Analysis

Obviously factoring various positions into the making of the 2011 appropriation, President Goodluck Jonathan yesterday presented to the National Assembly a budget with aggregate expenditure at N4.226 trillion, which represents 18.1 per cent reduction from the N5.159 trillion appropriated by the 2010 amendment and supplementary budgets.
A potential problem solver is the plan by the Federal Government to embark on massive public works, thereby confronting the unemployment challenge.

A Public Works Programme is to commence across the 36 states and the Federal Capital Territory and will involve the engagement of private sector contractors to implement simple, labour-intensive public works in areas such as the renovation and maintenance of buildings such as schools, hospitals and primary healthcare centres; roads rehabilitation and maintenance works; urban sanitation and solid waste disposal; erosion control; and community works projects.
The stated objective of massive job creation, to be kick-started with seed funding of N50 billion, has been long awaited as this is capable of creating thousands of new jobs in urban and rural communities.

But there are always fears that the programme may be politicised and turned into a partisan project thereby
negating the purpose of addressing the unemployment menace in the country. This is a potential drawback if not well handled.
The budget also seeks to cut aggregate expenditure while stimulating growth in various sectors, notably with the provision of concessionary funds small and medium scale businesses. There is also an attempt to be more conservative with the budget benchmark, with a projection of $65 per barrel compared to $67 last year. Does this mean there would now be fresh savings in Excess Crude Account as well as funding for the proposed Sovereign Wealth Fund?
Analysing the budget yesterday, Managing Director, Financial Derivatives, Mr. Bismark Riwane, described the expenditure reduction in the 20101 budget as a welcome development.

He, however, told THISDAY: “It is not enough to peg spending. Other challenges such as the nature and assumptions of the budget and the quality of spending should be looked into.”
He insisted that the quantity of spending was not the issue but the quality.
Specifically, he said what a country in recession like Nigeria needs is a strategic investment that has the greatest multiplier effect.
"Government needs to engage in very aggressive spending in targeted areas but not on consumption. Personally, I think quantity of spending is not the issue but the quality of spending. You can spend small amount wisely or large amount foolishly.

"Austerity is not the road to prosperity. You can spend your way wisely out of a recession,” he said.
Rewane had in a recent preview of the 2011 fiscal year expressed reservations about budgeting in the country.
He wrote in his Monthly Economic Review: “Since the beginning of budgeting in Nigeria, the country has adopted what experts call a single budget scenario, a crude, short-sighted, inefficient and unrealistic method of planning, whether at the individual, corporate or national level. It is simply a budget without a contingency plan.”

“But what if revenue assumptions fall short of expectations due to oil price or production shocks? How will spending and deficits be managed? The idea of multiple scenario budgets is not new in the policy sphere. The problem has been the lack of political will to implement such a decisive plan for spending.
"Effective fiscal management will also continue to face head winds if issues relating to transparency and accountability are not addressed.”

An Analyst with Standard Chartered, Razia Khan, said the combined benchmark oil price and output assumption – at 65/bbl and 2.3mn bpd – still make for uncomfortable reading.
Khan wrote: “Although oil prices are currently higher, and production should exceed these levels, the run-down of Nigeria’s buffer post-crisis, in the form of depletion of the excess crude account, means that there may be few alternatives to more borrowing, if – for any reason – oil output should disappoint. A USD-NGN FX rate of 150 is assumed, but given budget assumptions, and the suggestion that the replenishing of FX reserves will at best be a slow process, a further tightening of monetary policy may well be required to ensure continued FX rate stability. Given 2011 spending plans, FX reserves may remain under pressure, and offsetting policy will require from the authorities to ensure price stability.

“With only N1trillion of the budget set aside for capital spending, this is now confirmed. Total spending may be set to fall by 18 per cent y/y [year-on-year] (after rising over 50 per cent y/y in FY 10 – so context is everything), but the share of recurrent expenditure in overall spending will increase. Given the ongoing dependence on the oil sector for much of Nigeria’s fiscal revenue, this is a concern. Despite a promising start with the unveiling of power sector reforms, there are still too few signs of meaningful structural change. 2011 growth will be boosted by the level of spending – that already seen in 2010, as well as what is yet to come, but investors seeking reassurance that there is more long term thinking to underscore policy, are likely to be disappointed, with any meaningful fiscal consolidation delayed until 2012.

“While the deficit numbers are not, in and of themselves, a great concern, and while Nigeria appears to have got through its banking sector crisis with relatively little fiscal impact, it is what’s missing from the picture that is more worrying. Oil is not a renewable resource, and the use of oil revenue to finance mainly recurrent expenditure, with little done to boost longer term savings, and the longer-term productive potential of the economy, is the more important issue.”
Emerging-markets strategist at London-based Standard Bank Plc, Samir Gadio, told Bloomberg news in an e-mailed note yesterday: "The proposal suggests that this year’s loose fiscal stance will gradually be reversed as the electoral cycle comes to an end in the second quarter of next year.

“This is positive news since the current fiscal path would have been unsustainable in the long run.”
Senate President David Mark had in response to the budget presentation indicated that the National Assembly would lead a crusade to cut spending on recurrent expenditure by all tiers of government.
It is a clear endorsement of the stand of the Finance Minister, Dr. Olusegun Aganaga, and Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi on the need to cut recurrent expenditure.

The decision of the government to focus on capital expenditure is also a positive response to the clamour for a reversal of the lopsided ratio between recurrent and capital expenditure as canvassed by experts including the Sanusi.
Analysts maintained that there is need to block leakages in the budgetary process but harped on total implementation of the appropriation especially capital provisions such that public revenue and spending can impact positively on the lives of the people.
The fallout of the 2010 budget raised concern for the 2011 fiscal year. The economic team of the current administration, led by top officials at the Federal Ministry of Finance, National Planning Commission and the CBN had in the past months given clues to the thinking of technocrats in government circles concerning the 2011 fiscal appropriation.

Issues of public expenditure, the quality of spending, sectoral allocation of the budget, macroeconomic assumptions, budget implementation and fiscal deficits among others had come on the front burner vis a vis the need to reduce distortions to micro and macroeconomic indicators in the coming year.

As the global economic crisis recedes, posing fresh challenges to repositioning the economy, analysts have called for a budget that would accelerate infrastructure development and jump-start the real sector.
The threat of inflation in an election year, exacerbated by increase in wages of public servants, was of major concern to the formulators of monetary policy, who felt the 2011 budget should recognise the threat of bloated public expenditure to the price system.


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Ma j Blige, U again. Who asked U to inform US with all these information. While waste ur time on N4.2tr dat wl be diverted in2 some people's pocket. News Caster

^^^^

My humble conclusion is that you need psychiatric examination.