FG to Set up Wholesale Lender to Drive down Rates

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

2013 Budget at a Glance

Total Budget                                             N4.987 trillion
Statutory Transfers                                   N387.97 billion
Debt Service                                            N591.76 billion

Recurrent Expenditure (Non-Debt)         N2.38 trillion
- Personnel Cost                                       N1.71 trillion
- Overheads                                               N208.9 billion
Capital Expenditure                                  N1.62 trillion
SURE-P                                                    N273.5 billion
Fiscal Deficit                                           1.85% of GDP
Oil Production                                         2.53 million barrels per day
Oil Benchmark                                       $79 per barrel

• Budget amendment bill underway

•National security gets lion's share of N950 billion

By Ndubuisi Francis

The Federal Government, in collaboration with some international development partners, intends to set up a ‘wholesale’ financial institution, in a major drive to push down interest rates and provide an investment-friendly window for long-term funds to investors.

The attempt is a bold move to bolster the real sector, which has been hampered by the twin problems of lack of access to long-term financing and a high interest rate regime.
Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, who unfolded government’s plan during the 2013 budget breakdown in Abuja, Thursday, said the manufacturing sector, especially the small and medium enterprises (SMEs) cannot grow without reliable long-term sources of finance and affordable interest rates.

“As a result, Mr. President and Mr. Vice-President have set up a committee to look into the issue. We now have approval to restructure existing DFIs (development finance institutions) as retail outlets for financing domestic lenders, while we build a strong wholesale institution that will increase and drive lending costs down,” she disclosed.

The minister said the framework for the wholesale institution, which is expected to come on stream in the next 18 months, was being put together.

On the 2013 budget, the minister said it was prepared in record time, and submitted to the National Assembly, which also worked hard to review same and returned their version to the executive arm before embarking on Christmas recess.

However, the minister noted that at the beginning of the year, when  “we reviewed the National Assembly’s version, there were several challenges which had to be revisited.”

According to her, there were three main challenging areas, including a reduction in the wage bill, major capital expenditure which had been re-allocated, as well as re-allocation of the Subsidy Reinvestment Programme (SURE-P) budget.

“We successfully resolved these challenges in the past two weeks, and Mr. President will send a proposal to the National Assembly for amendment of the 2013 budget. Let me also add here that Mr. President has assigned the Minister of Special Duties to assist in overseeing the implementation of the N100 billion constituency projects across the country,” she said.

The 2013 budget with an aggregate expenditure of N4.987 trillion, she said, would promote the continuity of the four main pillars on which the 2012 budget was predicated, namely: macroeconomic stability, structural reforms, governance and institutions, and expenditure and investing in priority sectors.

The N4.97 trillion, which she said was a modest increase of 6.2 per cent over the N4.697 trillion in 2012, is made up of N387.97 billion for statutory transfers; N591.76 billion for debt service; N2.38 trillion for recurrent (non-debt), of which N1.71 trillion is the provision for personnel cost, while overhead cost is projected at N208.9 billion.

Similarly, a total of N1.62 trillion has been provided for capital expenditure, even as N273.5 billion is for SURE-P. This figure includes N180 billion provided in 2013 and an unspent N93.5 billion from 2012.

Given the above, she said the fiscal deficit is projected to improve to about 1.85 per cent of GDP in the 2013 budget compared to 2.85 per cent last year.

“This is well below the threshold stipulated in the Fiscal Responsibility Act, 2007, and clearly highlights our commitment to fiscal prudence,” she said.

According to her, the budget is underpinned by oil production of 2.53 million barrels per day compared to 2.48 million barrels per day in 2012; oil benchmark price of $79 per barrel, up from $75 per barrel in 2012; projected real GDP growth rate of 6.5 per cent; and an average exchange rate of N160/$.

The minister also gave the revenue projections for the year, with gross federally collectible revenue put at N11.34 trillion. Of this, the total revenue available for the Federal Government was forecast at N4.1 trillion—representing an increase of 15 per cent over the 2012 estimates.

Non-oil revenue, Okonjo-Iweala stated, is also projected to sustain its growth in 2013.

National security, she said, got the lion’s share of the 2013 budget with N950 billion, broken down as N320 billion for the police, N364 billion for the armed forces, N115 billion for the Office of the National Security Adviser (NSA), and N154 billion for the Ministry of Interior.

Other key allocations included critical infrastructure (comprising Power, Works, Transport, Aviation, Gas Pipelines and the Federal Capital Territory) – N497 billion; Human Capital Development (Education and Health) – N705 billion; and Agriculture/Water Resources – N175 billion.

On other priorities for 2013 budget, the minister said the Federal Government intend to prune the cost of governance, adding that the government has sustained its policy of re-balancing its expenditure in favour of capital investment over the medium term.
“I am therefore pleased to announce that the share of recurrent spending in total expenditure has reduced from 74.4 per cent in 2011 to 67.5 per cent in 2013. Similarly, capital spending has increased from 25.6 per cent in 2011 to 32.5 per cent in 2013,” she said.

The minister disclosed that as part of the overall measures to reduce the huge personnel cost, the Federal Government has started implementing the recommendations of the Steve Oransaye report, adding that some of the agencies with overlapping functions were being rationalised.

She, however, acknowledged that some of the agencies were legally set up, adding that the executive would need the collaboration of the National Assembly to rationalise them.