Monetary Policy

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The Conduct of Fiscal Policy

2007 Budget of the Federal Government
The 2007 Federal budget focused on the theme: “to accelerate Investments in Basic Physical and Human Resource Capital”. Thus, government expenditure was to be channeled towards completing on-going projects in the power, water, roads, security, education and health sub-sectors. These investments aimed at improving the quality of life of Nigerians and addressing the infrastructural deficiencies that constrained the ability of indigenous businesses to optimize their operations and generate employment.

The 2007 Federal Budget
The Federal Government proposed to spend the sum of N2.3 trillion in 2007 compared with N1.9 trillion in 2006. The Ministries, Departments and Agencies ( MDA 's) were allocated the sum of N1.8 trillion while Statutory Transfers, and Debt Service were allocated the sum of N102 and N326 billion, respectively. The Federal Budget provided for a deficit of N0.5 trillion, an equivalent to 2.9 per cent of GDP , which was to be financed from proceeds of sale of Government properties and Domestic borrowings.

Federal Revenue and Expenditure in the 2007 Budget
In 2007, the Federal Government expected to earn a total of N4.3 trillion; being an increase of 23 per cent over the level in 2006. Of the total expected revenue of the Federal government, oil was projected to contribute N3.2 trillion or 84.0 per cent, while the balance of N1.1 trillion or 16.0 per cent was expected to come from non-oil sources. The Federal Government's share of the federation account revenue was projected at N1.8 trillion, indicating an increase of 20.0 per cent over the level in 2006. From the Federal Government's share of the Federation Account, N1.7 trillion was earmarked for the Federal Budget as against N1.4 trillion in 2006, while the balance of N0.1 trillion would be appropriated to special funds such as Ecology, Stabilization, Development of Natural Resources and the Federal Capital Territory . The Federal Government was also expected to earn N86.0 billion from its Independent revenue sources as against N75.0 billion in 2006.

Review of the 2007 Budget:
On assumption of office on 29th May, 2007, the Government of Alhaji Umaru Musa Yar'Adua reviewed the 2007 budget, mainly, to ensure efficiency and provide funds for the payment of the 15.0 per cent salary increase agreed with the Nigerian Labour Congress (NLC) for Federal Civil servants by the previous government. Under the review, recurrent expenditure was increased from N1.050.3 billion to N1,256.9 billion, a decrease in the capital expenditure from N830.70 billion to N730 billion, as well as a reduction in Domestic Debt Servicing from N326.0 billion to N265.0 billion.

Expected revenue of the Federal Government was reviewed upwards from N1,729.0 billion to N1,777.0 billion, while expenditure of the Federal Government similarly rose from N2,309.3 to N2,386.2 billion. Recurrent expenditure of the Federal Government rose from N1,376.3 billion to N1,553.9 billion, while Capital and Transfers amounted to N832.3 billion as against N933.0 billion in the old budget. The reviewed budget provided for a deficit of N609.2 billon as against N580.30 billion in the previous budget.

Appraisal of the 2007 Federal Budget
As at the time of this report (October 2007), the Federation Account had earned N4,221.2 billion or 86.0 per cent of the projected N4,864.7 billion for fiscal 2007. Of this, oil accounted for N3,510.5 billion, while the non-oil sector, comprising the Customs and Excise, Companies Income Tax and Value Added Tax (VAT), made up the balance of N710.7 billion. The Federal Government's share of the Federation Account was N1,600.7 billion compared with the total projected revenue of N1,745.9 billion for fiscal 2007.

From year to date, the Federal Government has earned the sum of N1,817.7 billion; comprising N1,155.8 from the Federation account (including VAT), N126.2 billion from Independent revenue sources, while the balance of N535.7 billion came from Federal Government's share of the Excess Crude Account and Bond issues. The expenditure of the Federal Government during the period amounted to N1,493.6 billion while debt service was N949.7 billion, with capital and transfers accounting for the difference of N543.9 billion. This resulted in an actual surplus of N324.1 billion compa