27th July
By Chesa Chesa,State House Correspondent, Abuja

The government says it will withdraw more subsidy and, thereby, allow the market to top up the current rate of N65 per litre.

That would generate a long list of multiplier effects, after months of price stability.

Abuja says it is for the public good, anyway; although Labour is not likely to be impressed.

The news emerged on Wednesday when the Federal Executive Council (FEC) approved a N1.9 trillion budget for 2007, the same amount in this year’s budget which has been implemented 40 per cent, according to Finance Minister, Nenadi Usman.

On immediate concerns, the government has concluded arrangements to pay the N75 billion it owes 300,000 pensioners.

The payment is through bonds issued to four banks that will start to pay out in cash by the end of this month.

Usman informed journalists after the FEC meeting in Abuja that the budget approval was based on her memorandum the FEC considered a framework on which to fine-tune the proposal.

The meeting was chaired by President Olusegun Obasanjo.

The strategy paper will get to the National Assembly next week. The Appropriation Bill is expected there by September.

Usman expressed optimism that the budget will be passed by the lawmakers before the year runs out.

The budgets for this year and 2007 (even with an increase of one per cent) are similar because no heavy expenditure is envisaged.

She narrated: "For 2006, the Appropriation Act authorised an aggregate spending of N1.9 trillion for the Federal Government. This is made up of statutory transfers of N92 billion, debt service of N290 billion. Expenditures of ministries, departments and agencies stood at N1.5 trillion.

"We do not foresee that there would be much of an increase in the budgeted figure. We still believe that we will keep it at about N1.9 trillion again. This is basically so because there are some expenditures which we incurred this year that are of a one-off kind. So, next year we would not have such expenditure".

Budget Office Director, Bode Augusto, added: "There are some major expenditures that we incurred in 2006 that are not going to be repeated in 2007. First, that on the Independent National Electoral Commission (INEC). The bulk of the spending for the 2007 elections is already in this year’s budget.

"Second, the National Population Commission. The census has already held this year. Third, we have contractors whose arrears we are spending N27 billion to clear. And lastly, we have the petroleum subsidy of N75 billion this year; the level of subsidy is not likely to be as high next year.

"So, all these will lead to healthy increases to what the ministries, departments and agencies will spend. The major ministries that are receiving the bulk of the money will be education, health, power, works and water. We are also looking at a deficit of not less than one per cent of GDP next year".

Specific capital and recurrent expenditure as well as the benchmark for oil earnings in the 2007 budget are yet to be concluded.

But Augusto said N230 billion will go for debt servicing – N80 billion for foreign debts and N150 billion local debts. Ministries and agencies will share N1.6 trillion.

Would the decision to slash fuel subsidy not translate into another increase in pump price, after a moratorium of one year?

His explanation: "The President promised that for the whole of 2006, there would be no increase in the pump price of gasoline and the other products.

"The price of crude, which is the principal component, has been going up, as much as over $70 per barrel. Clearly, there will be need for some adjustments, but it is left for the President to decide the level of adjustments.

"We have had informal discussions with members of the Appropriation Committees of the National Assembly and we will formally transmit the document of the fiscal strategy paper before the end of this week.

"We will also begin to talk with the Organised Private Sector and the civil society about the budget. The ministries, departments and agencies have been advised of their expenditures".