Comparison of the Projected Key Macroeconomic Variables of the 2010 and 2011 Federal Government Budgets

 Comparison of the Projected Key Macroeconomic Variables of the 2010 and 2011 Federal Government Budgets in Nigeria

By

Dr. Mustapha Muktar

Department of Economics

Bayero University, Kano-Nigeria

Introduction

The Federal Budget is the Federal Government’s instrument for allocating public

resources among the nation’s competing socio- economic needs. I t is a financial

representation of government’s spending plans for delivering public goods and services to the citizens . Budget is therefore the Federal Government’s instrument for delivering essential

public goods and services, such as education, healthcare, infrastructure and national

defence to its citizens to meet their social and economic needs. To provide these

goods and services and generally carry on the business of governance, government

needs to plan its financial activities and come up with detailed spending plans. As a

statement of government’s policy direction and spending priorities, the Federal

Budget also affects the; general price level of goods and services in the economy,

interest rates at which individuals and businesses can borrow money (c) exchange

rate of the Naira against other currencies and (d) the rate at which the economy

grows. These are some of the major factors, or ‘macroeconomic variables which affect the wellbeing of the economy as a whole and by extension the social and economic wellbeing of the citizens.

The 2010 Budget: This is the first budget to be prepared based on the Nigeria Vision 20:2020’s First National Implementation Plan”. The budget, according to the president, is based on four pillars of Job            creation, Optimization of capital spending by rationalizing recurrent            expenditure; accelerate the implementation of reforms and to reinstate greater prudence in the management of the nation’s financial resources.

The 2011 Budget:  this is aimed at increasing economic growth and employment generation however part of the Medium Term Fiscal Framework (MTEF) of 2011 – 2013 and the fiscal strategy pare (FSP) which is the revenue and expenditure frameworks of the government. It is aimed at fiscal consolidation towards achieving the vision 20:2020

Key Macroeconomic Indicators 0f 2010 and 2011 Budget

Key Parameters	2010 Budget	2011 Budget
Expenditure	N5.159 Tr.	N4.236 Tr.
Recurrent Expenditure	2.011 Tr.	2.372 Tr.
Capital Expenditure	1.37 Tr.	2.01 Tr.
Debt Service	517.071 bn.	542 bn.
Crude oil Production	2.088 mbpd.	2.35mbpd
Average oil benchmark prices	$57/barrel	$65/barrel
Exchange Rate	N150 to $1	N150 to $1
Real GDP Growth	6.1%	7%
Inflation Rate	11.2%	10.5%
Unemployment Rate	18.2%	13.6%
Fiscal Deficit	4.2%	3.62%

Analysis: From the forecast of the 2010 and 2011 budgets one can see a sharp decline of the total budgeted expenditure from by about 18% from 2010 to 2011. Capital expenditure is expected to increase from N 1.37 trillion in 2010 to N2.01 Trillion in 2010. There is also an increased in the proposed amount for debt service by 5% from N517.071 Billion to N542 Billion. The output of crude oil production is proposed to increase by 11% from 2.088 Million bpd to 2.35 Million bpd. Average crude oil benchmark price is forecasted to increase   by 12% that is from $57/barrel to $65/barrel and this is due to improvements recorded in the prices of oil which has been unfavorable in the last three quarters due to the global economic meltdown and the financial crises. Real Gross Domestic Product (RGDP) growth is forecasted to be 7% in 2011 and hence an increase of about 13% from the 2010 forecast, this also represent about 3% higher than the growth of population of the country. Inflation and unemployment rates are expected to fall by 13% and 25% respectively. While the fiscal deficit is also forecasted to go down by 14% from 2010 to 2011.  For exchange rate however it still remains at N150 to $1 in both budgets.

A “new” National Job Creation Scheme”, NJCS, which will be funded with N50billion, It remains to be seen how 7% GDP growth will generate new employment when the issue at hand is about how the Federal Government realistically expects to reduce the expenditure by almost N1trillion when the minimum wage bill, when passed, will increase the wage bill by more than 250%.

Economists stressed that as the global economic crisis recedes, posing fresh challenges to repositioning the economy, there is the need for budget that would accelerate infrastructure development to revamp the real sector of the economy to enhance relative full employment now. Therefore, issues of public expenditure, the quality of spending, sectoral allocation of the budget, macroeconomic assumptions, budget implementation and fiscal deficits, among others, must be given serious thought.

For Nigeria to reach top 20 in 2020, there is the need to grow at 11-12% year after year for more than ten years. Based on the above forecast therefore, it is difficult for the country to be among the top 20 by 2020 if the projected real GDP growth is 7%.