up from monthly allocations meant for states and local governments.

The total cumulative accrual from the partial removal of subsidy for the federal, states, and local governments now stands at N426 billion from which the Federal Government would get N180 billion as against N478 billion it would have saved had the subsidy of petrol been fully removed.

The minister, who also spoke on the Subsidy Reinvestment and Empowerment Programme (SURE-P), said since the accrual to the Federal Government now stands at N180 billion under a partial subsidy regime, the government would scale down projects under SURE-P.
She listed some of the priority projects/programmes, which will now be accommodated under the reduced accrual as social safety nets such as those for health care, mass transit programmes, vocational training, major road and rail projects, including the Abuja-Abaji road, Benin-Shagamu road, second Niger Bridge and Kano-Maiduguri road, among others.

Okonjo-Iweala stated that with the budget revision, the fiscal deficit now stands at N1.18 trillion, adding that although the deficit increased slightly from 2.77 per cent of GDP in the original budget proposal to 2.97 per cent of GDP under the revised budget, the extant sources of financing the deficit remained privatisation proceeds, signature bonuses and domestic borrowing.

The minister noted that following President Jonathan’s directive, and in line with his commitment to reduce the fiscal deficit and domestic borrowing, several steps were taken to bring the deficit in the 2012 budget to a more manageable level.

On the revenue side, the minister said the measures included squeezing further resources from revenue generating agencies, adding that internally generated revenue would go up by N53.3 billion from N393.46 billion to N446.78 billion as a result of the ongoing engagement with these agencies.

She also disclosed that the Pension Task Force made a recovery of about N151 billion following the use of the biometric verification system in plugging leakages occasioned by the menace of ghost workers in the public sector.

The minister disclosed that N74 billion of the amount had already been reflected in the revised 2012 budget. 
Okonjo-Iweala said the cut in aggregate expenditure was also achieved through reductions in statutory transfers by N25.34 billion; the service wide vote - N24.39 billion from N337.08 billion to N312.69 billion; and the overhead vote which was reduced by N17.75 billion.

Capital expenditure was also reduced by N35.53 billion from N1.319 trillion to N1.284 trillion, as a result of the removal of administrative capital items such as the procurement of fridges, computers, fans and vehicles, among others.

She said these cuts and others resulted in savings of about N100.25 billion, with aggregate expenditure coming down from N4.749 trillion in the previous budget proposal to N4.649 trillion in the revised budget.

The minister, who also spoke on the Federal Government's planned external borrowing, said external debt currently stands at $5.6 billion while domestic debt was put at N5.6 trillion, adding that though domestic debt is worrisome, the nation's debt to GDP ratio is still sustainable. 

Tags: Featured, FG, News, Nigeria, SPENDING, SUBSIDY

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  • How about the presidents budget on food? How about the 25% basic salary cuts and travel expenses? What are the implications on the budget? These guys are jokers.

    From: lalaska

    Posted: 2 years ago

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  • Reasonable cuts, yes. But much more is still needed.

    From: Tunde

    Posted: 2 years ago

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  • Who is this Government deceiving? 1.4trn last year and 656bn this year when we pay 50% more than last year. If we were paying last year's price, subsidy this would still have been 1.4trn!!! This is because the balance on the 656bn that Government is not paying is being paid by the people. The cabals are still being fed anyway.

    From: El Martino

    Posted: 2 years ago

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  • Good work. But you guys have to keep working to reduce the recurrent.

    From: Swally

    Posted: 2 years ago

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  • It is better you do not make a comment than to make one and not make sense. So many people cannot govern their family of less than five, yet they want to teach government how to govern. Incredible! The time has come for us to believe in ourselves and believe in our govt especially the federal govt. We have been deceived for so long that we see every president as a deceiver even when he is sincere. We cannot continue like this if we want development. We all have a part to play. When you are not comfortable with a particular govt policy or practice, come up with a better alternative.

    From: SSA

    Posted: 2 years ago

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  • Having gone through the Minister's revised budget summary, I still disagree with the subsidy provisions. In escence, the total subsidy payment for 2011 is now about =N=2trillion, and a whopping =N=656billion provision made for 2012. I strongly disagree with the said subsidy provision for 2012, since subsidy removal is still in place, going by fuel price of =N=97 per litre, translating to 49.2% increase in the price of fuel from the original =N=65 per litre price. Since this agreed subsidy provision was arrived at in conjunction with NNPC and PPPRA, the Minister should also tell Nigerians how many litres of petrol and kerosine are consumed on a daily basis, since there is wide disparity on figures quoted at the ongoing fuel subsidy probe (between 35m litres and 59m litres per day). Since the cabal has been severally accused of cheating Nigerians in the subsidy regime, what measures were taken by the govt to ensure that those leakages were blocked? Who are now the importers of fuel and kerosine? Are they not thesame cabal that was used in deceiving Nigerians? I smell very strong deceit in this new budget proposal. The govt is aware that the reason they gave for subsidy removal was diversionary, hence the re-introduction of the said subsidy again, which is only reflecting now in theory. This govt should also tell Nigerians the measures taken so far in infrastructure improvement both in the oil sector and other sectors. Have the repairs and maintenance work on the refineries commenced? How long will the govt continue to import petroleum products? These are questions begging for answers.

    From: John

    Posted: 2 years ago

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  • You people are trying but what we need now is job opportunity.

  • Much need to done by federal Government because we have not heard anything about the president budget on food .

    From:chigo

  • I believe this is a bold step and @ the rite direction. lets give them our full support and keep hoping for the best. GOD bless naija

    From: ogo samuel

    Posted: 2 years ago

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  • Cheers people!

    From: ONEWORLD.

    Posted: 2 years ago

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  • Habaaa!!!!!!!!!!. You said the Government was unable to remove the subsidy, and yet the price of gasolin(petrol) has been raised from N65.00 per a liter to almost N100.00 per liter.Mrs. Why did you raise the price in the first place?

    From: ONEWORLD.

    Posted: 2 years ago

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  • If the government can implement these priority projects like the Abuja-Abaji, Benin-Shagamu, etc, it will earn the trust of the people to conclude the deregulation and end this scam in the NNPC, meanwhile it still needs to do more housekeeping at NNPC

    From: DrP2

    Posted: 2 years ago

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  • The minister explained that the 2012 Fiscal Framework earlier submitted to the National Assembly had assumed 100 per cent subsidy removal with only N155 billion provided for carry-over of 2011 subsidy payments.

    Giving a breakdown of the N888.1 billion built into the revised budget, the minister said that the subsidy on petrol and kerosene in 2012 is N656.30 billion, while N231.8 billion is a carryover from outstanding payments for 2011.

    From 155billion carry over to revised number of 231 billion, these guys are really taking us for a fool!!

    From: tommey

    Posted: 2 years ago

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  • The chicken is finally coming home to roost. This must rank as one as the most irresponsible and corrupt government in Nigeria. The budget provision for subsidy was 240 billion. All of a sudden it jumped to N1.3tr then upon investigation was increased to 1.7tr. We have now been told the final figure is 2tr. PMS prices has increased by 50 and the new subsidy figure is 888 billion with the SURE Programme falling from 1.3tr to 180 billion. Yet another federal Government scam. Where are the 25 cuts the President promised in those in political offices. What about the oil cabal who have been paid subsidy for petrol that was eventually sold outside the territorial waters of Nigeria to neighbouring countries. Will this Government go after them? of course not. This Government stinks to high heaven of corruption with a President that will only bark but not bite alongside so called transparent technocrats who promise the world but deliver nothing. A clear case of if you cant beat them join them.

    From: Bankole

    Posted: 2 years ago

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